EXHIBIT 10.38
[EXECUTION COPY]
ASSET PURCHASE AGREEMENT
Dated as of January 31, 1997
Among
STYLES ON VIDEO, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇, INC.
HASCO INTERNATIONAL, INC.
and
HASCO HOLDINGS CORP.
TABLE OF CONTENTS
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PAGE
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ARTICLE 1. DEFINITIONS 1
ARTICLE 2. PURCHASE AND SALE OF ASSETS 6
2.1 Transferred Assets 6
2.2 Excluded Assets 7
ARTICLE 3. ASSUMPTION OF LIABILITIES 7
3.1 Assumed Liabilities 7
3.2 Excluded Liabilities 8
3.3 Payment of Excluded Liabilities 9
3.4 Closing Date Agreements 9
ARTICLE 4. CONSIDERATION 10
4.1 Purchase Price 10
4.2 Purchase Price Adjustment - Hospital Contracts 11
4.3 Allocation of Purchase Price 12
4.4 Purchase Price Adjustment -- Operations 12
ARTICLE 5. THE CLOSING 14
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
PARENT 14
6.1 Organization 14
6.2 Power and Authority 14
6.3 Valid and Binding Agreement 14
6.4 Subsidiaries 15
6.5 Consents and Approvals 15
6.6 No Violations 15
6.7 Financial Statements 15
6.8 No Undisclosed Liabilities 15
6.9 Title to Properties 16
6.10 Condition of Transferred Assets 16
6.11 Real Property 16
6.12 Proprietary Rights 16
6.13 Contracts 17
6.14 Litigation 18
6.15 Compliance with Laws 18
6.16 No Material Adverse Change 18
6.17 Interim Changes 18
6.18 Taxes 19
6.19 Labor Matters 20
6.20 Environmental and Safety Matters 20
6.21 ▇▇▇▇▇▇ Agreements 21
6.22 Inventory 21
6.23 Transactions with Affiliates 21
6.24 Employee Benefit Plans 21
6.25 Insurance 22
6.26 Brokers 22
6.27 Accuracy of Information 22
6.28 Representations and Warranties on Closing Date 22
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF THE BUYER 23
7.1 Organization 23
7.2 Power and Authority 23
7.3 Valid and Binding Agreement 23
7.4 Consents and Approvals 23
7.5 No Violations 23
7.6 Brokers 23
7.7 Financial Statements 24
7.8 No Material Adverse Change 24
7.9 Representations and Warranties on Closing Date 24
ARTICLE 8. COVENANTS OF THE SELLER AND PARENT 24
8.1 Conduct of Business 24
8.2 Access to Information 25
8.3 Efforts to Consummate Transaction 25
8.4 No Solicitation 26
8.5 Hospital Contracts 26
8.6 Financial Information. 26
8.7 Employees. 27
8.8 Pre-Closing Activities 27
8.9 Consultation 27
8.10 Limitation of Liability 27
ARTICLE 9. COVENANTS OF THE BUYER 27
9.1 Actions and Consents 27
9.2 Continued Assistance 28
9.3 Buyer Financial Statements 28
ARTICLE 10. OTHER AGREEMENTS AMONG THE PARTIES 28
10.1 Expenses 28
10.2 Certain Tax Matters 28
10.3 Receivables; Mail 29
ARTICLE 11. CONDITIONS OF CLOSING 30
11.1 Conditions to Obligation of the Buyer to Close 30
11.2 Conditions to Obligation of the Seller to Close 31
ARTICLE 12. INDEMNIFICATION 32
12.1 Indemnification 32
12.2 Minimum Amounts of Indemnity 33
12.3 Survival; Time Limit On Indemnity 33
12.4 Procedure for Claims By Third Parties 33
12.5 Right of Set-off 34
ARTICLE 13. MISCELLANEOUS 35
13.1 Termination 35
13.2 Publicity 35
13.3 Entire Agreement 35
13.4 Power of Attorney 36
13.5 Non-Assignable Assets 36
13.6 Further Assurances 37
13.7 Notices 37
13.8 Waivers and Amendments 38
13.9 Counterparts 38
13.10 Governing Law 38
13.11 Severability 38
13.12 No Strict Construction 38
13.13 Assignment 38
13.14 Specific Performance 39
13.15 Headings 39
13.16 No Third Party Beneficiaries 39
13.17 Guarantee By the Parent 39
13.18 Guarantee By Holdings 40
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated January 31, 1997,
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among STYLES ON VIDEO, INC., a Delaware corporation ("Parent"), ▇▇▇▇▇▇▇ ▇▇▇▇▇,
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INC., a California corporation (the "Seller"), HASCO INTERNATIONAL, INC., a
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Missouri corporation (the "Buyer"), and HASCO HOLDINGS CORP., a Delaware
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corporation ("Holdings").
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WHEREAS, the Parent owns all of the outstanding stock of the Seller;
WHEREAS, Holdings owns all of the outstanding stock of the Buyer;
WHEREAS, the Seller is engaged in the newborn portrait, photography
and imaging service (the "Business");
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WHEREAS, the Seller desires to sell, assign and transfer, and the
Buyer desires to purchase and acquire, substantially all of the assets,
properties and rights used by the Seller in the operation of the Business,
subject to the assumption by the Buyer of certain specified liabilities and
obligations of the Seller relating to the Business, on the terms and conditions
set forth herein;
WHEREAS, on the date hereof the Buyer has agreed to make available to
the Seller certain loans to be used in connection with the Business as provided
in the Loan Agreement, dated as of the date hereof (the "Loan Agreement");
WHEREAS, the Business has been, and is expected to continue to,
operate at a loss; and
WHEREAS, the Buyer desires that Seller take certain actions to reduce
its losses between the date hereof and the Closing Date and the Seller has
agreed to take actions as provided in Sections 8.8 and 8.9 with this objective.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1. DEFINITIONS
"Affiliate" means, as to any Person, any other Person which directly
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or indirectly controls, or is under common control with, or is controlled by,
such Person and, if such Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual, any trust
whose principal beneficiary is such individual or one or more members of such
individual's immediate family and any Person who is controlled by any such
member or trust.
"Adjustments" has the meaning set forth in Section 4.4(a).
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"▇▇▇▇▇▇ Agreements" means those certain termination and Settlement
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Agreements, dated as of December 18, 1996, among the Seller, Parent and ▇▇▇▇▇▇
▇▇▇▇▇▇ and, dated as of December 19, 1996, among the Seller, Parent and ▇▇▇▇
▇▇▇▇▇▇.
"Assumed Liabilities" has the meaning set forth in Section 3.1.
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"Agreement" has the meaning set forth in the preamble hereof.
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"Business" has the meaning set forth in the preamble hereof.
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"Buyer" has the meaning set forth in the preamble hereof.
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"CERCLA" means the Comprehensive Environmental Response, Compensation,
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and Liability Act of 1980, as amended.
"Change of Control" shall mean the acquisition by any Person or a
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group (as defined in section 13(d) of the Exchange Act of 1934) of Persons
(other than any current stockholder of Holdings, their Affiliates or group of
such current stockholders or their Affiliates and, in the case of Buyer,
Holdings) of control (directly or indirectly) of Holdings or the Buyer; provided
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that the change of directors or officers of the Buyer or Holdings shall not be
deemed an acquisition of control.
"Closing" has the meaning set forth in Article 5.
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"Closing Date" has the meaning set forth in Article 5.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Control" (including, with its correlative meanings, "controlled by"
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and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies of the subject Person (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Credit Amount" shall initially be zero and shall be increased or
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decreased in accordance with Section 4.2.
"Dycam" means Dycam Inc., a Delaware corporation.
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"Dycam Master Agreement" has the meaning given to such term in Section
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3.4.
"Dycam Option" has the meaning set forth in Section 3.4.
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"Environmental and Safety Requirements" means all federal, state,
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local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, Release,
threatened Release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"Excluded Assets" has the meaning set forth in Section 2.2.
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"Excluded Liabilities" has the meaning set forth in Section 3.2.
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"GAAP" means, with respect to any date of determination, generally
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accepted accounting principles as used by the Financial Accounting Standards
Board and/or the American
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Institute of Certified Public Accountants consistently applied and maintained in
accordance with past practice throughout the periods indicated.
"Governmental Agency" means any federal, state, local, foreign or
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other governmental agency, instrumentality, commission, authority, board or
body.
"Hasco Hospital" means any hospital in which Hasco is Installed on
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December 13, 1996, or was Installed during the 12 months preceding December 13,
1996.
"Hasco Loans" means the loans by the Buyer under the Loan Agreement.
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"Hazardous Materials" means "hazardous substances" as defined in
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CERCLA, petroleum products, asbestos, pollutants, contaminants and wastes, and
shall include, but not be limited to, all substances regulated under
Environmental and Safety Requirements.
"Hospital Contracts" means each written or oral contract or
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arrangement of Seller existing on the date hereof or entered into in accordance
with Section 8.5 after the date hereof with any hospital for the provision of
infant photography services in hospitals.
"Hospital Guarantee" has the meaning given to such term in Section
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3.2(e).
"Indemnified Party" has the meaning set forth in Section 12.4(a).
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"Indemnifying Party" has the meaning set forth in Section 12.4(a).
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"Installed" by the Seller or the Buyer means that the Seller or the
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Buyer has one of its cameras in the hospital in question that is operational and
taking pictures and where the Seller or Buyer, as the case may be, is providing
sales materials to mothers of the newborn infants.
"Interim Financials" has the meaning set forth in Section 8.6.
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"Internal Revenue Service" or "IRS" means the United States Internal
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Revenue Service.
"IP License" has the meaning set forth in Section 3.4.
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"Latest Balance Sheet" means the Seller's balance sheet as of December
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31, 1996.
"Leased Property" has the meaning set forth in Section 6.11(b).
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"Leases" has the meaning set forth in Section 6.11(b).
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"Letter of Intent" means the Letter Agreement among the Parent,
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Seller, Buyer and Dycam, dated as of December 13, 1996, relating to the sale of
the Business and certain other matters.
"Liability" means any liability or obligation (whether known or
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unknown, absolute or contingent, liquidated or unliquidated or due or to become
due), including any liability for Taxes.
"Liens" means any mortgage, pledge, security interest, encumbrance,
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lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof), any sale of receivables
with recourse against the Seller or any of its affiliates, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Seller under
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a lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the Ordinary Course of Business).
"Loan Agreement" has the meaning set forth in the preamble hereof.
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"Losses" means any and all damages, costs, liabilities, losses,
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judgments, claims, penalties, fines, expenses or other costs (including
attorney's fees).
"Material Adverse Effect" means a material adverse effect upon (a) the
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Transferred Assets, (b) the business, operations, condition (financial or
otherwise), assets, prospects or employee, customer or supplier relations of the
Seller, (c) the ability of the Seller, Parent or Dycam to consummate the
transactions contemplated hereby, (d) the enforceability of this Agreement or
the other agreements contemplated hereby against the Seller, Parent or Dycam, as
applicable, or (e) the ability of the Buyer following the Closing Date to
operate the Business as operated by the Seller prior to the Closing Date;
provided that income before tax of the Seller (excluding legal and accounting
expenses relating to the ▇▇▇▇▇▇ Agreements or the transactions contemplated
hereunder), calculated consistently, of not less than an average of negative
$250,000 per month following September 30, 1996 shall not, in and of itself,
constitute a Material Adverse Effect.
"Monthly Financials" means the balance sheet and statement of
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operations of the Seller for the each month commending with January, 1996 and
ending with December, 1996.
"Monthly Interim Financials" means the balance sheet and statement or
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operations of the Seller, to the extent provided to the Buyer pursuant to
Section 8.6, for each month after December 1996.
"Noncompetition Agreement" means the noncompetition agreement dated as
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of the Closing Date to be entered into between the Buyer, the Seller and the
Parent in the form of Exhibit A hereto.
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"Ordinary Course of Business" means the ordinary course of business
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consistent with past practice.
"Person" means any individual, partnership, joint venture,
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corporation, trust, unincorporated organization or other entity.
"Post-Closing Tax Period" means, with respect to a taxable period
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which includes (but does not end on) the Closing Date, the period beginning on
the day after the Closing Date and ending on the last day of such taxable
period.
"Pre-Closing Tax Period" means, with respect to a taxable period which
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includes (but does not end on) the Closing Date, the period beginning on the
first day of such taxable period and ending on (and including) the Closing Date.
"Proprietary Rights" means, collectively, all patents, patent
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applications and patent disclosures; inventions (whether or not patentable and
whether or not reduced to practice as well as any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof); all
trade and corporate names, service marks, trademarks, trade dress, together with
all goodwill associated therewith; all mask works; all registered and
unregistered statutory and common law copyrights and copyrightable works; all
registrations, applications and renewals for any of the foregoing; all trade
secrets, confidential information, ideas, formulae, compositions, know-how,
manufacturing and production processes and techniques, research information,
drawings, specifications, designs, plans, improvements, proposals, technical and
computer data, documentation and software, financial, business and marketing
plans, customer and supplier lists
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and related information, marketing and promotional materials and all other
information, know-how and proprietary rights and all copies and tangible
embodiments of the foregoing (in whatever form or medium).
"Quarterly Financials" means the balance sheet and statement of
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operations of the Seller for the each of the first four fiscal quarters of 1996.
"Quarterly Interim Financials" means the balance sheet and statement
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of operations of the Seller, to the extent provided to the Buyer pursuant to
Section 8.6, for each fiscal quarter of 1997.
"Real Property" has the meaning set forth in Section 6.11(b).
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"Release" shall have the meaning set forth in CERCLA.
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"Retained Employees" shall have the meaning set forth in Section 8.7.
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"Seller" has the meaning set forth in the preamble hereof.
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"Seller Financials" has the meaning set forth in Section 6.7.
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"Tax" means any (a) federal, state, local or foreign income, gross
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receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; (b) Liability of any corporation
for the payment of any amounts of the type described in clause (a) arising as a
result of being (or ceasing to be) a member of any affiliated group (or being
included in any Tax Return relating thereto); and (c) Liability for the payment
of any amounts of the type described in clause (a) or (b) as a result of any
express or implied obligation to indemnify or otherwise assume or succeed to the
Liability of any other Person.
"Tax Liabilities" has the meaning set forth in Section 3.2(d).
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"Tax Returns" means returns, declarations, reports, claims for refund,
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information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Third Party Claim" has the meaning set forth in Section 12.4(a).
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"Trademark Assignment" has the meaning set forth in Section 3.4.
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"Transferred Assets" has the meaning set forth in Section 2.1.
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"Transferred Employees" has the meaning set forth in Section 8.7.
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"Underpayment" has the meaning given to such term in Section 3.2(e).
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"Year-End 1996 Financials" means the balance sheet and statement of
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operations of Parent for the fiscal year ended December 31, 1996.
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As used herein, the term "includes" or "including" shall be deemed to
be followed by "without limitations."
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1 TRANSFERRED ASSETS. On the terms and subject to the conditions
set forth in this Agreement, the Seller shall sell, transfer, convey, assign and
deliver to the Buyer, and the Buyer shall purchase, acquire and accept from the
Seller, on the Closing Date, all of the right, title and interest of the Seller
in and to all of the properties, assets and rights used or useful in connection
with the Business, other than the Excluded Assets (as defined below), as the
same shall exist on the Closing Date (collectively, the "Transferred Assets"),
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free and clear of all liens, including, without limitation, the following:
(a) all Hospital Contracts, including those listed on Schedule 2.1(a)
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(such listed Hospital Contracts are referred to as the "Current Contracts");
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(b) all machinery, equipment (including cameras and camera units
computer equipment and office equipment), inventories, raw materials, supplies,
spare parts and other items of personal property of the Seller utilized in
connection with the Business;
(c) all motor vehicles owned or leased by the Seller utilized in
the Business;
(d) all cash and cash equivalents of Seller;
(e) all accounts receivable of the Seller or relating to products sold
or services rendered in connection with the Business, whether or not invoices
relating thereto have been issued;
(f) all right, title and interest in and to all leases, contracts,
licenses, purchase orders, sales orders, commitments and other similar
agreements of the Seller relating to the Business to the extent that they are
listed on Schedule 3.1;
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(g) all prepaid expenses (excluding amounts due from Parent), advances
and deposits of the Seller relating to the Business;
(h) all causes of action, demands, judgments, claims (including
insurance claims), indemnity rights or other rights of the Seller relating to
the Transferred Assets or the Business or arising under express or implied
warranties from suppliers with respect to the Transferred Assets;
(i) all Proprietary Rights of the Seller utilized in connection with
the Business, including, but not limited to, the Proprietary Rights set forth on
Schedule 6.12 but excluding those set forth on Schedule 2.2(b); all income,
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royalties, damages and payments due at Closing or thereafter and all other
rights with respect thereto (including rights to damages and payments for past,
present or future infringements or misappropriations thereof) in all countries,
in each case with respect to any of the Proprietary Rights transferred pursuant
to this Section 2.1(i);
(j) all rights under confidentiality and non-compete agreements, and
all similar rights arising under common law or by statute, to the extent
assignable as contemplated in Section 13.5;
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(k) all franchises, consents, licenses, marketing rights, permits,
authorizations, approvals and other operating authorities issued by any
Governmental Agency to the Seller relating to the Business;
(l) all right, title and interest of the Seller relating to the
Business as a going concern, including its goodwill (if any) and all other
intangible assets associated therewith;
(m) the originals or copies of all books and records of the Seller
relating to the Business, including correspondence, employment records,
production records, accounting records, property records, mailing lists,
customer and vendor lists, Proprietary Rights prosecution files, and regulatory
files (including master files); and
(n) all other assets and properties of the Seller relating to the
Business which exist on the Closing Date, whether tangible or intangible, real
or personal.
2.2 EXCLUDED ASSETS. The Seller is not selling, and the Buyer is not
purchasing, any of the following assets relating to the Business, all of which
shall be retained by the Seller and shall not be reflected on the Closing Date
Balance Sheet (collectively, the "Excluded Assets"):
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(a) the Seller's rights under this Agreement;
(b) the Proprietary Rights described on Schedule 2.2(b); and
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(c) interests in land and buildings owned or leased by the
Seller.
ARTICLE 3. ASSUMPTION OF LIABILITIES
3.1 ASSUMED LIABILITIES. On the Closing Date, simultaneously with
the transfer by the Seller to the Buyer of the Transferred Assets, the Buyer
shall assume and shall thereafter pay or cause to be paid or otherwise
discharged, as the same become due, the following liabilities and obligations of
the Seller relating to the Business (collectively, the "Assumed Liabilities"):
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(a) all (i) trade payables and commissions, (ii) accrued employee
compensation for the current pay periods on the Closing Date and (iii)
reimbursement of employee business expenses, in each case that arose in the
Ordinary Course of Business and exist on the Closing Date (collectively, the
"Payables"), but only to the extent so reflected or reserved in the Final
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Adjustment Amount; provided that Buyer shall not assume any such liability or
obligation to the extent it (x) is a liability for or obligation in respect of
breach of contract, breach of warranty, violation of law, infringement or
misappropriation of any Proprietary Right or any claim or lawsuit, (y) relates
to a Hospital Guarantee, except to the extent set forth in Section 3.3 or (z) is
an Underpayment;
(b) all obligations under (i) unfilled customer orders for goods and
services which have been accepted in the Ordinary Course of Business and (ii
contracts, agreements, purchase orders and other commitments set forth on
Schedules 2.1(a) and 3.1 hereto and all other Hospital Contracts, provided that
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Buyer shall not assume any such liability or obligation to the extent it (x) is
a liability for or obligation in respect of breach of contract, breach of
warranty, violation of law, infringement or misappropriation of any Proprietary
Right or any claim or lawsuit, (y) relates to a Hospital Guarantee, except to
the extent set forth in Section 3.3 or (z) is an Underpayment; and
(c) the Hasco Loans, including all accrued interest thereon.
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3.2 EXCLUDED LIABILITIES. Except as expressly provided in Section
3.1, the Buyer does not assume and shall not be obligated to pay, perform or
discharge any liabilities or obligations of the Seller or otherwise relating to
the Business other than the Assumed Liabilities (all of which are sometimes
referred to collectively herein as "Excluded Liabilities"). Excluded
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Liabilities include:
(a) liabilities or obligations of the Seller which may arise by
reason of or with respect to this Agreement or any of the transactions
contemplated hereunder (including legal, accounting, brokerage, investment
banking, finder's fees or liabilities to directors, officers, stockholders or
creditors of the Seller or Parent);
(b) liabilities for money borrowed including bank lines of
credit, the current portions of any long-term debt, capitalized lease
obligations (except capital leases set forth on Schedule 3.1 and as provided in
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Section 3.1(b)) and written but unpaid checks;
(c) all long-term liabilities including any and all shareholder
loans payable, industrial revenue bonds, land loans payable and subordinated
indebtedness owed to related parties;
(d) liabilities or obligations for Taxes (i) for which the Seller
is liable or that relate to the operations of the Business on or prior to the
Closing Date or (ii that are incurred by the Seller or Parent as a result of the
transactions contemplated hereby (collectively, "Tax Liabilities");
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(e) except to the extent set forth in Section 3.3, liabilities
for commissions or other similar payments owed to (i) hospitals in connection
with guarantees or other assurances of specified commission or income levels
("Hospital Guarantees"), (ii) hospitals or other Persons resulting from
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underpayment of amounts owed ("Underpayments") or (iii) ▇▇▇▇ ▇▇▇▇ or any other
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seller of a business or hospital contracts;
(f) liabilities and obligations resulting from damage or injury
(actual or alleged) to persons or property occurring prior to the Closing Date;
(g) liabilities and obligations arising under or imposed pursuant
to Environmental and Safety Requirements, including those associated with the
alleged or actual release of any toxic or hazardous waste, constituent or other
substance into the environment during any period prior to the Closing Date,
whether or not attributable to actions or failures to act by Seller, with
respect to the operation of or properties utilized in connection with the
Business at any time prior to the Closing Date;
(h) any liability with respect to any past or present employee
(including officers) or independent contractor including any liability owing to
any employee of the Seller for accrued bonuses or profit sharing or any
liability or obligation under or with respect to any employee benefit plan,
program, contract or arrangement covering past or present employees of the
Business and their dependents and beneficiaries, except for (i) accrued employee
compensation for the current pay period on the Closing Date and reimbursement of
employee business expenses, in each case, that arose in the Ordinary Course of
Business and exists on the Closing Date and (ii) liabilities to Transferred
Employees that arise after the Closing Date out of such employment;
(i) liabilities for infringement or misappropriation arising from
the use of the Proprietary Rights prior to the Closing Date;
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(j) liabilities or obligations of the Seller the existence of which
would violate or constitute a breach of any representation, warranty, covenant
or agreement of the Seller contained herein or made in connection herewith;
(k) liabilities or obligations to any stockholder or director of the
Seller or Parent, or Affiliates of the Parent or Seller; and
(l) liabilities or obligations of any nature relating to the
Excluded Assets.
3.3 PAYMENT OF EXCLUDED LIABILITIES.
(a) On the Closing Date, the Seller shall pay or make arrangements or
otherwise satisfy the Buyer that the Seller will be able to satisfy its
indebtedness for borrowed money and other Excluded Liabilities. In the event
that the Buyer or the Seller receives a claim for payment under a Hospital
Guarantee or for an Underpayment, each party shall notify the other. The Seller
shall pay any such claim within 20 business days following receipt thereof,
unless within such period it determines in good faith that such claim is not
valid; provided that if the Seller determines that any such claim is not valid,
it shall first give Buyer a notice of such determination and the basis therefor
and give the Buyer an opportunity to discuss with the Seller such determination;
provided further that if the Seller does not pay such claim within such 20
business day period, the Buyer may pay such claim and, subject to and in
accordance with Section 12.5, offset the amount paid.
(b) All Hospital Guarantees are described on Schedule 3.3 hereto.
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The Buyer agrees that all obligations arising under such listed Hospital
Guarantees for periods beginning and ending after the Closing Date are included
in the Assumed Liabilities and are the responsibility of the Buyer. The Seller
agrees that all obligations arising under Hospital Guarantees not listed on such
schedule or for periods beginning and ending before the Closing Date are
included in the Excluded Liabilities and remain the responsibility of the
Seller. The Buyer and Seller agree that with respect to those Hospital
Guarantees listed on such schedule that relate to periods beginning prior to the
Closing Date and ending after the Closing Date, (i) the Buyer shall be liable
for such Hospital Guarantee if the sales at such subject hospital are materially
less during the applicable period after the Closing Date than during the
applicable period before the Closing Date due to the servicing (or lack of
servicing) by the Buyer and (ii) the Buyer and Seller shall be liable for such
Hospital Guarantee for such period based upon the number of days in such
guarantee period prior to and after the Closing Date with respect to any such
Hospital Guarantees not subject to clause (i).
(c) In the event that the Cedars Sinai Los Angeles hospital makes any
claim for commissions for pictures taken during the three year period following
the Closing Date for security purposes (i.e., other than for pictures sold), the
Seller shall indemnify the Buyer for any such amounts; provided that such
amounts do not exceed $50,000; and provided further that the provisions of
Section 12.4 shall apply as if such claim were a Third Party Claim.
3.4 CLOSING DATE AGREEMENTS. On the Closing Date,
(a) Dycam and the Buyer shall execute and deliver the Dycam Master
Agreement in the form attached hereto as Exhibit B, with such changes as are
reasonably acceptable to the Buyer and Dycam (the "Dycam Master Agreement");
----------------------
(b) Parent shall execute and deliver to the Buyer the Option Agreement
in the form attached hereto as Exhibit C (the "Dycam Option");
--------- ------------
9
(c) the Seller and the Buyer shall execute an agreement whereby the
Buyer will sublease from the Seller the premises at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇ that is subject to that certain Standard Industrial/Commercial
Single-Tenant Lease-Net for a period ending December 31, 1998 with rental
payments equal to Seller's lease cost for such period, which agreement shall be
in form and substance reasonably satisfactory to the Buyer and Seller (the
"Sublease Agreement");
------------------
(d) the Seller, Parent and Buyer shall execute the Noncompetition
Agreement;
(e) the Seller and the Buyer shall execute a license agreement in
the form attached as Exhibit D (the "IP License"); and
--------- ----------
(f) the Seller and Parent shall execute the trademark assignment in
the form of Exhibit E (the "Trademark Assignment").
--------- --------------------
ARTICLE 4. CONSIDERATION
4.1 PURCHASE PRICE.
(a) In consideration for the transfer, conveyance and assignment of
the Transferred Assets, the Buyer shall:
(i) on the Closing Date, pay to the Seller an amount equal to
$3,468,060 (subject to adjustment as provided herein); and
(ii) on each three month anniversary of the Closing Date, pay to
the Seller an amount equal to $88,750 until (and including) the third
anniversary of the Closing Date, for total payments (subject to
adjustment as provided herein) of $1,065,000.
The amounts set forth in Sections 4.1(a)(i) and (a)(ii) shall be paid by wire
transfer of immediately available funds to such account of the Seller as
designated in writing from time to time. In the event any payment is due on a
date which is not a business day in the State of Missouri, such payment shall be
made on the next business day. Except as specifically set forth herein, no
interest shall accrue or be payable on the payments contemplated under Section
4.1(a)(ii). The amount set forth in Section 4.1(a)(ii) shall become immediately
due and payable upon notice from the Seller following (i) the default in the
payment when due of any amount contemplated by such Section 4.1(a)(ii), if such
default continues for a period of three business days following notice of such
default by the Seller, (ii) the default in the payment when due of any Assumed
Liability, if such default continues for a period of ten business days following
notice by the Seller of such default (provided that if Buyer does not have
sufficient information to determine the nature and amount of such Payable,
Seller shall also provide such information) and (iii) a Change of Control;
provided that (w) in the event of a default under clause (i), the Seller shall
be entitled interest, at a rate per annum equal to 10%, on any unpaid amount
from the date it was due until the date it is paid, (x) the withholding of any
amount in accordance with Section 12.5 shall not be deemed a default even if
such amount is later determined to be due and owing to the Seller, (y) no
default shall exist under clause (ii) if the Buyer is contesting any Assumed
Liability in good faith or if the Seller contests a purchase price reduction or
offset for the amount of such Assumed Liability and (z) in the event such
amounts become payable pursuant to clause (iii), the amount payable shall be
equal to the remaining payments owed pursuant to Section 4.1(a)(ii), discounted
at the then current blended interest rate for the Buyer's and Holdings'
indebtedness for borrowed money.
10
(b) In addition, as part of the purchase consideration, the Buyer
shall pay to the Seller on the Closing Date the amount, if any, equal to the
Seller's estimated ordinary compensation costs (which shall be limited to normal
salary or hourly rate and allocated cost of health benefits, life insurance
premiums workers compensation and payroll taxes) for any Retained Employees for
the period from the Closing Date up until April 15, 1997; provided that if the
Closing Date occurs on or after April 15, 1997, no consideration shall be
payable under this section 4.1(b); provided further that the calculation of such
estimate shall be reasonably satisfactory to the Buyer; provided further that
this obligation is a purchase price adjustment solely for the benefit of the
Seller and shall not impose any liability or obligation on the Buyer with
respect to such Retained Employees.
4.2 PURCHASE PRICE ADJUSTMENT - HOSPITAL CONTRACTS.
(a) [INTENTIONALLY LEFT BLANK]
(b) If, prior to the Closing Date, the Seller receives a notice of
termination of any Current Contract for any reason (a "Terminated Contract"),
-------------------
(i) first, the Credit Amount shall be reduced (but not below zero) by the amount
set forth opposite such Terminated Contract on Schedule 2.1(a) and (ii) then,
---------------
the consideration payable under Section 4.1(a)(i) and (a)(ii) shall be reduced
pro rata (based upon the aggregate amounts payable under such subsections) by an
amount equal to the excess, if any, of (x) the amount set forth opposite such
Terminated Contract on Schedule 2.1(a) and (y) the reduction to the Credit
---------------
Amount pursuant to clause (i).
(c) If, after the Closing Date, the Seller receives a notice of
termination of any Current Contract (also a "Terminated Contract"), (i) first,
-------------------
the Credit Amount shall be reduced (but not below zero) by the Reduction Amount
(defined below) and (ii) then, the consideration payable under Section
4.1(a)(ii) shall be reduced by the excess, if any, of the Reduction Amount over
the reduction to the Credit Amount pursuant to clause (i). The "Reduction
---------
Amount" means the product of (x) the amount set forth opposite such Current
------
Contract on Schedule 2.1(a) times (y) the Applicable Percentage. The
---------------
"Applicable Percentage" equals 100% for any Terminated Contract where notice of
----------------------
termination is received on or prior to the 3rd month anniversary of the Closing
Date, 75% for any Terminated Contract where notice of termination is received
after the 3rd and on or prior to the 6th month anniversary of the Closing Date,
50% for any Terminated Contract where notice of termination is received after
the 6th and on or prior to the 9th month anniversary of the Closing Date and 25%
for any Terminated Contract where notice of termination is received after the
9th and on or prior to the 12th month anniversary of the Closing Date.
(d) In the event that (i) the Seller executed or executes a
Hospital Contract in accordance with Section 8.5 after December 13, 1996 and
prior to February 28, 1997 and (ii) such contract is Installed (either by Seller
or Buyer) prior to June 30, 1997, the Credit Amount shall be increased in an
amount equal to $20 times the number of annualized hospital births (calculated
as provided in Section 4.2(h)) for the hospital subject to such Hospital
Contract; provided that this Section 4.1(d) shall not apply to any Hasco
Hospital. Following the Closing Date, the Buyer shall use its commercially
reasonable efforts (which shall be consistent with those used for other similar
contracts of Buyer) to Install any such contract prior to June 30, 1997.
(e) If (x) any Terminated Contract continues for a period of at
least 12 months following the notice of termination or (y) the Terminated
Contract is reinstated within 12 months following the date of notice of
termination (such 12 month anniversary, in the case of clause (x), or the date
of reinstatement, in the case of clause (y), is referred to as the "Date of
-------
Reinstatement"), Buyer shall pay to the Seller the amount of any purchase price
-------------
reduction relating to such Terminated Contract. A Terminated Contract shall be
deemed to be "reinstated" if the
11
subject hospital enters into a new written contract with the Buyer
notwithstanding there being no intermediate provider of such services. To the
extent any purchase price reduction with respect to such Terminated Contract
related to payments already made by Buyer (such as those made on the Closing
Date or those made pursuant to 4.1(a)(ii)), such payment shall be made in cash
within 10 Business Days following the Date of Reinstatement, and any other
amounts shall increase the future payments under 4.1(a)(ii).
(f) Any reduction to or increase of payments under Section 4.1(a)(ii)
will be made pro rata across all remaining payments.
(g) The Seller shall not be entitled to payment for any Credit
Amount.
(h) The number of hospital births at any hospital shall be agreed upon
between the Buyer and Seller in good faith based upon the American Hospital
Association published statistics and other sources agreed to by the Buyer and
the Seller and determined consistent with the calculations used to arrive at
hospital births for the Current Contracts as set forth on Schedule 2.1(a).
---------------
4.3 ALLOCATION OF PURCHASE PRICE. Within 60 days after determination
of the Final Closing Balance Sheet (defined below), Buyer shall make, or cause
to be made, an appraisal of the Transferred Assets (the "Appraisal"). Each of
Buyer and Seller shall allocate the purchase price among the Transferred Assets
pursuant to Section 1060 of the Code in accordance with the fair market values
of the assets as set forth in the Appraisal. Each of Buyer and Seller shall
file Internal Revenue Service Form 8594 in a timely manner.
4.4 PURCHASE PRICE ADJUSTMENT -- OPERATIONS.
(a) At least 3 days prior to the Closing Date, the Buyer and Seller
shall agree on good faith estimates of the Adjustments (defined below) as of the
Closing Date based on the Seller's most recently available (unaudited) monthly
balance sheets and Seller's good faith estimates of the changes thereto, which
estimate shall be reasonably acceptable to Buyer (the "Estimated Adjustment
--------------------
Amount"). The cash payable pursuant to Section 4.1(a)(i) shall be reduced by
------
the amount of the Estimated Adjustment Amount. "Adjustments" means the sum of
-----------
(i) the amount of Payables on the Closing Date, (ii) the amount by which the
principal amount of the Hasco Loans exceed the lesser of (x) $540,000 and (y)
$540,000 times the quotient of the number of days elapsed since January 15, 1997
divided by 90, (iii) the amount, if any, by which the liabilities of the Seller
(whether Assumed Liabilities or Excluded Liabilities, but excluding the Hasco
Loans) on the Closing Date (as reflected on the Final Closing Balance Sheet) are
less than the liabilities of the Seller (whether Assumed Liabilities or Excluded
Liabilities but excluding the Hasco Loans) on the date hereof (as reflected on
the Final Signing Balance Sheet), (iv) the amount of any non-ordinary course
expenses (including any legal fees or expenses and interest to Affiliates (other
than Dycam)) paid by the Seller between the date hereof and the Closing Date and
(v) the amount, if any, by which "accounts receivables," "pre-paid expenses,"
"inventory" and "deposits" (as such terms are used on the Financial Statements)
of the Seller on the Closing Date (as reflected on the Final Closing Balance
Sheet) are less than $115,000, $40,000, $20,000 and $30,000, respectively.
(b) Prior to the Closing Date, the Seller shall prepare and provide to
the Buyer a balance sheet of the Seller as of the date of this Agreement (the
"Preliminary Signing Balance Sheet"). Within 90 days following the Closing
---------------------------------
Date, the Buyer shall prepare and deliver to the Seller a balance sheet of the
Seller as of the Closing Date (immediately prior to giving effect to the
Closing) (the "Preliminary Closing Balance Sheet"), and the Buyer's calculation
---------------------------------
of the actual Adjustments based upon such Preliminary Closing Balance Sheet (the
"Preliminary Adjustment Amount"). The Preliminary Signing Date Balance Sheet
-----------------------------
and Preliminary Closing Date Balance
12
Sheet shall be prepared in accordance with GAAP, consistently applied, except
for the absence of footnotes and absence of statements of cash flow and
stockholders' equity and except that all proper accruals and other items shall
be set forth thereon.
(c) Following the delivery of the Preliminary Signing Balance Sheet
and Preliminary Closing Balance Sheet, the Buyer and Seller shall make itself
and its employees and independent accountants available to meet and discuss such
statements with the other party. Within thirty (30) calendar days following the
delivery of the Preliminary Closing Balance Sheet, (i) the Buyer may deliver to
the Seller its objections to the Preliminary Signing Balance Sheet and (ii) the
Seller may deliver to the Buyer its objections to the Preliminary Closing
Balance Sheet and/or determination of the Preliminary Adjustment Amount. If the
Buyer does not deliver written notice of an objection to the Preliminary Signing
Balance Sheet within such thirty (30) day period, the Buyer shall be deemed to
have accepted the Preliminary Signing Balance Sheet and such Preliminary Signing
Balance Sheet shall be deemed to be the "Final Signing Balance Sheet." If the
---------------------------
Seller does not deliver written notice of an objection to the Preliminary
Closing Balance Sheet within such thirty (30) day period, the Seller shall be
deemed to have accepted the Preliminary Closing Balance Sheet and Preliminary
Adjustment Amount and such Preliminary Closing Balance Sheet and Preliminary
Adjustment Amount shall be deemed to be the "Final Closing Balance Sheet" and
---------------------------
"Final Adjustment Amount," respectively.
------------------------
(d) If the Buyer or Seller (as applicable) delivers written notice of
an objections to the Preliminary Signing Balance Sheet, Preliminary Closing
Balance Sheet or Preliminary Adjustment Amount (the "Objections") within the
----------
thirty (30) day period contemplated above, the Buyer and the Seller shall,
during the fifteen (15) days following delivery of the Objections (or, if
Objections are delivered by both Buyer and Seller, 15 days following the latest
delivery of such Objections), meet and discuss in good faith the Objections. If
the Objections cannot be satisfied by negotiation between the parties within
such fifteen (15) day period, the Objections will be referred for arbitration to
an independent auditor selected pursuant to the terms of this Section. The
Buyer shall select two independent accounting firms; provided, that such
independent accounting firms shall not include Coopers & ▇▇▇▇▇▇▇ or any current
auditor, or auditor during the prior 12 months, of the Buyer, the Seller,
Holdings or Parent. Of such two independent accounting firms selected by the
Buyer, the Seller shall choose the Los Angeles office of one of the firms to
serve as the accounting arbitrator (the "Accounting Arbitrator") with respect to
---------------------
the Objections. The Accounting Arbitrator will be instructed to select, at its
discretion, the individuals who will have primary responsibility for this matter
and will be instructed to reach a determination within forty-five (45) days from
the date of referral. The Accounting Arbitrator will be limited to determining
matters of accounting as they relate to the Objections. The decision of the
Accounting Arbitrator will be final and binding upon the parties. The fees and
expenses of the Accounting Arbitrator engaged pursuant to this Section 4.4 shall
be paid by the party whose last calculation of the Final Adjustment Amount prior
to the submission of the matter to the Accounting Arbitrator is furthest from
the Final Adjustment Amount established by the Accounting Arbitrator. The
Preliminary Signing Balance Sheet, Preliminary Closing Balance Sheet and/or
Preliminary Adjustment Amount, as adjusted by agreement of the Seller and the
Buyer or by the Accounting Arbitrator in accordance with this Section 4.4, shall
be the "Final Signing Balance Sheet," "Final Closing Balance Sheet" and "Final
--------------------------- --------------------------- -----
Adjustment Amount," respectively.
-----------------
(e) (i) If the difference of (A) Estimated Adjustment Amount minus
(B) the Final Adjustment Amount is negative, then the amounts payable by the
Buyer to the Seller under Section 4.1(a)(ii) will be reduced (in the order of
maturity) by the absolute amount of such difference.
(ii) If the difference of (A) Estimated Adjustment Amount minus
(B) the Final Adjustment Amount is positive, then as soon as practicable (but in
no event later than three business days) after the final determination of the
Final Closing Balance Sheet pursuant to this
13
Section 4.3, the absolute value of such difference shall be paid to the Seller
by the Buyer by wire transfer in immediately available funds to an account
specified by the Seller.
(f) Notwithstanding anything to the contrary contained in this
Agreement, but subject to the provisions of Section 12.5, if any Payable arises
after the determination of the Final Closing Balance Sheet and was not included
therein, the Buyer may pay such Payable and reduce the amounts payable by the
Buyer to the Seller under Section 4.1(a)(ii) by the amount of such Payable (such
reduction to be in the order of maturity). The Buyer shall provide the Seller
with periodic statements of any such Payables and such other information in
Buyer's possession in connection therewith as the Seller reasonably requests;
provided that notice of all such Payables must be given on or before the first
--------
anniversary of the Closing Date.
ARTICLE 5. THE CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Sanders, Barnet, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
-------
Mosk at 1:00 p.m. on the date of the stockholders meeting contemplated by
Section 8.3, or at such other time or date as the Buyer and the Seller shall
agree. The time and date of the Closing is referred to herein as the "Closing
-------
Date."
----
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
PARENT
The Seller and Parent, jointly and severally, represent and warrant to
the Buyer as follows:
6.1 ORGANIZATION. The Seller is a corporation duly organized and
existing in good standing under the laws of the State of California, and has the
corporate power to own its property and to carry on its business as now
conducted and to carry out the transactions contemplated by this Agreement. The
Seller is qualified to do business as a foreign corporation in all jurisdictions
where failure to so qualify would have a Material Adverse Effect. Parent is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware, and has the corporate power to own its property and to carry
on its business as now conducted and to carry out the transactions contemplated
by this Agreement. Parent is qualified to do business as a foreign corporation
in all jurisdictions where failure to so qualify would have a Material Adverse
Effect.
6.2 POWER AND AUTHORITY. Subject to the approval of Parent's
stockholders holding a majority of each class of Parent's outstanding capital
stock, the Seller and Parent each have all requisite power and authority,
corporate or otherwise, to enter into this Agreement and the other agreements
contemplated hereby and to carry out the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other agreements
contemplated hereby and, subject to the approval of Parent's stockholders
holding a majority of each class of Parent's outstanding capital stock, the
performance by the Seller and Parent of their obligations hereunder and
thereunder have been duly and validly authorized by all necessary corporate
action. Except for approval by Parent's shareholders holding a majority of each
class of Parent's outstanding capital stock, no further corporate action or
other proceedings on the part of the Seller or Parent is necessary to authorize
this Agreement, the other agreements contemplated hereby or the transactions
contemplated hereby or thereby.
6.3 VALID AND BINDING AGREEMENT. When executed and delivered, this
Agreement and each of the other agreements, documents and instruments to be
executed and delivered by the Seller or Parent pursuant hereto shall constitute
valid and binding agreements of the Seller and/or Parent (as applicable),
enforceable against the Seller and/or Parent (as applicable)
14
in accordance with their terms, subject, as to enforcement, (a) to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and (b) to
general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law.
6.4 SUBSIDIARIES. The Seller does not have any subsidiaries or own
any investments in any other Person.
6.5 CONSENTS AND APPROVALS. Except as set forth on Schedule 6.5, no
------------
registration or filings with, notices to, or consent, approval, permit,
authorization or action of, any third party (including any Governmental Agency
or other Person) is required in connection with the execution and delivery by
the Seller or Parent of this Agreement or the other agreements, documents and
instruments to be executed and delivered by the Seller and/or Parent pursuant
hereto or in connection with the consummation of the transactions contemplated
hereby or thereby.
6.6 NO VIOLATIONS. The execution and delivery of this Agreement and
the other agreements, documents and instruments to be executed and delivered
pursuant hereto by the Seller and/or Parent and the consummation by the Seller
and Parent of the transactions contemplated hereby and thereby (a) do not and
will not conflict with or violate any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of the Seller or
Parent and (b) do not and will not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any Lien upon the Transferred Assets pursuant to, (iv)
give any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) except as set forth on Schedule
--------
6.5, require any authorization, consent, approval, exemption or other action by
or notice to any court, Governmental Agency or other third party pursuant to,
any law, statute, rule or regulation to which the Seller or Parent is subject,
or any agreement, instrument, order, judgment or decree to which the Seller or
Parent is subject or by which any of the Transferred Assets are bound.
6.7 FINANCIAL STATEMENTS. The Seller has previously delivered to the
Buyer copies of the Parent's financial statements as of and for the accounting
periods ended December 31, 1994 and 1995 (the "Year End Statements") and
Quarterly Financials and Monthly Financials for accounting periods ending prior
to the date hereof. The Year End Statements and Quarterly Statements
(collectively, the "Seller Financials") are, and in the case of the Quarterly
Interim Financials or Year-End 1996 Financials will be, consistent with the
books and records of Parent and the Seller, as the case may be, which, in turn,
are, and in the case of the Quarterly Interim Financials or Year-End 1996
Financials will be, accurate and complete in all material respects, have been
prepared in accordance with GAAP consistently applied (except, in the case of
the Quarterly Financials and Quarterly Interim Financials for absence of
footnotes and normal year-end adjustments, which adjustments will not be
material and the absence of statements of cash flow and stockholders' equity)
and fairly present the assets, Liabilities and financial condition of the Parent
or Seller at the dates specified and the results of their operations for the
periods then ended. As of the date of the most recent balance sheet of the
Seller included in the Seller Financials, the Seller had no liabilities or
obligations of any kind or nature, fixed or contingent, matured or unmatured,
which are not reflected or fully reserved against on such balance sheet to the
extent required by GAAP. The Monthly Financials are and in the case of the
Monthly Interim Financials will be, prepared in good faith by the Seller based
upon the books and records of the Seller.
6.8 NO UNDISCLOSED LIABILITIES. To its knowledge, the Seller does
not have any Liabilities arising out of transactions entered into prior to the
Closing, or any action or inaction prior to the Closing, or any state of facts
existing at or prior to the Closing other than (a) Liabilities set forth or
reserved against on its Latest Balance Sheet, (b) Liabilities which have arisen
after the date of its Latest Balance Sheet in the Ordinary Course of Business
(none of which is a Liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or law suit
15
which would have a Material Adverse Effect), (c) Liabilities under the ▇▇▇▇▇▇
Agreements and (d) other Liabilities expressly disclosed in other Schedules to
this Agreement.
6.9 TITLE TO PROPERTIES. The Seller has good and marketable title to
all of the Transferred Assets free and clear of all Liens, subject to the rights
of landlords, lessors and licensors in the case of leased or licensed assets.
The Transferred Assets include all of the assets, properties, whether tangible
or intangible, and other rights owned by the Seller and used in the conduct of
the Business as conducted on the Latest Balance Sheet Date and as currently
conducted by the Seller, other than as set forth on Schedule 6.9, the Excluded
------------
Assets and those disposed of in the ordinary course of business.
6.10 CONDITION OF TRANSFERRED ASSETS. Except as set forth on Schedule
--------
6.10, the machinery, equipment and other tangible assets (other than inventory)
----
included among the Transferred Assets are in normal operating condition,
reasonable wear and tear excepted, and have been maintained and repaired on a
regular basis so as to preserve their utility and value.
6.11 REAL PROPERTY.
(a) The Seller does not own, in whole or in part, any real
property.
(b) Attached as Schedule 6.11 is a list of all leases, subleases
-------------
and other similar agreements, including all amendments, extensions and other
modifications (the "Leases") for real property (the "Leased Property" or the
---------------
"Real Property") utilized in connection with the Business to which the Seller is
-------------
a party. The Seller has a good and valid leasehold interest in and to all of the
Leased Property, subject to no Liens except as described in such Schedule. Each
Lease is in full force and effect and is enforceable in accordance with its
terms. The Seller has previously delivered to the Buyer true and complete copies
of all the Leases. Except as described on Schedule 6.11 hereto, no consent,
-------------
waiver, approval or authorization is required from the landlord under any Lease
as a result of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
(c) Other than the Seller or Parent, there are no parties in
possession or parties having any rights to occupy any of the Real Property. The
Real Property is in good condition and repair and is sufficient and appropriate
for the conduct of the Business. All permits, licenses and other approvals
necessary to the current occupancy and use of the Real Property have been
obtained, are in full force and effect and have not been violated. There is no
pending or, to the knowledge of the Seller, any threatened condemnation
proceeding affecting any portion of the Real Property.
6.12 PROPRIETARY RIGHTS. Schedule 6.12 attached hereto sets forth a
-------------
complete and correct list and brief description of all patented and registered
Proprietary Rights owned by the Seller and used in connection with the Business
and all pending patent applications and applications for the registration of
other Proprietary Rights owned by the Seller. Schedule 6.12 also sets forth a
-------------
complete and correct list and brief description of (a) all unregistered
trademarks, trade names and corporate names used by the Seller, (b) all computer
software owned and/or used by the Seller (other than mass-marketed software with
a license fee of less than $1,000), and (c) all licenses and other rights
granted by the Seller to any third party with respect to Proprietary Rights and
all licenses and other rights granted by any third party to the Seller, in each
case together with a description of the subject matter licensed. The Seller has
delivered to the Buyer correct and complete copies of all documents embodying
such licenses. Except as set forth on Schedule 6.12, (a) the Seller owns and
-------------
possesses all right, title and interest in and to, or has a written, enforceable
and effective license to use, all of the Proprietary Rights necessary for the
operation of the Business as presently conducted and as presently proposed to be
conducted, free and clear of all Liens; (b) no claim by any third party
contesting the validity, enforceability, use or ownership of
16
any Proprietary Rights owned or used by the Seller has been made, is currently
outstanding or, to Seller's knowledge, is threatened, and there are no grounds
for any such claim; (c) the Seller has not received any notices of, nor is it
aware of any facts which indicate a likelihood of, any infringement or
misappropriation by, or other conflict with, any third party with respect to,
any Proprietary Rights owned or used by the Seller, nor has the Seller received
any claims alleging infringement or misappropriation of, or conflict with, any
Proprietary Rights of any third party or any offers by a third party to license
its intellectual property; (d) the Seller has not infringed, misappropriated or
otherwise acted in conflict with any Proprietary Rights of any third party, nor
is the Seller aware of any infringement, misappropriation or conflict which
shall occur as a result of the continued operation of the Business as currently
conducted or as proposed to be conducted; (e) all Proprietary Rights owned or
used in connection with the Business prior to the date hereof shall be owned by
or available for use by the Buyer on identical terms and conditions immediately
subsequent to Closing; (f) the Seller has made all necessary filings and
recordations and has paid all required fees and Taxes to record and maintain its
ownership of its patented and registered Proprietary Rights in the United States
Patent and Trademark Office, the United States Copyright Office, and all similar
foreign agencies; (g) the Seller has never agreed to indemnify any person with
respect to any Proprietary Rights; and (h) the Seller is not aware of any
Proprietary Rights that any competitors or other Person has developed which
reasonably could be expected to supersede or make obsolete any product or
process of the Seller or to limit the Business.
6.13 CONTRACTS.
(a) Schedule 6.13 hereto sets forth a complete and correct list (with
-------------
descriptions) of all Hospital Contracts existing on the date hereof and all
agreements, including commitments, instruments, leases (other than real property
leases) or other consensual obligations, to which the Seller is a party or to
which it is subject (excluding customary inventory purchase orders in the
Ordinary Course of Business) (i) which shall be binding upon the Buyer
subsequent to the Closing and which involves consideration with a value of
$20,000 or more, (ii) which shall require the Buyer to provide goods or services
more than ninety (90) days from the date hereof, (iii) which evidence or provide
for any indebtedness of the Seller or any Liens on any of the Transferred
Assets, (iv) which guarantee the performance, Liabilities or obligations of any
other entity, (v) which restrict the ability of the Seller to conduct any
business activities, (vi) which involve any related party, including the Parent
and any present or former employee of the Seller, (vii) which involve any
Governmental Agency, (viii) which are not in the Ordinary Course of Business,
(ix) which are terminable by any third party as a result of the transactions
contemplated by this Agreement, (x) which relate to the distribution or
marketing of the products of the Business, (xi) which relate to Proprietary
Rights used in connection with the Business, (xii) which are sales, distribution
or franchise agreements, or (xiii) which are otherwise material to the Business.
(b) All of the agreements included in the Transferred Assets are
valid, binding and enforceable in accordance with their respective terms. The
Seller is not in breach of any of the agreements included in the Transferred
Assets, nor to the best of the Seller's knowledge is any third party in breach
of such agreements or has repudiated any provision of such agreement and no
event has occurred which with notice, lapse of time or both would constitute a
breach or default or permit termination, modification or acceleration. True and
complete copies of all agreements set forth on Schedule 6.13 (including
-------------
amendments, waivers or other changes thereto) have previously been delivered to
the Buyer. Except as set forth on Schedule 6.13, all agreements included in the
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Transferred Assets are assignable by the Seller to the Buyer without the consent
of any other entity.
(c) As of January 31, 1997, the Seller has not been notified that any
hospital may terminate any Hospital Contract, or that any hospital will propose
any change to the terms of any Hospital Contract. Except as set forth on
Schedule 3.3, there are no guarantees to
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17
any hospital or other person regarding the minimum level of payments to be made
in connection with any Hospital Contract.
6.14 LITIGATION. Except as set forth on Schedule 6.14, there are no
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claims, actions, suits, inquiries, proceedings or investigations pending or, to
the best of the Seller's knowledge, threatened against or affecting the Seller
or any of the Transferred Assets before or by any court or Governmental Agency.
The Seller is not presently subject to any judgment, injunction, order or other
decree of any court of competent jurisdiction.
6.15 COMPLIANCE WITH LAWS. The Business has been conducted in
compliance in all material respects with all applicable laws and regulations of
foreign, federal, state and local Governmental Agencies. The Seller possesses,
and is in compliance in all material respects with, all licenses, permits,
franchises, certificates, approvals and other governmental authorizations
necessary to the conduct of the Business, and such licenses, permits, approvals
and authorizations are transferrable to the Buyer and will be in full force and
effect on and following the Closing Date.
6.16 NO MATERIAL ADVERSE CHANGE. Except as set forth on Schedule
--------
6.16, since the date of the Latest Balance Sheet, no event, occurrence, fact,
condition, change or development has occurred that, individually or in the
aggregate, has constituted or resulted in, or could constitute or result in, a
Material Adverse Effect.
6.17 INTERIM CHANGES. Except as set forth on Schedule 6.17 hereto,
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since the date of the Latest Balance Sheet there have not been:
(a) any changes in the financial condition, assets, liabilities,
personnel or operations of the Seller or in its relationships with suppliers,
customers, distributors, lessors, licensors or others, other than changes in the
ordinary course of business which would not individually or in the aggregate
result in a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Transferred Assets;
(c) any indebtedness for borrowed money or any forgiveness or
cancellation of indebtedness owing to the Seller or waiver of any claims or
rights by the Seller;
(d) any increase in the compensation or benefits paid or to
become payable by the Seller to any of its officers or employees, except for
increases in the Ordinary Course of Business to hourly-paid employees that in
the aggregate are not material;
(e) any dividends or distributions or any transfer, lease,
license or other disposition of assets of the Seller, other than sales of
inventory in the Ordinary Course of Business;
(f) any Liens placed on any of the Transferred Assets;
(g) any amendment or termination of any lease, contract, license
or other agreement to which the Seller is a party;
(h) any change in the collection, payment or credit experience
or practices of the Seller or in the accounting practices, procedures or methods
of the Seller;
(i) any agreement, arrangement or transaction between the Seller
and any affiliate of the Seller or any officer or employee of the Seller;
18
(j) a delay or postponement (beyond the Seller's normal practice) of
the payment of the Seller's accounts payable or other Liabilities;
(k) the mortgage, pledge or creation of a Lien against any of the
Transferred Assets, except Liens for current property taxes not yet due and
payable;
(l) the sale, assignment or transfer of any of the Transferred Assets,
except in the Ordinary Course of Business, or the cancellation without fair
consideration of any debts or claims owing to or held by the Seller;
(m) the sale, assignment or transfer of any Proprietary Rights, or the
disclosure of any proprietary confidential information to any Person or the
granting of any license or sublicense of any rights under or with respect to any
Proprietary Rights;
(n) any extraordinary losses or waiver of any rights of value by the
Seller, whether or not in the Ordinary Course of Business other than those not
having a Material Adverse Effect;
(o) any capital expenditures or commitments therefor that aggregate in
excess of $50,000.
(p) any other transaction not in the Ordinary Course of Business and
consistent with past practices or any material change in the business policies
or practices of the Seller; or
(q) any commitment by the Seller to do any of the foregoing.
6.18 TAXES. (a) Except as described on Schedule 6.18, the Seller has
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timely filed all Tax Returns required to be filed by it, each such Tax Return
has been prepared in compliance with all applicable law and regulations, and all
such Tax Returns are true and accurate in all material respects. All Taxes due
and payable by the Seller have been paid.
(b) The Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or other third party.
(c) Except as set forth in Schedule 6.18 attached hereto:
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(i) no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax has been proposed,
asserted or assessed by any taxing authority against the Seller, and to the
Seller's knowledge, no such deficiency or proposed adjustment has been
threatened;
(ii) no claim has ever been made by a taxing authority in a
jurisdiction where the Seller does not file Tax Returns that the Seller is
or may be subject to Taxes assessed by such jurisdiction; and
(iii) none of the Assumed Liabilities includes any obligation to
make any payments that will be nondeductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign income Tax law).
(d) Schedule 6.18 contains a list of states, territories and
-------------
jurisdictions (whether foreign or domestic) in which the Seller or Parent is
required to file Tax Returns.
19
(e) The Buyer will not be required to deduct and withhold any amount
pursuant to Section 1445(a) of the Code upon the transfer of the Transferred
Assets to the Buyer.
6.19 LABOR MATTERS. The Seller is not a party to any collective
bargaining agreement or any employment, consulting or similar agreement relating
to the Business or any agreement or arrangement providing for severance payments
to any employee of the Seller upon termination of employment or which provide
benefits upon a change in control of the Seller. To the best knowledge of the
Seller, there is no basis for any unfair labor practice charge or complaint
against the Seller arising out of the Seller's activities (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes), nor
is there any labor strike, work stoppage, grievance or other labor dispute
pending or, to the Seller's best knowledge, threatened against the Seller.
There is no existing representation question respecting any employees of the
Seller, nor to the Seller's best knowledge are there any organizational efforts
with respect to any employees of the Seller.
6.20 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on
Schedule 6.20 hereto:
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(a) The Seller has complied and is in compliance with all
Environmental and Safety Requirements.
(b) Without limiting the generality of the foregoing, the Seller has
obtained and complied with, and is in compliance with, all permits, licenses and
other authorizations that may be required pursuant to Environmental and Safety
Requirements for the occupation of their facilities and the operation of the
Business. A list of all such permits, licenses and other authorizations is set
forth on Schedule 6.20.
-------------
(c) The Seller has not received any written or oral notice, report or
other information regarding any Liabilities or potential Liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to the Seller or its
facilities and arising under Environmental and Safety Requirements.
(d) None of the following exists at any property or facility owned or
operated by the Seller:
(i) Asbestos-containing material in any form or condition;
(ii) Materials or equipment containing polychlorinated biphenyls;
(iii) Underground storage tanks or surface impoundments; or
(iv) Landfills or other permanent waste disposal areas.
(e) The Seller has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or Released any substance,
including without limitation any Hazardous Materials, or owned or operated any
facility or property, so as to give rise to Liabilities of the Seller pursuant
to Environmental and Safety Requirements, including without limitation any
Liabilities for corrective action, response costs, natural resource damage or
attorneys fees.
(f) Neither this Agreement, the agreements to be entered into
herewith, nor the consummation of the transactions contemplated hereby or
thereby will result in any obligations for site investigation or cleanup, or
notification to or consent of Government Agencies or third parties, pursuant to
any "transaction-triggered" or "responsible property transfer" Environmental and
Safety Requirements.
20
(g) The Seller has not either expressly or by operation of law assumed
or undertaken any Liability, including without limitation any obligation for
corrective or remedial action, of any other Person relating to Environmental and
Safety Requirements.
(h) Without limiting the foregoing, no facts, events or conditions
relating to the past or present facilities, properties or operations of the
Seller will prevent, hinder or limit continued compliance with Environmental and
Safety Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental and Safety Requirements, or give rise to
any other Liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements, including without
limitation any relating to onsite or offsite Releases or threatened Releases of
Hazardous Materials, personal injury, property damage or natural resource
damage.
6.21 ▇▇▇▇▇▇ AGREEMENTS. True and complete copies of the ▇▇▇▇▇▇
Agreements have been delivered to the Buyer. The ▇▇▇▇▇▇ Agreements have been
duly executed by each of the parties thereto and to the Seller's and Parent's
knowledge and belief, represent the binding and enforceable agreement of each of
the parties thereto, and are in full force and effect (subject to limitations
and restrictions imposed by applicable law with respect to covenants not to
compete). Neither the Seller nor Parent has any knowledge of any breach of the
terms thereof. The ▇▇▇▇▇▇ Agreements were negotiated and entered into with the
intent of, among other things, (a) protecting the Seller and Parent from damage
prior to and following the Closing Date and (b) following the Closing Date,
protecting, for the benefit of Buyer, the goodwill of the Business (including
hospital relationships and confidential information) that is being conveyed to
Buyer hereunder.
6.22 INVENTORY. The inventory of the Seller is, when taken as a
whole, of a level and quality consistent with that reflected on the Latest
Balance Sheet.
6.23 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
--------
6.23 since December 31, 1995, none of the Seller, Parent or their respective
----
Affiliates has been involved in any business arrangement or relationship and
none of the Parent or its Affiliates (other than Seller) owns any property or
right, tangible and intangible, which is used in the Business. Except as set
forth on Schedule 6.23, since the date of the Latest Balance Sheet, none of the
--------------
Parent or its Affiliates has loaned any money to or borrowed any money from the
Seller, which in either case remain outstanding as of the date hereof. Except
as set forth on Schedule 6.23, since the date of the Latest Balance Sheet, none
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of the Parent or its Affiliates has transferred any Liability property or right,
tangible or intangible, to the Seller and the Seller has not transferred any
property or right, tangible or intangible, to any of the Parent or its
Affiliates.
6.24 EMPLOYEE BENEFIT PLANS.
(a) Schedule 6.24 contains an accurate and complete list of each
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"employee benefit plan" (as such term is defined in Section 3(3) of ERISA) and
each other employee benefit plan, policy, understanding or arrangement, in each
case contributed to, maintained or sponsored by the Seller, or with respect to
which the Seller has any liability or potential liability. Each such item
listed on Schedule 6.24 is referred to herein as a "Benefit Plan." Schedule
------------- --------
6.24 also contains an accurate and complete list of each collective bargaining
----
agreement, employment agreement and each other agreement, arrangement,
commitment, understanding, or policy of any kind with or for the benefit of any
current or former employee, officer, director or consultant of the Seller.
(b) Each Benefit Plan that is intended to be qualified within the
meaning of Section 401(a) of the Code has received a determination from the IRS
that such Benefit Plan is qualified under Section 401(a) of the Code, and
nothing has occurred since the date of such determination that could adversely
affect the qualification of such Benefit Plan.
21
(c) The Seller does not contribute to, maintain, sponsor or have any
liability or potential liability with respect to any "employee pension benefit
plan" (as such term is defined in Section 3(2) of ERISA) that is subject to
Section 302 of ERISA or Section 412 of the Code or with respect to any
"multiemployer plan" (as such term is defined in Section 3(37) of ERISA).
(d) Except as set forth on Schedule 6.24, (i) each Benefit Plan and
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any related trust, insurance contract or fund has been maintained, funded and
administered in compliance with its respective terms and the terms of any
applicable collective bargaining agreements and in compliance with all
applicable laws and regulations, including, but not limited to, ERISA and the
Code; (ii) no asset of the Seller that is to be acquired by the Buyer, directly
or indirectly, pursuant to this Agreement is subject to any lien under ERISA or
the Code; (iii) the Seller has not incurred any liability under Title IV of
ERISA or to the Pension Benefit Guaranty Corporation; and (iv) there are no
pending or threatened actions, suits, investigations or claims with respect to
any Benefit Plan (other than routine claims for benefits) and Seller does not
have any knowledge of any facts which could give rise to (or be expected to give
rise to) any such actions, suits, investigations or claims.
(e) Except as set forth on Schedule 6.24, (i) the Seller has complied
-------------
with the health care continuation requirements of Part 6 of Subtitle B of Title
I of ERISA; and (ii) the Seller does not have any obligation under any Benefit
Plan or otherwise to provide health or life insurance benefits to former
employees of the Seller or any other person, except as specifically required by
Part 6 of Subtitle B of Title I of ERISA.
(f) The Seller does not have any liability with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA) solely by reason
of being treated as a single employer under Section 414 of the Code with any
trade, business or entity other than the Seller.
(g) With respect to each Benefit Plan, the Seller has provided the
Buyer with true, complete and correct copies of (to the extent applicable) (i)
all documents pursuant to which the Benefit Plan is maintained, funded and
administered, (ii) the most recent annual report (Form 5500 series) filed with
the IRS (with applicable attachments), (iii) the most recent financial
statement, (iv) the most recent actuarial valuation of benefit obligations, (v)
the most recent determination letter received from the IRS, and (vi) the most
recent summary plan description provided to participants.
6.25 INSURANCE. Seller has maintained, and has currently in effect,
insurance coverage that is usual and customary for a business of a type operated
by the Seller.
6.26 BROKERS. No broker's, finder's or any similar fee shall be
incurred by or on behalf of the Seller or the Parent in connection with the
origin, negotiation, execution or performance of this Agreement or the
transactions contemplated hereby for which the Buyer shall have any Liability.
6.27 ACCURACY OF INFORMATION. None of the Seller's or the Parent'
representations, warranties or statements contained in this Agreement or in the
Schedules hereto or any other information provided to the Buyer or its agents by
the Seller, the Parent or their respective agents contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make any of such representations, warranties or statements true.
6.28 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties contained in this Article 6 shall be true,
correct and complete on and as of the Closing Date with the same force and
effect as though such representations and warranties
22
had been made on and as of the Closing Date (or, in the case of any such
representations or warranties made only as of a particular date, as of such
particular date).
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer and Holdings, jointly and severally, represent and warrant
to Seller and the Parent as follows:
7.1 ORGANIZATION. The Buyer and Holdings are corporations duly
organized and existing in good standing under the laws of their states of
incorporation and have the corporate authority to own their properties and to
carry on their business as now conducted and to carry out the transactions
contemplated by this Agreement.
7.2 POWER AND AUTHORITY. Each of the Buyer and Holdings has all
requisite power and authority, corporate or otherwise, to enter into this
Agreement and the other agreements contemplated hereby to which they are a party
and to carry out the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other agreements contemplated
hereby and the performance by each of the Buyer and Holdings of its obligations
hereunder and thereunder have been duly and validly authorized by all necessary
corporate action. No corporate action or other proceedings on the part of the
Buyer or Holdings is necessary to authorize this Agreement, the other agreements
contemplated hereby or the transactions contemplated hereby or thereby.
7.3 VALID AND BINDING AGREEMENT. When executed and delivered, this
Agreement and each of the other agreements, documents and instruments to be
executed and delivered by the Buyer and/or Holdings pursuant hereto shall
constitute valid and binding agreements of the Buyer and/or Holdings (as
applicable), enforceable against the Buyer or Holdings (as applicable) in
accordance with their terms, subject, as to enforcement, (a) to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and (b) to
general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law.
7.4 CONSENTS AND APPROVALS. Except as set forth on Schedule 7.4, no
------------
registration or filings with, notices to, or consent, approval, permit,
authorization or action of, any third party (including any Governmental Agency
or other Person) is required in connection with the execution and delivery by
the Buyer or Holdings of this Agreement or the other agreements, documents and
instruments to be executed and delivered by the Buyer or Holdings pursuant
hereto or in connection with the consummation of the transactions contemplated
hereby or thereby.
7.5 NO VIOLATIONS. Except as set forth on Schedule 7.5, the
------------
execution and delivery of this Agreement and the other agreements, documents and
instruments to be executed and delivered pursuant hereto by the Buyer and/or
Holdings and the consummation by the Buyer and Holdings of the transactions
contemplated hereby and thereby (a) do not and will not conflict with or violate
any provision of the certificate of incorporation or by-laws (or similar
organizational documents) of the Buyer or Holdings and (b) do not and will not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) give any third party the right to
modify, terminate or accelerate any obligation under, (iv) result in a violation
of, or (v) except as set forth on Schedule 7.5, require any authorization,
------------
consent, approval, exemption or other action by or notice to any court,
Governmental Agency or other third party pursuant to, any law, statute, rule or
regulation to which the Buyer or Holdings is subject, or any agreement,
instrument, order, judgment or decree to which the Buyer or Holdings is subject.
7.6 BROKERS. No broker's, finder's or any similar fee shall be
incurred by or on behalf of the Buyer in connection with the origin,
negotiation, execution or performance of this
23
Agreement or the transactions contemplated hereby for which the Seller or the
Parent shall have any liability.
7.7 FINANCIAL STATEMENTS. Holdings has previously delivered to the
Seller copies of Holdings' financial statements as of and for Holdings' fiscal
years ended September 30, 1994, 1995 and 1996 and fiscal quarter ended December
31, 1996 (collectively, the "Holdings Financials"). The Holdings Financials are
-------------------
consistent with the books and records of the Holdings which, in turn, are
accurate and complete in all material respects, have been prepared in accordance
with GAAP consistently applied (except, in the case of interim financials for
absence of footnotes and normal year-end adjustments, which adjustments will not
be material) and fairly present the assets, Liabilities and financial condition
of Holdings at the dates specified and the results of its operations for the
periods then ended. As of the date of the most recent balance sheet included in
Holdings Financials, Holdings had no liabilities or obligations of any kind or
nature, fixed or contingent, matured or unmatured, which are not reflected or
fully reserved against on such balance sheet to the extent required by GAAP.
7.8 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, no event,
occurrence, fact, condition, change or development has occurred (or is likely to
occur) that, individually or in the aggregate, has constituted or resulted in,
or could constitute or result in a material adverse change in the Buyer's
business, operations, condition (financial or otherwise), assets, prospects or
employee, customer or supplier relations that Seller reasonably determines
(after written disclosure of all material facts and circumstances) could be
expected to have a material adverse effect on the Buyer's ability to fulfill its
obligations under this Agreement.
7.9 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties contained in this Article 7 shall be true and
complete on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the Closing Date.
ARTICLE 8. COVENANTS OF THE SELLER AND PARENT
8.1 CONDUCT OF BUSINESS. Except (x) as set forth on Schedule 8.1 and
------------
(y) for leases of cameras from Dycam that are installed in hospitals subject to
Hospital Contracts which leases are on terms consistent (and no less favorable
to the Seller) than those entered prior to the date hereof, from the date hereof
to the Closing Date, except as expressly contemplated by this Agreement or
otherwise consented to by the Buyer in writing, the Seller shall:
(a) carry on the Business, including the cash management practices of
the Business, only in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and use its best efforts to preserve
intact its present business organizations, keep available the services of its
present officers and employees (except ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇), and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(b) maintain in all material respects all of the structures, equipment
and other tangible personal property of the Seller in good repair, order and
condition except for ordinary wear and tear and damage by unavoidable casualty;
(c) preserve, maintain, protect and continue to develop all
Proprietary Rights used in the Business;
(d) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by the Seller;
24
(e) perform in all material respects all obligations of the Seller
under leases, agreements, contracts and instruments relating to or affecting the
Business;
(f) maintain the books of account and records of the Seller in
the usual, regular and ordinary manner;
(g) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the Seller and the conduct of
the Business;
(h) not hire or terminate employees, enter any employment agreement or
commitment to employees or effect any increase in the compensation or benefits
payable or to become payable to any officer, director or management employee or
effect any increase in the compensation of any other employee, except for (i)
increases for hourly employees in the Ordinary Course of Business that in the
aggregate are not material and (ii) hiring of employees on a temporary basis
pending the Closing and (iii) termination of employees for cause;
(i) not (i) create or incur any indebtedness for borrowed money,
capital lease or similar obligation, (ii enter into or terminate any lease of
real estate or personal property, (ii create any Lien on the Transferred Assets,
or (iv cancel without payment in full any notes, loans or other obligations
receivable from any person or entity, except loans from, and Liens in favor of,
the Buyer;
(j) not sell, lease, license or otherwise dispose of any material
asset of the Seller (other than dispositions of the Excluded Assets and sales of
inventory in the Ordinary Course of Business), acquire any substantial assets,
make any investment (including capital expenditures) or enter into any contract
or make any material commitment relating to the Business, except as contemplated
by Section 8.5;
(k) not (i) loan or advance funds to the Parent or any affiliate of
the Seller or (ii engage in any transaction with the Parent or any Affiliate of
the Seller or Parent, or create or discharge any intercompany account, other
than in the Ordinary Course of Business;
(l) not take any action which would require disclosure under
Section 6.17; and
(m) not commit itself to do any of the actions described in
clauses (h) through (l) above.
8.2 ACCESS TO INFORMATION. Between the date of this Agreement and the
Closing Date, the Seller will (a) give the Buyer and its authorized
representatives (including lenders and accountants) reasonable access to all
employees, plants, offices, warehouses and other facilities and property of the
Seller and to its books and records (including such access as may be necessary
to enable the Buyer and its independent accountants to perform a physical
inventory prior to Closing in connection with the preparation of the Closing
Date Balance Sheet), (b) permit the Buyer and its authorized representatives to
make such inspections thereof as the Buyer may reasonably request, and (c)
furnish the Buyer and its representatives and advisers with such financial, tax
and operating data and other information with respect to the business and
properties of the Seller as the Buyer may from time to time reasonably request;
provided, however, that any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the Seller. Any
information provided pursuant to this Section 8.2 shall be subject to the
Confidentiality Agreements described in Section 13.3.
8.3 EFFORTS TO CONSUMMATE TRANSACTION. The Seller and the Parent
shall use their reasonable commercial efforts to take or cause to be taken all
actions under their control
25
and required to consummate the transactions contemplated hereby including,
without limitation, such actions as may be necessary to obtain, prior to the
Closing, all necessary governmental or other third-party approvals and consents
required in connection with the consummation of the transactions contemplated by
this Agreement. Without limiting the foregoing, Parent will file with the
Securities and Exchange Commission ("SEC") its preliminary proxy materials on
---
or before February 21, 1997 and will use its commercially reasonable efforts to
expedite receipt of comments on such materials from the SEC and will respond
promptly to any such comments. The Board of Directors of Parent will recommend
that Parent's stockholders vote in favor of the transactions contemplated
hereby. The Seller or Parent shall provide the Buyer with copies of all proxy
materials to be filed with the SEC or sent to Parent's stockholders (except for
those materials that do not vary in any material respect to those previously
provided to the Buyer). None of such proxy materials shall refer to the Buyer,
Holdings or their Affiliates unless the Buyer has consented to such reference
(which consent shall not be unreasonably withheld or delayed).
8.4 NO SOLICITATION. Unless and until this Agreement shall have been
terminated pursuant to Section 13.1, the Seller and the Parent shall not
directly or indirectly (a) solicit, elicit, encourage or initiate any
discussions or negotiations with or provide any information to any person (other
than the Buyer or its representatives) concerning or in connection with any sale
of substantial assets of, or an equity interest in, the Seller or any merger or
other business combination relating to the Seller, or (b) disclose any
information not customarily disclosed to any person concerning the business and
assets of the Seller, or afford to any other person access to the properties,
books and records of the Seller, or otherwise assist any person in connection
with any of the foregoing. The Seller or the Parent, as the case may be, shall
promptly notify the Buyer of any proposal, inquiry or offer relating to any of
the foregoing matters and shall advise the Buyer of the material terms thereof.
8.5 HOSPITAL CONTRACTS.
(a) The Seller will only enter into Hospital Contracts in its Ordinary
Course of Business (including, without limitation, with respect to commissions
payable thereunder); provided that such Hospital Contracts shall be evidenced in
writing; provided further that the Seller will not, without the consent of the
Buyer (i) provide guarantees of minimum commissions or income or (ii) enter into
a Hospital Contract with any hospital with less than 500 annualized births
(calculated as provided in Section 4.2(h)); and provided further that,
notwithstanding the foregoing, the Seller will not enter into any Hospital
Contracts (or Install any Hospital Contract entered into prior to the date
hereof) if the Buyer notifies the Seller within 5 days after the Buyer's receipt
of written notice of the material terms of such Hospital Contract (or proposed
Installation) that the Buyer has in good faith determined that it does not
expect such contract to provide a reasonable return. The Seller will notify the
Buyer of the material terms of any Hospital Contract prior to entering into such
Hospital Contract. The Hospital Contracts entered into after December 13, 1996
and prior to the date hereof are listed on Schedule 8.5.
------------
(b) The Seller will promptly notify the Buyer if the Seller receives
notice that any hospital may terminate a Hospital Contract, or that any hospital
intends to propose any change to a Hospital Contract.
8.6 FINANCIAL INFORMATION. Prior to the Closing, the Seller shall
provide to the Buyer, as soon as such information becomes available, audited
financials statements of Parent or for the year ended December 31, 1996 and
monthly and quarterly financial statements of Seller for months and quarters
ending after December 31, 1996 (the "Interim Financials") for the Seller
------------------
(prepared consistent with the applicable Financial Statements) together with
such other financial information as the Buyer may reasonably request; provided
that financial statements for each month (including January 1997) shall be
delivered within 21 days following such month end and financial
26
statements for the fiscal year ended December 31, 1996 shall be delivered prior
to the Closing Date.
8.7 EMPLOYEES. As of the Closing Date, the Buyer shall offer to
employ those employees of the Seller as Buyer determines in its sole discretion,
it being agreed that the Buyer shall have no obligation to hire any or all of
such employees. The wages or salaries offered to any such employee shall be
substantially similar to such employee's then current wage or salary and the
employee benefits offered to such employees shall be substantially similar to
those afforded to other similarly-situated employees of the Buyer. The employees
who accept the Buyer's offers of employment as of the Closing Date shall be
referred to herein as "Transferred Employees." All employees who do not accept
---------------------
such offers of employment and each other employee of the Seller who does not
become a Transferred Employee (including, without limitation, any employee of
the Seller who on the Closing Date is on an approved medical leave of absence,
short-term or long-term disability leave of absence, or workers' compensation
leave of absence) shall be referred to herein as "Retained Employees." The
------------------
Seller shall be solely responsible for all liabilities, obligations and
commitments relating to compensation of the Retained Employees and as may arise
as a result of the transactions contemplated by this Agreement, including, but
not limited to, any severance payments. Nothing in this Agreement shall limit
the Buyer's ability to terminate the employment of any Transferred Employee at
any time and for any reason, including without cause.
8.8 PRE-CLOSING ACTIVITIES. The Seller agrees that prior to the
Closing Date, the Seller shall direct its management and other personnel to
focus their material efforts and business activities on servicing existing
hospitals to increase hospital sales and hospital satisfaction with the Seller's
services. In addition, the Seller shall, in coordination with Hasco, provide
hospitals subject to Hospital Contracts with information regarding Hasco and the
transactions contemplated hereby.
8.9 CONSULTATION. The Seller will, from time to time, consult with
the Buyer regarding the daily operations of the Seller's business. In
connection therewith, the Seller will, at the Buyer's request, set up meetings
with key personnel of the Seller and the Buyer to discuss such operations. Such
meeting will be held as frequently as reasonably requested by the Buyer. The
Seller will make office space available from time to time prior to the Closing
Date for up to one employee of the Buyer in connection with such consultation
and meetings with key personnel.
8.10 LIMITATION OF LIABILITY. The Seller and Parent agree that
neither the Buyer, Holdings or any of their Affiliates shall have any liability
to the Seller, Parent or any Affiliate, stockholder, officer, employee, agent or
other Person for any failure of the Buyer or Holdings to grant a consent under
this Agreement or the Loan Agreement or for any suggestion or request made to
Seller or Parent relating to their business, except to the extent of the Buyer's
gross negligence or wilful misconduct. Notwithstanding anything contained in
the Agreement to the contrary, no claim may be made against the Buyer or
Holdings or any of their Affiliates for any lost profits or any special,
indirect or consequential damages in respect of any breach or wrongful conduct
(other than willful misconduct constituting actual fraud) in connection with,
arising out of or in any way related to the transactions contemplated hereunder,
or any act, omission or event occurring in connection herewith or therewith; and
the Seller and Parent hereby waive, release and agree not to ▇▇▇ upon any such
claim for any such damages.
ARTICLE 9. COVENANTS OF THE BUYER
9.1 ACTIONS AND CONSENTS. The Buyer and Holdings shall use their
reasonable commercial efforts to take or cause to be taken all actions under
their control and required to consummate the transactions contemplated hereby
including, without limitation, such
27
actions as may be necessary to obtain, prior to the Closing, all necessary
governmental or other third party approvals and consents required in connection
with the consummation of the transactions contemplated by this Agreement.
9.2 CONTINUED ASSISTANCE. At all times from and after the Closing
Date, the Buyer shall cooperate with the Seller and provide such assistance as
the Seller may reasonably request, at the Seller's expense, in connection with
the defense or prosecution of any claims, actions, suits or investigations
arising out of the conduct of the Business prior to the Closing Date (except if
the Buyer and Seller are adverse on such matter).
9.3 BUYER FINANCIAL STATEMENTS. At least five business days prior to
the Closing Date, the Buyer shall deliver to the Seller a copy of its most
recently available monthly or quarterly financial statements.
ARTICLE 10. OTHER AGREEMENTS AMONG THE PARTIES
10.1 EXPENSES. Except as otherwise specifically provided in this
Agreement, each party hereto shall pay its own expenses incident to this
Agreement and the transactions contemplated hereby, including legal and
accounting fees and disbursements. Any filing, recording or other fees or
sales, transfer or other Taxes applicable to the conveyance and transfer of the
Transferred Assets from the Seller to the Buyer pursuant to the provisions of
this Agreement or the effectuation of any of the other transaction contemplated
hereby shall be borne and paid by the Seller. The provisions of this Section
10.1 shall survive any termination of this Agreement.
10.2 CERTAIN TAX MATTERS.
(a) Access and Record Retention. The Buyer and Seller shall each
---------------------------
permit authorized representatives of the other, at all reasonable times after
the Closing, access to their offices, records and accounts which relate to the
Seller prior to the Closing for the purpose of obtaining any information
necessary for the preparation and filing of any Tax Returns or other reports to
any Governmental Agency for any period and for other proper purposes. The Buyer
and the Seller shall each (i) retain such records as the other may reasonably
request, including those which shall be necessary to permit preparation and
filing of federal and state Tax Returns, for reasonable periods (not less than
seven years) consistent with their record retention policies, and (ii) give the
other party reasonable written notice prior to transferring, destroying or
discarding such records and, if the other party so requests, the Buyer or
Seller, as the case may be, shall allow the other party to take possession of
such records. This Section 10.2(a) shall not apply in connection with
litigation or other action between or among the parties hereto or their
Affiliates.
(b) Prorations. All real property Taxes, personal property Taxes, ad
----------
valorem obligations and similar Taxes imposed on a periodic basis, in each case
levied with respect to the Transferred Assets, other than conveyance taxes
provided for in Section 10.2(c) below, for a taxable period which includes (but
does not end on) the Closing Date shall be apportioned between the Seller and
the Buyer as of the Closing Date based on the number of days of such taxable
period included in the Pre-Closing Tax Period and the number of days of such
taxable period included in the Post-Closing Tax Period. The Seller shall be
liable for the proportionate amount of such Taxes that is attributable to the
Pre-Closing Tax Period. Within 90 days after the Closing, the Seller and the
Buyer shall present a reimbursement to which each is entitled under this Section
10.2(b) together with such supporting evidence as is reasonably necessary to
calculate the proration amount. The proration amount shall be paid by the party
owing it to the other within 10 days after delivery of such statement.
Thereafter, the Seller shall notify the Buyer upon receipt of any ▇▇▇▇ for real
or personal property Taxes relating to the Transferred Assets, part or all of
which are attributable to the Post-Closing Tax Period, and shall promptly
deliver such ▇▇▇▇ to the Buyer who
28
shall pay the same to the appropriate taxing authority, provided that if such
▇▇▇▇ covers the Pre-Closing Tax Period, the Seller shall also remit prior to the
due date of assessment to the Buyer payment for the proportionate amount of such
▇▇▇▇ that is attributable to the Pre-Closing Tax Period. In the event that
either the Seller or the Buyer shall thereafter make a payment for which it is
entitled to reimbursement under this Section 10.2(b), the other party shall make
such reimbursement promptly but in no event later than 30 days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement. Any payment
required under this Section and not made within 20 business days of delivery of
the statement shall bear interest at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day until
paid.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the Seller
when due, and the Seller will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, the Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
10.3 RECEIVABLES; MAIL.
(a) In the event that any payment of the accounts receivable or other
asset included in the Transferred Assets is received by the Seller after the
Closing Date, the Seller will hold such amounts received or paid as trustee for
the Buyer and remit such payments to the Buyer as soon as practicable following
receipt thereof (but in any event within 2 business days).
(b) Notwithstanding any other provision of this Agreement, the Seller
shall on the sixth month anniversary of the Closing Date pay to the Buyer the
amount by which the aggregate of all sums received by the Buyer in respect of
accounts receivable included in the Transferred Assets (after subtracting from
any amount paid any reasonable collection costs incurred by the Purchaser) is
less than the amount thereof reflected on the Final Closing Balance Sheet (net
of reserves); provided that this provision shall apply only to the extent that
Buyer fulfills its obligations under this Section 10.3 to collect the Receivable
and that a purchase price adjustment pursuant (or further adjustment) would have
occurred pursuant to Section 4.4 had the amount of such uncollected
receivable(s) (net of reserves) been valued at zero on the Closing Date. Upon
receipt of such payment as contemplated by the preceding sentence, the Buyer
shall assign any such receivables back to the Seller and shall thereafter pay to
the Seller any amounts subsequently collected by the Buyer in respect of such
assigned receivables. For the purposes of this Section 10.3, an account
receivable shall not be regarded as realizing its full face value to the extent
that it is paid, received or otherwise recovered in circumstances in which such
payment, receipt or recovery is or may be void, voidable or otherwise liable to
be reclaimed or set aside. With respect to any delinquent receivable included
in the Transferred Assets, the Buyer shall take such actions to collect such
receivable as are consistent with its normal collection policies for its other
receivables. Any collections received shall be applied to the oldest
outstanding receivable of such payee unless such payee specifies another
receivable in writing. Any amounts due Buyer under this Section 10.3(b) shall
be satisfied pursuant to an offset of payments due the Seller under Article 4
(such offset to be in the order of maturity).
(c) The Seller authorizes and empowers the Buyer from and after the
Closing Date (i) to receive and open mail addressed to the Seller and (ii) to
deal with the contents thereof in any manner the Buyer sees fit; provided, in
the case of clause (ii), such mail and the contents thereof relate to the
Transferred Assets or otherwise to the Business or to any of the Assumed
Liabilities. The Seller agrees to deliver to the Buyer promptly upon receipt
any mail,
29
checks or other documents received by it pertaining to the Transferred
Assets or otherwise to the Business or any of the Assumed Liabilities. The
Buyer agrees to deliver to the Seller any mail, checks or documents which it
receives to which it is not entitled by reason of this Agreement or otherwise
and to which the Seller is entitled.
ARTICLE 11. CONDITIONS OF CLOSING
11.1 CONDITIONS TO OBLIGATION OF THE BUYER TO CLOSE. The obligation
of the Buyer to close the transactions contemplated hereby shall be subject to
the fulfillment and satisfaction, prior to or at the Closing, of the following
conditions, or the written waiver thereof by the Buyer:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Seller and the Parent contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date (or, in the
case of any such representation or warranty made only as of a particular date,
as of such particular date). The Seller and the Parent shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Seller or the Parent, as
the case may be, on or prior to the Closing Date.
(b) No Proceedings. No action, suit or proceeding will be pending or
--------------
threatened before any judicial authority or Government Entity the result of
which could prevent or prohibit the consummation of any transaction pursuant to
the this Agreement, cause any such transaction to be rescinded following
consummation, or adversely affect the Buyer's right to conduct the Business or
to own the Transferred Assets or the Seller's performance of its obligations
pursuant to this Agreement or the other agreements contemplated hereby, and no
judgment, order, decree, stipulation, injunction or charge having any such
effect will exist.
(c) Approvals. All governmental and third party approvals, consents,
---------
permits or waivers necessary for consummation of the transactions contemplated
by this Agreement shall have been obtained. Stockholders of Parent holding the
required number of shares shall have approved the transactions contemplated
hereunder.
(d) Financing. The Buyer shall have received the proceeds of the
---------
financing required to pay the cash portion of the Purchase Price and related
fees and expenses and the consent of ▇▇▇▇▇▇ Financial, Inc. and the other
lenders providing such financing to the other transactions contemplated hereby,
in each case on terms satisfactory to the Buyer.
(e) Deliveries. The Seller and/or the Parent shall have delivered, or
----------
caused to be delivered, to the Buyer the following documents and certificates
(which shall be in form and substance satisfactory to the Buyer):
(i) Officer's Certificate - a certificate dated the Closing Date
---------------------
and signed by an executive officer of the Seller and Parent expressly certifying
that the conditions set forth in Section 11.1(a), 11.1(b), 11.1(c) and 11.1(f)
have been satisfied;
(ii) ▇▇▇▇ of Sale - a ▇▇▇▇ of sale in form and substance
------------
reasonably acceptable to the Buyer and other good and sufficient instruments of
transfer and conveyance as shall be effective to vest in the Buyer good and
marketable title to the Transferred Assets;
(iii) Instruments of Assignment - assignment, duly executed
-------------------------
by the Seller and in form and substance reasonably acceptable to the Buyer of
all contracts, agreements, licenses, purchase orders and leases (including
leases for motor vehicles) relating to
30
the Business; and separate assignments in form and substance to the Buyer of all
Proprietary Rights, including those set forth on Schedule 6.12;
-------------
(iv) Miscellaneous - such other documents of transfer,
-------------
conveyance and assignment valid to transfer all of the Transferred Assets to the
Buyer;
(v) Opinion of The Seller's Counsel - an opinion of the
-------------------------------
Seller's counsel as to the due authorization and enforceability of this
Agreement and that the proper stockholder approval and other corporate actions
of the Parent and the Seller have taken place to authorize the performance of
the transactions contemplated hereby, which opinion shall be in form and
substance reasonably acceptable to the Buyer and dated the Closing Date;
(vi) Noncompetition Agreement - the Noncompetition Agreement,
------------------------
duly executed by the Seller and Parent;
(vii) Sublease Agreement -- the Sublease Agreement duly executed
by Seller;
(viii) Dycam Option -- the Dycam Option, duly executed by Parent;
------------
(ix) Dycam Master Agreement -- the Dycam Master Agreement, duly
----------------------
executed by Dycam; and
(x) IP License -- the IP License, duly executed by the Seller.
----------
(f) No Material Adverse Effect. No event, occurrence, fact,
--------------------------
condition, change or development shall occur (or be likely to occur) that,
individually or in the aggregate, has constituted or resulted in, or could
constitute or result in, a Material Adverse Effect.
(g) Key Employee. ▇▇▇▇▇ ▇▇▇▇ shall have accepted the Buyer's offer of
------------
employment and shall not have given any indication of his intention to terminate
such employment.
(h) Other Documents and Instruments. The Buyer shall have received
-------------------------------
such other documents and instruments as reasonably requested by the Buyer in
connection with the transactions contemplated hereunder.
11.2 CONDITIONS TO OBLIGATION OF THE SELLER TO CLOSE. The obligation
of the Seller to close the transactions contemplated hereby shall be subject to
the fulfillment and satisfaction, prior to or at the Closing, of the following
conditions, or the written waiver thereof by the Seller:
(a) Representations, Warranties and Covenants; Officer's Certificate.
----------------------------------------------------------------
The representations and warranties of the Buyer and Holdings contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Buyer and
Holdings shall have performed and complied with all covenants and agreements
required by this Agreement to be performed or complied with by the Buyer and
Holdings on or prior to the Closing Date.
(b) Approvals. All governmental and third party approvals, consents,
---------
permits or waivers necessary for consummation of the transactions contemplated
by this Agreement shall have been obtained. Stockholders of Parent holding the
required number of shares shall have approved the transactions contemplated
hereunder.
31
(c) Proceedings. No action, suit or proceeding will be pending or
-----------
threatened before any judicial authority or Government Entity the result of
which could prevent or prohibit the consummation of any transaction pursuant to
the this Agreement, cause any such transaction to be rescinded following
consummation, or adversely affect the Buyer's performance of its obligations
pursuant to this Agreement or the other agreements contemplated hereby, and no
judgment, order, decree, stipulation, injunction or charge having any such
effect will exist.
(d) Deliveries. The Buyer shall have delivered, or caused to be
----------
delivered, to the Seller and the Parent:
(i) Officer's Certificate - a certificate dated the Closing Date
---------------------
and signed by an executive officer of the Buyer and Holdings expressly
certifying that the conditions set forth in Sections 11.2(a), 11.2(b), (1.2(c)
and 11.2(e) have been satisfied;
(ii) Sublease Agreement -- the Sublease Agreement, duly
------------------
executed by Buyer;
(iii) Opinion of the Buyer's Counsel - an opinion of the
------------------------------
Buyer's New York counsel as to the due authorization and enforceability of this
Agreement (assuming New York law applies), which opinion shall be in form and
substance reasonably acceptable to the Seller and dated the Closing Date;
(iv) Dycam Master Agreement -- the Dycam Master Agreement
----------------------
duly executed by Buyer;
(v) Assumption Agreement -- an assumption agreement, in form and
--------------------
substance reasonably acceptable to the Seller, pursuant to which the Buyer
assumes all the Assumed Liabilities; and
(vi) IP License -- the IP License, duly executed by the
----------
Seller.
(e) No Material Adverse Effect. No event, occurrence, fact, condition,
--------------------------
change or development has occurred (or is likely to occur) that, individually or
in the aggregate, has constituted or resulted in, or could constitute or result
in a material adverse change in the Buyer's business, operations, condition
(financial or otherwise), assets, prospects or employee, customer or supplier
relations that Seller reasonably determines (after written disclosure of all
material facts and circumstances) could be expected to have a material adverse
effect on the Buyer's ability to fulfill its obligations under this Agreement.
ARTICLE 12. INDEMNIFICATION
12.1 INDEMNIFICATION. (a) The Seller and the Parent hereby agree,
jointly and severally, to indemnify and hold harmless the Buyer and its
directors, officers, employees, agents, Stockholders and affiliates against and
in respect of any and all damages, costs, liabilities, losses, judgments,
penalties, fines, expenses or other costs (including attorney's fees)
(collectively, "Losses") arising from or relating to: (i) any breach of any of
------
the representations or warranties made by the Seller or the Parent in this
Agreement, any Schedule hereto or any other agreement, document or instrument
delivered by the Seller or the Parent in connection with the Closing; (ii) any
breach of the covenants and agreements made by the Seller or the Parent in this
Agreement or any other agreement, document or instrument delivered by the Seller
or the Parent in connection with the Closing; (iii) any litigation or other
proceeding brought by any Stockholder, officer, director, employee or creditor
of Seller, Parent or Dycam in connection with the transactions contemplated
hereby; and (iv) the Excluded Liabilities, including liabilities associated with
broker's and finder's fees and similar compensation based on arrangements to
which the Buyer is not a party.
32
(b) The Buyer shall indemnify and hold harmless the Seller and the
Parent, against and in respect of any Losses arising from or relating to (i) any
breach of any of the representations or warranties made by the Buyer or Holdings
in this Agreement, any Schedule hereto or any other agreement, document or
instrument delivered by the Buyer or Holdings in connection with the Closing,
(i) any breach of the covenants and agreements made by the Buyer or Holdings in
this Agreement or any other agreement, document or instrument delivered by the
Buyer or Holdings in connection with the Closing, and (ii following the Closing
Date, the Assumed Liabilities.
12.2 MINIMUM AMOUNTS OF INDEMNITY. (a) No amounts shall be payable
by the Seller or the Parent pursuant to Section 12.1(a)(i) unless and until the
aggregate amount otherwise payable pursuant to such Section 12.1(a)(i) in the
absence of this Section 12.2 exceeds $50,000, in which event such amount in
excess of $50,000 (but only such amount in excess) shall be due.
12.3 SURVIVAL; TIME LIMIT ON INDEMNITY. Notwithstanding any
examination made by or on behalf of any party hereto, the knowledge of any party
or the acceptance by any party of any certificate or opinion, each
representation, warranty and covenant contained herein, and in any writing
delivered pursuant hereto, shall survive the Closing. Notwithstanding the
foregoing, no claim for indemnification under Section 12.1(a)(i) shall be made
after 5:00 p.m. (St. Louis time) on the 30th month anniversary of the Closing
Date.
12.4 PROCEDURE FOR CLAIMS BY THIRD PARTIES. (a) Any party asserting a
right of indemnification provided for under this Agreement (the "Indemnified
-----------
Party") in respect of, arising out of or involving a claim or demand made by any
-----
person, firm, Governmental Agency or corporation against the Indemnified Party
(a "Third Party Claim") shall notify the indemnifying party (the "Indemnifying
----------------- ------------
Party") in writing of the Third Party Claim within 20 business days after
-----
receipt by such Indemnified Party of written notice of the Third Party Claim.
As part of such notice, the Indemnified Party shall furnish the Indemnifying
Party with copies of any pleadings, correspondence or other documents relating
thereto that are in the Indemnified Party's possession. The Indemnified Party's
failure to notify the Indemnifying Party of any such matter within the time
frame specified above shall not release the Indemnifying Party, in whole or in
part, from its obligations under this Section 12, except to the extent that the
Indemnified Party's ability to defend against such claim is actually prejudiced
thereby. If, within 15 days following notification of a Third Party Claim that
seeks solely monetary damages, the Indemnifying Party unconditionally
acknowledges its liability under this Section 12 with respect to such Third
Party Claim and provides to the Indemnified Party assurances of its ability to
pay any such Third Party Claim (reasonably acceptable to the Indemnified Party),
the Indemnifying Party shall have the right to defend against any such Third
Party Claim at the expense of such Indemnifying Party. Any such defense shall
be conducted actively and diligently by reputable attorneys employed by the
Indemnifying Party reasonably acceptable to the Indemnified Party; provided that
the Indemnified Party shall be entitled at any time to participate in such
proceedings and to be represented by attorneys of its own choosing; and provided
further that the fees and expenses of such counsel shall be at the sole expenses
of the Indemnified Party unless (i) the Indemnifying Party shall not have
notified the Indemnified Party that it will assume the defense of such Third
Party Claim and have designated counsel reasonably acceptable to the Indemnified
Party as provided above or (ii) the named parties to any proceeding with respect
to such Third Party Claim (including any actual or potential impleaded parties)
include both the Indemnified Party and the Indemnifying Party and representation
of both parties by the same counsel would, as reasonably determined by the
Indemnified Party's counsel, be inappropriate due to actual or potential
differing interests between them. The cost of separate counsel for the
Indemnified Party in the case of clauses (i) or (ii) of the preceding sentence
shall be paid by the Indemnifying Party. If any Indemnifying Party shall
undertake to defend any Third Party Claim, the Indemnified Party agrees to
cooperate fully with
33
the Indemnifying Party and its counsel in the defense against any such Third
Party Claim. All costs and expenses incurred in connection with such cooperation
shall be borne by the Indemnifying Party. The Indemnifying Party shall not
settle any Third Party Claim for other than cash (and with a full release of the
Indemnified Party) unless the Indemnified Party shall consent.
(b) If any party becomes obligated to indemnify another party with
respect to any Third Party Claim and the amount of liability with respect
thereto shall have been finally determined, the Indemnifying Party shall pay
such amount to the Indemnified Party in immediately available funds within ten
days following written demand by the Indemnified Party. All amounts paid
hereunder shall be paid as an adjustment to the purchase price.
12.5 RIGHT OF SET-OFF. (a) The Buyer shall have the right to set-off
against any payments to the Seller or Parent (and any transferee thereof)
required under this Agreement all or any part of its Losses (in lieu of seeking
cash indemnification therefor to which it is entitled under this Article 12) or
other amount owed by the Seller or Parent (or any transferee) hereunder or under
agreements entered into pursuant to this Agreement that have been fixed by
agreement of the Buyer and the Seller or fixed pursuant to this Section 12.5
hereof by notifying the Seller that the Buyer is exercising its right of set-
off; provided that if a portion, but not all, of the claim has been fixed (by
agreement or otherwise), the amount that has been fixed may be offset. In the
event that the Buyer has a good faith claim for Losses or other offset and the
amount thereof or basis therefore has not been fixed by agreement of the Buyer
and the Seller or pursuant to the procedure set forth in this Section 12.5
hereof, then the Buyer may withhold from any payment to the Seller or Parent (or
any transferee thereof) the amount equal to the disputed amount of such claim
for Losses or other offset; provided that if the aggregate amounts withheld at
any one time exceed $100,000 the Seller may request, and promptly upon such
request, the Buyer shall establish and deposit such withheld amounts in an
escrow account at a trust department of a nationally recognized bank. Such
escrow account shall provide that such monies may not be released without either
(i) joint agreement by the Buyer and the Seller or (ii) a written decision
issued pursuant to Section 12.5(b). Any costs of such escrow account shall be
paid by the party (the Buyer or Seller) that receives the least amount of the
aggregate funds deposited in the escrow account. Upon the resolution of such
claim for Losses or other offset, then the amount deposited in the escrow as set
forth above shall be paid to the appropriate party; provided that any such
payment shall be accompanied by the proportional share of the interest earned by
the escrow on such amounts. Any such set-off shall be in addition to any other
rights the Buyer has to indemnification or payment of Losses or other amounts.
(b) If the parties are unable to resolve any dispute regarding an
offset under this Section 12.5 within 30 days after the date of such offset,
such unresolved dispute shall be submitted to a third party mutually agreeable
to the parties, which third party shall not have had a material relationship
with any of the parties or their respective Affiliates within the two years
preceding appointment (an "independent third party"), for resolution. If the
parties are unable to agree on the selection of an independent third party to
act as Arbitrator, the Seller shall select one independent third party to act as
an arbitrator, the Buyer shall select one independent third party to act as an
arbitrator and the two appointed arbitrators shall select a third arbitrator,
who shall also serve as chair of the tribunal; provided that each of the persons
selected pursuant to this sentence shall be persons listed as potential
arbitrators by the Los Angeles chapter of the American Arbitration Association.
The Buyer and Seller shall make their selections within 15 days following notice
by either party to the other that agreement on a single arbitrator will not be
reached. The two arbitrators shall select the third arbitrator within 15 days
following the selection of the second arbitrator. If any arbitrator has not
been appointed within the time limits specified herein, such appointment shall
be made by the American Arbitration Association upon the written request of any
party within 15 days of the request in accordance with the rules of such
organization. The single arbitrator chosen or the three chosen are referred to
as the "Arbitration Panel." If there are three arbitrators, the decision of two
of such arbitrators shall control. The Arbitration Panel shall
34
determine those items in dispute, based solely on presentations by the parties
and not by independent review, and shall render a written report as to the
resolution of each dispute. In resolving any disputed item, the Arbitration
Panel may not assign a value to an item greater than the greatest value for such
item claimed by any party or less than the smallest value for such item claimed
by any party. The Arbitration Panel shall have exclusive jurisdiction over, and
resort to the Arbitration Panel as provided in this Section shall be the sole
recourse and remedy of the parties against one another with respect to any
disputes arising under this Section 12, and the Arbitration Panel's
determination shall be conclusive and binding on the parties and shall be
enforceable in a court of law.
(c) Any offset contemplated by this Section 12.5 shall be deemed an
adjustment to the purchase price payable hereunder.
ARTICLE 13. MISCELLANEOUS
13.1 TERMINATION. (a) Anything herein to the contrary notwithstanding,
this Agreement may be terminated at any time prior to the Closing Date: (i) by
mutual written consent of the Buyer and the Seller; (ii) by either the Buyer or
the Seller if for any reason the Closing shall not have occurred on or before
May 30, 1997; or (iii) by either the Buyer or the Seller in the event that a
condition to the terminating party's obligations to close the transactions
contemplated by this Agreement shall become incapable of satisfaction; provided,
however, that no party shall be entitled to terminate this Agreement pursuant to
clause (ii) or (iii) in the event that the failure of the Closing to occur or
any condition to Closing to be satisfied shall be attributable to such party's
breach of this Agreement.
(b) If any party terminates this Agreement pursuant to this Section
13.1, this Agreement shall become void and of no force or effect, without any
Liability or further obligation on the part of any party hereto, except for (x)
Liabilities arising from a breach of this Agreement prior to its termination in
accordance with Section 13.1(a) above and (y) Sections 13.1(c), 13.2 and 13.3.
(c) In consideration of the benefits provided by the Buyer to the
Seller and Parent and in recognition of the substantial time and money that the
Buyer has spent and will spend in connection with the transactions contemplated
hereby and as an inducement to the Buyer to enter into this Agreement, the
Seller and Parent, jointly and severally, agree to pay to the Buyer a cash fee
of $400,000 if, within 12 months of any termination of this Agreement pursuant
to this Section 13.1, a Third Party Transaction is consummated. Such fee is due
and payable on the date such Third Party Transaction is consummated. A "Third
Party Transaction" means any acquisition of all or any significant part of the
business and properties, capital stock or capital stock equivalents of Parent
and/or the Seller, whether by merger, purchase of stock, purchase of assets,
tender offer or otherwise, including any such transaction with a current
stockholder or employee but excluding a transaction among the Seller, Parent,
Dycam and/or IDI provided that such transaction does not result, directly or
indirectly, in any of the stockholders of Seller, Parent or Dycam receiving any
cash proceeds or any Person or group of Persons (other than now current
stockholders of Parent or Dycam) obtaining beneficial ownership of more than 5%
of any of the combined entities' common stock.
13.2 PUBLICITY. No press release or other public announcement concerning
this Agreement or the transactions contemplated hereby shall be made without
advance approval thereof by the Seller and the Buyer (not to be unreasonably
withheld), except as required by law.
13.3 ENTIRE AGREEMENT. This Agreement and the other documents delivered in
connection herewith constitutes the entire agreement of the parties with respect
to the subject matter hereof. The representations, warranties, covenants and
agreements set forth in this Agreement and
35
in any financial statements, schedules or exhibits delivered pursuant hereto
constitute all the representations, warranties, covenants and agreements of the
parties hereto and upon which the parties have relied, and except as
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
Notwithstanding the foregoing, the Confidentiality Agreements dated as of
September 25, 1996 (the "Buyer's Confidentiality Agreement") (whereby the Buyer
---------------------------------
agrees to keep information confidential) and October 8, 1996 (the "Seller's
--------
Confidentiality Agreement") (whereby the Seller agrees to keep information
-------------------------
confidential) shall survive the execution of this Agreement; provided that the
Buyer's Confidentiality Agreement shall terminate on the Closing Date.
13.4 POWER OF ATTORNEY. Effective upon the Closing Date, the Seller
hereby irrevocably constitutes and appoints the Buyer and its successors,
assigns and designees as its true and lawful attorney-in-fact, with full power
of substitution, in the name of the Buyer or the Seller, on behalf of and for
the benefit of the Buyer, to collect all accounts receivable and other items
being transferred, conveyed and assigned to the Buyer as provided herein; to
endorse, without recourse, checks, notes and other instruments relating to the
Transferred Assets in the name of the Seller; to institute and prosecute, in the
name of the Seller, all proceedings which the Buyer may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
Transferred Assets; to defend and compromise any and all actions, suits or
proceedings in respect of any of the Transferred Assets; and to do all such acts
and things in relation to the Transferred Assets as the Buyer may deem
advisable. The Seller agrees that the foregoing powers are coupled with an
interest and shall be irrevocable by the Seller. The Seller further agrees that
the Buyer shall retain for its own account any amounts collected pursuant to the
foregoing powers and the Seller shall promptly transfer and deliver to the Buyer
any cash or other property received by the Seller, directly or indirectly, at
any time after the Closing Date in respect of any accounts receivable or
otherwise relating to the assets, properties, rights or businesses transferred,
conveyed and assigned to the Buyer as provided herein.
13.5 NON-ASSIGNABLE ASSETS. (a) Notwithstanding anything contained
in this Agreement to the contrary, this Agreement shall not constitute an
agreement or an attempted agreement to transfer, sublease or assign any
contract, license, lease, commitment, sales, purchase order, franchise, consent,
license, right, permit, authorization, approval or any other agreement or any
claim, right or benefit arising thereunder or resulting therefrom if any such
attempted transfer, sublease or assignment without the consent of any other
party thereto would constitute a breach thereof or would in any way adversely
affect the rights of the Buyer thereunder. The Seller shall, between the date
hereof and the Closing Date (and, if requested by the Buyer, after the Closing
Date), use its best efforts to obtain the consent of any party or parties to any
such contracts, licenses, leases, commitments, sales orders, purchase orders or
other agreements to the transfer, sublease or assignment thereof by the Seller
to the Buyer or its designees hereunder in all cases in which such consent is
required. If any such consent is not obtained, or if an attempted assignment
would be ineffective or would affect the rights of the Seller thereunder such
that the Buyer would not in fact receive all such rights, the Seller shall
perform such agreement for the account of the Buyer or otherwise cooperate with
the Buyer in any arrangement necessary or desirable to provide for the Buyer or
its designees the benefits of any such agreement, including without limitation
enforcement for the benefit of the Buyer of any and all rights of the Seller
against the other party thereto arising out of the breach, termination or
cancellation of such agreement by such other party or otherwise; provided that
if the Buyer is required to pay any fee or cost in connection with such
transfer, such fee shall be paid by the Seller or, if paid by the Buyer, the
Seller shall reimburse the Buyer. Notwithstanding any of the provisions of this
Section 13.6, nothing herein shall be deemed to waive or excuse any obligation
on the part of the Seller, or any condition for the benefit of the Buyer, to
obtain any necessary consents of any person or entity to the assignment to the
Buyer of any of the Transferred Assets or any contract, license, lease,
commitment, order or other agreement required to be assigned hereunder.
36
(b) Without limiting Section 13.5(a), (i) prior to the Closing Date,
the Seller and Parent shall take all actions within their control to enforce the
provisions of the ▇▇▇▇▇▇ Agreements, including in particular Article 5 of each
▇▇▇▇▇▇ Agreement, and (ii) after the Closing Date, the Seller and Parent shall
take all actions reasonably requested by the Buyer to enforce the provisions of
the ▇▇▇▇▇▇ Agreements, including hiring such counsel as reasonably requested by
the Buyer and filing such legal actions as recommended by such counsel or the
Buyer, and otherwise cooperate with the Buyer in connection with such
enforcement. Any out-of-pocket costs incurred, and any recovery obtained, by
the Seller or Parent as a result of actions undertaken pursuant to clause (ii)
shall be at the cost, and for the benefit, of the Buyer; provided that the Buyer
shall, except as set forth in the next proviso, be liable for any legal fees or
other expenses due under the ▇▇▇▇▇▇ Agreements as a result of such action;
provided that the Buyer shall not be liable for any breach (or liability arising
therefrom) by the Seller, Parent or any of their Affiliates under the ▇▇▇▇▇▇
Agreements or any other liability arising out of actions of the Seller, Parent
or their Affiliates. The Seller and Parent acknowledge and agree that they
retain significant interest in the ▇▇▇▇▇▇ Agreements' enforceability and that a
breach of the ▇▇▇▇▇▇ Agreements would cause significant damage to the Seller and
Parent.
13.6 FURTHER ASSURANCES. From time to time after the Closing, each
party hereto will execute and deliver, or cause its affiliates to execute and
deliver, to any other party hereto such instruments of sale, transfer,
conveyance, assignment and delivery, and such consents, assurances, powers of
attorney and other instruments as may be reasonably requested by the requesting
party or its counsel in order to vest in the Buyer all right, title and interest
of the Seller in and to the Transferred Assets and otherwise in order to carry
out the purpose and intent of this Agreement.
13.7 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made for
all purposes if (a) sent by certified or registered mail, return receipt
requested and postage prepaid, (b) hand delivered, (c) sent by a nationally
recognized overnight courier or (d) sent by telephone facsimile transmission
(the receipt of which is confirmed) as follows:
If to the Buyer:
Hasco International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
37
Attention: ▇▇▇▇▇ ▇'▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent:
Styles On Video, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (in each case) to:
Sanders, Barnet, ▇▇▇▇▇▇▇, Simons & Mosk
1901 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as any party may specify by notice given to the other
party in accordance with this paragraph. The date of giving of any such notice
shall be the date three days following the posting of the mail, the date of hand
delivery, the day after delivery to the overnight courier service or the date
sent by telephone facsimile.
13.8 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended and the terms hereof may be waived
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance.
13.9 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
13.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
CALIFORNIA.
13.11 SEVERABILITY. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Agreement shall nevertheless continue in full
force and effect.
13.12 NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.
13.13 ASSIGNMENT. This Agreement shall be binding upon, and inure to
the benefit of, the parties and their respective successors and permitted
assigns. This Agreement or any rights or obligations hereunder shall not be
assignable by either party, except that (a) the Buyer may (i) assign any or all
of its rights and interests hereunder (x) to one or more of its Affiliates, (y)
in connection with the transfer of all or substantially all of the assets of the
Buyer and/or (z) to any party(ies) providing financing to the Buyer or (ii)
designate one of more of its Affiliates to perform
38
its obligations hereunder (in any or all of which cases the Buyer shall
nonetheless remain liable and responsible for the performance of all of its
obligations hereunder) and (b) the Seller may, after the Closing Date, assign
its rights to receive money hereunder to (i) its Affiliates and, after the first
anniversary of the Closing Date, to any other Person that the Buyer consents to
(which consent will not be unreasonably withheld); provided that the Buyer's
rights of offset and the adjustments set forth herein to the purchase price
shall continue to apply notwithstanding any assignment by the Seller; and
provided further that the provisions of Section 4.1 relating to a Change of
Control or default by Buyer shall continue to apply notwithstanding any
assignment by the Buyer.
13.14 SPECIFIC PERFORMANCE. Each of the Buyer and the Seller
acknowledges and agrees that the other would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached and to enforce specifically this
Agreement and the terms and provisions thereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Buyer and the Seller and the matter, in addition to any other remedy to which
they may be entitled, at law or in equity.
13.15 HEADINGS. The Section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement or of any term or provision hereof.
13.16 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
13.17 GUARANTEE BY THE PARENT. The Parent, as principal obligor and
not as surety, covenants with the Buyer:
(a) to cause the Seller to effect prompt and complete performance of
all the terms, covenants, conditions and provisions of this Agreement and the
agreements contemplated hereby that are to be kept, observed and performed by
the Seller.
(b) that, if for any reason whatsoever, including the insolvency or
bankruptcy of the Seller, the Seller shall at any time or from time to time fail
to keep, perform or observe any term, covenant, condition or provision of this
Agreement or any of the agreements contemplated hereby that is to be kept,
observed or performed by the Seller, then the Parent shall forthwith on demand
of the Buyer, perform or observe, as the case may be, such term, covenant,
condition or provision in accordance with the relevant provisions of this
Agreement and the agreements contemplated hereby;
(c) that the Parent is jointly and severally bound with the Seller to
perform the terms, covenants, conditions and provisions of this Agreement and
the agreements contemplated hereby that are to be kept, observed and performed
by the Seller and, in the enforcement of its rights pursuant to this Section
13.17 the Buyer may proceed against the Parent as if the Parent were a principal
party under this Agreement with respect to such terms, covenants, conditions and
provisions applicable to the Seller.
In the event of a default by the Seller under this Agreement or the
agreements contemplated hereby, the Parent waive any right to require the Buyer
to:
(i) proceed against the Seller or pursue any rights or remedies
with respect to this Agreement or the agreements contemplated hereby
against the Seller, or
39
(ii) pursue any other remedy whatsoever in the power of the Buyer
prior to the Buyer pursuing any rights it may have under this Agreement or
the agreements contemplated hereby against the Parent.
Without limiting the generality of the foregoing, the liability of the
Parent shall not be deemed to have been waived, released, discharged, impaired
or affected by reason of the release or discharge of the Seller in any
receivership, bankruptcy, winding-up or other creditors' proceedings or the
rejection, disaffirmance or disclaimer of this Agreement or any of the
agreements contemplated hereby in any proceeding, and shall continue with
respect to the periods prior thereto and thereafter, for and with respect to
this Agreement and the agreements contemplated hereby.
13.18 GUARANTEE BY HOLDINGS. Holdings, as principal obligor and not as
surety, covenants with the Seller:
(a) to cause the Buyer to effect prompt and complete performance of
all the terms, covenants, conditions and provisions of this Agreement and the
agreements contemplated hereby that are to be kept, observed and performed by
the Buyer.
(b) that, if for any reason whatsoever, including the insolvency or
bankruptcy of the Buyer, the Buyer shall at any time or from time to time fail
to keep, perform or observe any term, covenant, condition or provision of this
Agreement or any of the agreements contemplated hereby that is to be kept,
observed or performed by the Buyer, then Holdings shall forthwith on demand of
the Seller, perform or observe, as the case may be, such term, covenant,
condition or provision in accordance with the relevant provisions of this
Agreement and the agreements contemplated hereby;
(c) that Holdings is jointly and severally bound with the Buyer to
perform the terms, covenants, conditions and provisions of this Agreement and
the agreements contemplated hereby that are to be kept, observed and performed
by the Buyer and, in the enforcement of its rights pursuant to this Section
13.17 the Seller may proceed against Holdings as if Holdings were a principal
party under this Agreement with respect to such terms, covenants, conditions and
provisions applicable to the Buyer.
In the event of a default by the Buyer under this Agreement or the
agreements contemplated hereby, Holdings waive any right to require the Seller
to:
(i) proceed against the Buyer or pursue any rights or remedies
with respect to this Agreement or the agreements contemplated hereby
against the Buyer, or
(ii) pursue any other remedy whatsoever in the power of the
Seller prior to the Seller pursuing any rights it may have under this
Agreement or the agreements contemplated hereby against Holdings.
Without limiting the generality of the foregoing, the liability of
Holdings shall not be deemed to have been waived, released, discharged, impaired
or affected by reason of the release or discharge of the Buyer in any
receivership, bankruptcy, winding-up or other creditors' proceedings or the
rejection, disaffirmance or disclaimer of this Agreement or any of the
agreements contemplated hereby in any proceeding, and shall continue with
respect to the periods prior thereto and thereafter, for and with respect to
this Agreement and the agreements contemplated hereby.
* * * * *
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed on the date and year first above written.
HASCO INTERNATIONAL, INC.
By:
Name:
Title:
HASCO HOLDINGS CORP.
By:
-------------------------------
Name:
Title:
▇▇▇▇▇▇▇ ▇▇▇▇▇, INC.
By:
Name:
Title:
STYLES ON VIDEO, INC.
By:
Name:
Title:
41
