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Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and between
Chronimed Inc.,
MEDgenesis Inc.
and
Medisys plc
and
Hypoguard America Limited
Dated as of December 1, 2000
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is made as of the 1st
day of December, 2000, by and between Chronimed Inc., a Minnesota corporation
with principal offices at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("PARENT"), MEDgenesis Inc., a Minnesota corporation and a wholly-owned
subsidiary of Chronimed with principal offices at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "SELLER"), and Medisys plc, a corporation
organized under the laws of Scotland with offices at ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("BUYER") and Hypoguard America Limited, a private limited
company organized under the laws of the United Kingdom and a wholly-owned
subsidiary of Buyer ("NEWCO").
RECITALS
WHEREAS, Buyer and Newco desire to purchase, and Parent and Seller
desire to sell, all of the assets and business of Seller's diagnostic products
division for the consideration set forth in this Agreement and for the
assumption of liabilities arising from or relating to the Business (as defined
below), upon the terms and subject to the conditions set out in this Agreement;
and
WHEREAS, as part of the consideration for the Assets and Business,
Seller will receive ordinary shares of Newco, and Seller desires to exchange
said ordinary shares for shares of Buyer.
NOW, THEREFORE, in consideration of the mutual covenants and premises
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I. SALE AND DELIVERY OF THE ASSETS.
1.1 DELIVERY OF THE ASSETS.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "CLOSING"), Seller shall sell, transfer, convey and assign, to Newco, and
Newco shall purchase from Seller, the following properties, assets, rights and
interests, wherever located, whether or not carried or reflected on the books
and records of Seller and whether or not carried in the name of Seller or one or
more Affiliates (as defined below) of Seller (the "ASSETS"):
(i) all inventories of raw materials, work in process,
finished goods and spare parts of Seller which are used in the Business
(collectively with the maintenance supplies, packaging materials and
similar items referred to in SECTION 1.1(A)(II) below, the "INVENTORY")
which exist on the date of the Closing (the "CLOSING DATE"), except for
such raw materials, work in process, finished goods or spare parts set
forth in Section 1.1(a)(i) of the Disclosure Schedule;
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(ii) all maintenance supplies, packaging materials and similar
items which are used exclusively in the Business, which exist on the
Closing Date;
(iii) all accounts, accounts receivable, notes and notes
receivable existing on the Closing Date that are payable to Seller and
arise from sales of Inventory by the Business (the "ACCOUNTS
RECEIVABLE");
(iv) Seller's right, title and interest to its governmental
licenses, permits, registrations, orders and authorizations to the
extent utilized in the Business and to the extent transferable under
applicable law (collectively, the "LICENSES");
(v) all rights of Seller under all contracts (written or
oral), agreements, leases (including, without limitation, equipment
leases), sales orders, licenses, instruments, commitments or other
understandings or arrangements material to and relating to the Business
or the Assets including, without limitation, those listed on Section
1.1(a)(v) of the Disclosure Schedule (collectively, the "PURCHASED
CONTRACTS") including, without limitation, the real estate leases for
the premises at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (the "BURY
DRIVE LOCATION"), and at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (the "EDINA
LOCATION");
(vi) all books, records, accounts, correspondence, production
records, technical, manufacturing and procedural manuals and customer
lists and studies used principally in the Business; provided, however,
that Seller's corporate record books, minute books, tax returns and
other records relating to taxes, employment records and general ledgers
are not included in the books and records being conveyed to Newco;
provided, further, however that Seller shall provide or make available
to Buyer and Newco copies of all such items to the extent related to
the Business or the Assets and to the extent permitted under applicable
law (collectively, the "RECORDS");
(vii) all rights of Seller under express or implied
warranties, to the extent such rights relate to the Business or the
Assets, from vendors or suppliers of Seller (collectively, the
"WARRANTY RIGHTS");
(viii) all machinery, equipment, tools, tooling dies,
fixtures, maintenance machinery and equipment, furniture, office
equipment, computers, photocopy machines, leasehold improvements and
other tangible personal property (other than Inventory) owned by Seller
and used by Seller principally in the Business, whether or not
reflected as capital assets in the accounting books and records of
Seller, including the items listed on Section 1.1(a)(viii)(A) of the
Disclosure Schedule (which Schedule includes a listing of the furniture
and equipment located at Seller's headquarters at Red Circle Drive that
are included in the Assets) (collectively, the "TANGIBLE ASSETS"), but
excluding certain items located at the Edina Location and the Bury
Drive Location, specifically listed as excluded items on Section
1.1(a)(viii)(B) of the Disclosure Schedule;
(ix) all of Seller's right, title and interest in and to all
intangible property rights, including but not limited to inventions,
discoveries, trade secrets, customer lists, processes, formulae,
know-how, United States and foreign patents, patent applications, trade
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names, trademarks, trademark registrations, applications for trademark
registrations, copyrights and copyright registrations, which are
material to the Business as presently conducted or the Assets and are
(i) owned by Seller or (ii) where not owned, used by Seller in the
Business (it being understood that in the case of any such items not
owned by Seller, Seller's interest therein is being conveyed subject to
any necessary consents or approvals being obtained from the third party
who owns the same, as listed on Section 2.2 of the Disclosure Schedule)
and all licenses and other agreements to which Seller is a party (as
licensor or licensee) which relate principally to the Business (subject
to any necessary consents or approvals from third parties who own the
same, as specifically listed on Section 2.2 of the Disclosure Schedule)
(collectively with the computer software, computer codes and internet
domain names referred to in Section 1.1(a)(x) below, the "INTANGIBLE
PROPERTY"), it being understood that Section 1.1(a)(ix) of the
Disclosure Schedule lists the patents, registered trademarks and
service marks, applications to register patents, trademarks and service
marks, and licenses and other agreements which are included in the
Intangible Property; provided, however, that in addition to the items
of Intangible Property referenced above, the items of Intangible
Property, or interest therein, referenced on Section 1.1(a)(ix) of the
Disclosure Schedule, are being conveyed to Newco hereunder; and
provided, further, that except for transitional arrangements, the right
to the name "Chronimed" and variants thereof is not being conveyed and
the right to the items listed in Section 1.1(a)(ix) of the Disclosure
Schedule is not being conveyed;
(x) the computer hardware, software, computer codes, internet
domain names and software licenses listed on Section 1.1(a)(x) of the
Disclosure Schedule, which, except as listed on Section 1.1(a)(x) of
the Disclosure Schedule, constitute all such items which are material
to the Business as presently conducted or the Assets and are (i) owned
by Seller or (ii) where not owned, used by Seller in the Business (it
being understood that in the case of any such items not owned by
Seller, Seller's interest therein is being conveyed subject to any
necessary consents or approvals being obtained from the third party who
owns the same, as listed in Section 2.2 of the Disclosure Schedule),
subject to any necessary consents or approvals from third parties who
own the same, as specifically listed on Section 2.2 of the Disclosure
Schedule;
(xi) all toll-free telephone numbers used exclusively for or
in connection with the Business; and
(xii) except as specifically provided in SECTION 1.1(B)
hereof, all other assets, properties, claims, rights and interests of
Seller existing on the Closing Date, of every kind, nature and
description, which are used exclusively in the Business as presently
conducted and not for Seller's general and administrative functions or
for Seller's other businesses.
(b) Notwithstanding the provisions of paragraph (a) above, the assets
to be transferred to Newco under this Agreement shall not include (i) Seller's
cash and cash equivalents, bank deposits and bank accounts and (ii) marketable
securities and (iii) the other assets specifically listed on Section 1.1(b) of
the Disclosure Schedule (the "EXCLUDED ASSETS") and (iv) all other assets of
Seller and of Parent and its Subsidiaries not conveyed under the provisions of
SECTION 1.1(A) above. In this connection, it is specifically understood that in
the case of machinery, equipment, tools, tooling dies, fixtures, maintenance
machinery and
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equipment, furniture, office equipment, computers, photocopy machines, leasehold
improvements and other tangible personal property, such items which are not
located at the Bury Drive Location or the Edina Location are not conveyed unless
they are specifically listed. (To the extent that Seller does not transfer the
Excluded Assets and other assets set forth in Subsection (iii) above to Newco,
such assets shall not be treated as assets in the determination of Closing Date
Net Working Capital.)
1.2 FURTHER ASSURANCES. At any time and from time to time after the
Closing, without further consideration, Parent and Seller promptly shall execute
and deliver such instruments of sale, transfer, conveyance, assignment and
confirmation, and take such other action, as Buyer or Newco may reasonably
request to more effectively transfer, convey and assign to Newco, and to confirm
Newco's title to, all of the Assets and the Business, to put Newco in actual
possession and operating control thereof, to assist Newco in exercising all
rights with respect thereto and to carry out the purpose and intent of this
Agreement and related transaction documents including, without limitation, in
connection with the execution and delivery of the Haemofix Letter Agreement (as
defined in SECTION 7.12 below).
1.3 PURCHASE PRICE.
(a) The purchase price for the Business and the Assets shall be equal
to thirty-nine million nine-hundred and seventy-five thousand dollars
($39,975,000) which shall be payable as follows: (i) a wire transfer of
immediately available funds at the Closing in an amount equal to (A) thirty
million four hundred and seventy-five thousand dollars ($30,475,000) plus (B)
the value, as listed on Section 2.28 of the Disclosure Schedule, of the
Reimbursable Investments (provided, however, that Buyer shall only be
responsible for the payment of such Reimbursable Investments to the extent
Seller certifies in writing at or prior to the Closing that such Reimbursable
Investments were actually incurred by Seller prior to the Closing) (the "CLOSING
INSTALLMENT"); and (ii) delivery of nine (9) shares of Newco's ordinary shares,
par value 1p. per share credited issued as fully paid and excluding fractions
(the "NEWCO COMMON STOCK"), and (iii) plus or minus the adjustment (if any)
provided in SECTION 1.7 hereof (together with the Closing Installment and the
Newco Common Stock, the "PURCHASE PRICE"). Notwithstanding the foregoing, the
parties hereto agree that any and all Reimbursable Investments paid by Buyer on
the Closing Date shall be excluded from the Net Working Capital calculation set
forth in Section 1.7.
(b) At the Closing, (i) Seller shall deliver the Newco Common Stock to
Buyer as consideration and in exchange for Buyer's delivery to Seller of shares
of Buyer's ordinary shares, par value 1p. per share credited issued as fully
paid and excluding fractions (the "BUYER COMMON STOCK"), having a value as near
as practicable equal to $9,500,000 (the "STOCK CONSIDERATION"), calculated on
the basis of the average closing market price for Buyer Common Stock for the
five (5) trading days ending on the second trading day immediately prior to the
date of the Closing (the "INITIAL SHARES"), and (ii) Buyer shall deliver the
Stock Consideration to Seller as consideration and in exchange for Seller's
delivery to Buyer of the Newco Common Stock;
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(c) At the Closing, Newco shall deliver to Seller the full amount of
the Closing Installment in cash by wire transfer of immediately available funds
to an account designated by Seller to Buyer no later than two (2) Business Days
(as defined below) prior to the Closing.
(d) At the Closing, Newco shall deliver a share certificate
representing the Newco Common Stock in favor of Seller and Buyer shall deliver
to Seller a share certificate representing the Stock Consideration in favor of
Seller.
1.4 ASSUMPTION OF LIABILITIES, ETC.
(a) All of the Business and Assets shall be purchased by Newco free and
clear of all Encumbrances and Taxes that arise from Seller's conduct of the
Business prior to Closing except (i) materialmen's, merchants', carriers',
workmen's, repairmen's or other like Encumbrances arising in the ordinary course
of business with respect to liabilities that are not yet delinquent, in each
case which individually or in the aggregate do not impair the value or the
marketability of the property subject to each such Encumbrance and Tax or the
use of such property in the operation of the Business or use of the Assets or
result in a liability or obligation of Buyer or Newco and (ii) those
Encumbrances, if any, which secure obligations of the Business as of the Closing
Date that are specifically disclosed on Section 1.4(a)(ii) of the Disclosure
Schedule as disclosed in writing to Buyer and Newco immediately prior to the
Closing Date (collectively, the "PERMITTED ENCUMBRANCES").
(b) At the Closing, Newco shall assume and agree to pay and perform the
following liabilities, whether known or unknown, absolute or contingent, accrued
or non-accrued, or otherwise, of the Seller which arise or arose in the ordinary
course of business of the Business or its operations (whether said liabilities
arise or arose from Parent's conduct of the Business or its operation or from
Seller's conduct of the Business or its operation) and which primarily relate to
the Business, in each case, other than accounts payable and accrued liabilities
which remain Seller's obligation pursuant to SECTION 6.2(B):
(i) All accounts payable and accrued liabilities reflected on
the balance sheet of the Business as of June 30, 2000, included in the
Audited Business Financials (as defined in SECTION 2.5 below) which
previously were delivered to the Buyer (other than those paid after
said date), plus all accounts payable and accrued liabilities of Seller
for or arising from the Business incurred in the ordinary course of
business of the Business or its operations from said date to the
Closing Date (with respect to the accounts payable and current accrued
liabilities, as reflected on the Closing Date Balance Sheet), other
than such liabilities which are excluded pursuant to sub-section (v)
below.
(ii) All warranty and service liabilities and obligations of
Seller for products of the Business or services of the Business sold,
leased or provided in the ordinary course of business of the Business
on or prior to the Closing Date;
(iii) All other liabilities and obligations of Seller for
products of the Business or services of the Business sold, leased or
provided in the ordinary course of business
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of the Business on or prior to the Closing Date, including but not
limited to liabilities and obligations for product liability, product
defects, or infringement;
(iv) All claims and litigation that primarily relate to the
Business or the Assets, including any liabilities and obligations that
arise thereunder and all costs and expenses arising in connection
therewith, including but not limited to the Bayer litigation and the
other now known claims and other litigation specified on Section
1.4(b)(iv) of the Disclosure Schedule;
(v) All liabilities and obligations of the Seller under the
Purchased Contracts; provided, however, that to the extent that payment
first became due and payable under any of said Purchased Contracts,
before the Closing Date, Seller shall remain responsible for any and
all payments subject to the proration provisions hereinafter set forth
in SECTION 1.8. (To the extent that Seller remains responsible for any
such payments pursuant to this sub-section (v), such payments and the
liabilities therefor shall not be treated as liabilities in the
determination of Closing Date Net Working Capital.)
(vi) All other liabilities and obligations of the Seller
specifically set forth on Section 1.4(b)(vi) of the Disclosure
Schedule.
The liabilities and obligations described in clause (b) above and
assumed by Newco are collectively referred to as the "ASSUMED LIABILITIES."
(c) At Closing, Newco shall execute and deliver an Instrument of
Assumption of Liabilities (the "INSTRUMENT OF ASSUMPTION") substantially in the
form attached as Exhibit A hereto, pursuant to which Newco shall assume and
agree to perform, pay and discharge the Assumed Liabilities.
(d) Newco shall not assume or agree to perform, pay or discharge, and
Seller shall remain liable for, all obligations, liabilities and commitments,
fixed or contingent, of Seller at the Closing other than the Assumed
Liabilities, including but not limited to those which relate to the Excluded
Assets and those arising under any Benefit Plan (the "RETAINED LIABILITIES").
1.5 ALLOCATION OF PURCHASE PRICE. The aggregate amount of the Purchase
Price (including the Assumed Liabilities) shall be allocated among the Assets as
set forth on Section 1.5 of the Disclosure Schedule in accordance with the rules
under Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE")
and the Treasury Regulations promulgated thereunder. Unless otherwise required
by applicable law, Newco and Seller agree to act, and cause their respective
Affiliates to act, in accordance with the computations and allocations contained
in Section 1.5 of the Disclosure Schedule in any relevant Tax returns or similar
filings for Tax and accounting purposes. In the event of any Purchase Price
adjustment pursuant to SECTION 1.7, Newco and Seller agree to adjust such
allocation to reflect such Purchase Price adjustment and to file consistently
any Tax Returns (as hereinafter defined) required as a result of such Purchase
Price adjustment.
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1.6 THE CLOSING. The Closing shall take place on the first Friday
following the first date on which (a) all waiting periods applicable to the
purchase of the Assets under HSR Act shall have expired and been terminated and
(b) all the other conditions to closing set forth in Articles VII and VIII
(other than those conditions which by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) shall
have been satisfied or waived or at such other time and date as Newco and Seller
may mutually agree. The Closing shall take place at the offices of Buyer or
Buyer's counsel or at such other place as may be mutually agreed upon in writing
by the parties hereto. The transfer of the Assets by Seller to Newco shall be
deemed to occur at 12:01 a.m., New York time, on the Closing Date.
1.7 ESTIMATED CLOSING DATE BALANCE SHEET; PURCHASE PRICE ADJUSTMENTS.
(a) For the purposes of this Agreement, the term "NET WORKING CAPITAL"
shall mean, with respect to the Assets, the difference between (i) the sum of
(1) accounts receivable (net of reserves for bad debt), (2) inventory (net of
reserves for slow moving or obsolete inventory) and (3) prepaid expense and
other current assets (other than cash and marketable equity securities and the
officer loan to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇), minus (ii) the sum of (1) accounts
payable, (2) accrued vacation and (3) other payables. All such items shall be
determined in accordance with GAAP, applied on a basis consistent with the
Audited Business Financials (as hereafter defined).
(b) Within sixty (60) days following the Closing Date, Seller shall
cause a balance sheet of the Assets and Assumed Liabilities as of the Closing
Date (the "PRELIMINARY CLOSING DATE BALANCE SHEET") to be prepared, at Seller's
expense, and delivered to Buyer. The Preliminary Closing Date Balance Sheet will
present fairly the consolidated financial position of the Assets and Assumed
Liabilities as of the Closing Date and will be in conformity with GAAP, applied
on a basis consistent with the Audited Business Financials (as hereinafter
defined). The Preliminary Closing Date Balance Sheet also shall be prepared on a
basis consistent with the pre-closing calculation worksheet delivered by Parent
and Seller to Buyer and Newco prior to the date of this Agreement, the delivery
of which is hereby acknowledged by Buyer and Newco. It is specifically
understood that the Preliminary Closing Date Balance Sheet (and the Closing Date
Balance Sheet) shall include only Assets acquired by Newco and liabilities
assumed by Newco. Newco shall fully cooperate in good faith with Seller in the
preparation of the Preliminary Closing Date Balance Sheet, such cooperation to
include, without limitation, full access to the books and records of Newco for
such purpose and assistance, on a reasonable basis, from Newco's accounting
personnel.
(i) Upon receipt of the Preliminary Closing Date Balance
Sheet, Newco and its accountants shall have the right during the
succeeding thirty (30) day period to examine, at Newco's expense, the
Preliminary Closing Date Balance Sheet and all records used to prepare
such Preliminary Closing Date Balance Sheet. Newco shall notify Seller
in writing, on or before the last day of such thirty (30) day period,
of any good faith objections to the Preliminary Closing Date Balance
Sheet, setting forth a detailed description of Newco's objections and
the dollar amount of each objection. If Newco does not deliver such
notice within
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such thirty (30) day period, the Preliminary Closing Date Balance Sheet
shall be deemed to have been accepted by Newco.
(ii) If Newco in good faith objects to the Preliminary Closing
Date Balance Sheet, Seller and Newco shall attempt to resolve any such
objections within ten (10) days following Seller's receipt of Newco's
objections. If the parties agree upon the resolution of their
disagreement, such resolution shall be conclusive and binding upon the
parties. If the parties are unable to resolve the matter within such
ten (10) day period, then Newco and Seller will retain Deloitte &
Touche LLP to resolve such disagreement. The fees of such independent
public accountants shall be divided equally between Seller, on the one
hand, and Newco, on the other hand. Seller and Newco shall provide such
firm with full cooperation, and such firm shall perform such procedures
and examine such books and records of Newco as it deems relevant. Such
firm shall be instructed to reach its conclusion regarding the dispute
within thirty (30) days following the submission to it of any
disagreements and, in any case, as soon as practicable after such
submission. Such firm's resolution of the dispute shall be conclusive
and binding upon the parties hereto. The Preliminary Closing Balance
Sheet after the acceptance thereof by Newco pursuant to SECTION
1.7(B)(I) hereof or the resolution of all disputes in connection
therewith pursuant to this SECTION 1.7(B)(II) is referred to herein as
the "CLOSING DATE BALANCE SHEET."
(c) If Net Working Capital as calculated from the Closing Date Balance
Sheet (the "CLOSING DATE NET WORKING CAPITAL") is less than the Net Working
Capital as calculated from the balance sheet comprising part of the Interim
Business Financials (the "INTERIM BALANCE SHEET"), then Seller shall deliver to
Newco the amount of such shortfall. If Closing Date Net Working Capital exceeds
the Net Working Capital as calculated from the Interim Balance Sheet, then Newco
shall deliver to Seller the amount of such overage.
(d) Any payments required pursuant to this SECTION 1.7 shall be made by
wire transfer of immediately available funds within five (5) days following the
determination of Closing Date Net Working Capital pursuant to the Closing Date
Balance Sheet.
1.8 PRORATION OF REVENUE AND EXPENSES.
(a) Except as otherwise provided herein including, without limitation,
Section 1.7 hereof, all expenses incurred and all revenue earned arising from
the conduct of the Business shall be prorated between Newco and Seller as of
12:01 a.m., New York time, on the Closing Date such that all amounts arising or
accruing prior to such time shall be for the account of Seller and all amounts
arising or accruing after such time shall be for the account of Newco. Such
prorations shall include, without limitation, all ad valorem, real estate and
other property Taxes, including, without limitation, any and all real estate
Taxes if separately charged under the real estate leases set forth in SECTION
1.1(A)(V) (but excluding Taxes arising by reason of the transfer of the Assets
as contemplated hereby, which shall be paid as set forth in SECTION 12.2 of this
Agreement), Business and license fees, rents and similar prepaid and deferred
items attributable to the ownership and operation of the Business or the Assets.
Real estate Taxes, if separately charged under the Leases (as defined below),
also shall be pro-rated as of the Closing Date based
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on the amount of such Taxes payable under the Leases in the year in which the
Closing Date occurs.
(b) The prorations and adjustments contemplated by this SECTION 1.8, to
the extent practicable, shall be made on the Closing Date. As to those
prorations and adjustments not capable of being ascertained on the Closing Date,
an adjustment and proration shall be made within sixty (60) calendar days
following the Closing Date.
(c) In the event of any disputes between the parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at the time
provided in SECTION 1.8(B) and such disputes shall be determined by the
independent certified public accountant specified in SECTION 1.7(B), and the
fees and expenses of such accountant shall be paid one-half by Newco and
one-half by Seller.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER.
Parent and Seller, jointly and severally, represent and warrant to
Buyer and Newco as follows:
2.1 PARENT AND SELLER.
(a) Parent and Seller are each a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota, and each
has all requisite power and authority (corporate and other) to own or lease its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements and other documents and instruments
contemplated hereby, and to consummate the transactions contemplated hereby. A
certified copy of the Articles of Incorporation and By-laws of each of Parent
and Seller, as amended to date, have been previously delivered to Buyer, are
complete and correct, and no amendments have been made thereto or have been
authorized since the respective dates thereof. Parent and Seller are each duly
qualified to do business as a foreign corporation and are in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by each such party, or the nature of the
activities conducted by each such party, require such qualification, except
where the failure to obtain which would not Adversely Affect such properties or
the activities conducted by such parties, respectively. Neither Parent nor
Seller own any capital stock of or other equity interest in any corporation,
partnership or other entity (no matter how such interest may be denominated or
evidenced) which relates to or is involved in the Business other than shares of
Cell Robotics International, Inc.
(b) Neither Parent nor Seller is in violation of any of the terms of
their respective Articles of Incorporation or By-laws.
2.2 AUTHORIZATION. The execution and delivery by each of Parent and
Seller of this Agreement and the Termination Agreement and the other agreements,
documents and instruments contemplated hereby, and the consummation by each of
Parent and Seller of all transactions contemplated hereby, have been duly
authorized by all requisite corporate action, and except that shareholder
approval by Parent as the shareholder of Seller is required and has
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been duly and validly obtained, no shareholder action is required, including,
without limitation, approval of the stockholders of Parent. This Agreement and
all such other agreements, documents and instruments and obligations entered
into and undertaken in connection with the transactions contemplated hereby to
which either or both Parent and Seller are a party constitute the valid and
legally binding obligations of each such party, as applicable, enforceable
against each such party in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding at equity or at law) or by an
implied covenant of good faith and fair dealing (collectively, the
"ENFORCEABILITY EXCEPTIONS").
2.2.A NO VIOLATION. The execution, delivery and performance by each of
Parent and Seller of this Agreement, the Termination Agreement and the other
agreements, documents and instruments contemplated hereby will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to each such party or the
Business; (b) violate the provisions of the Articles of Incorporation or Bylaws
of either Parent or Seller; (c) violate any judgment, decree, order or award of
any court, governmental body or arbitrator applicable to either Parent or
Seller; or (d) except as may arise as a result of the failure to obtain consents
and approvals referenced in the Disclosure Schedule, conflict with or result in
the breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any Encumbrance
upon the Assets pursuant to, any Contractual Obligation to which either Parent
or Seller is a party or by which either Parent or Seller or any of their
respective properties is or may be bound. Section 2.2 of the Disclosure Schedule
sets forth a true, correct and complete list of all consents and approvals of
any Authority or other third party (the "REQUIRED CONSENTS") that are required
in connection with the consummation by each of Parent and Seller of the
transactions contemplated by this Agreement.
2.3 OWNERSHIP OF THE ASSETS. (a) The Disclosure Schedule sets forth a
true, correct and complete list of all Encumbrances of any kind affecting the
Assets. Seller is, and at the Closing will be, the true and lawful owner of the
Assets, and except as may arise from failure to obtain the Required Consents,
will have the right to sell and transfer to Newco good, clear, record and
marketable title to the Assets, free and clear of all Encumbrances of any kind,
except for Permitted Encumbrances.
(b) The delivery to Newco of the instruments of transfer of ownership
contemplated by this Agreement will vest good and marketable title to the Assets
in Newco, free and clear of all Encumbrances of any kind or nature whatsoever,
except for the Permitted Encumbrances, and except as may arise from failure to
obtain the Required Consents.
2.4 PUBLIC REPORTS. (a) Parent has filed all forms, reports and
documents with the Securities and Exchange Commission that it has been required
to make since June 30, 1997 under the Securities Act of 1933, as amended (the
"SECURITIES ACT") and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") (collectively, the "PUBLIC REPORTS"). Each of the Public Reports
and any forms, reports and other documents filed by Parent (or on Parent's
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behalf) after the date of this Agreement and until the Closing Date (i) complied
with or will comply with the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations thereunder, in all material respects and
(ii) did not contain, at the time they were filed, or will not contain, at the
time they are filed, any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Parent has made
available to Newco, or there is publicly available to Newco, a correct and
complete copy of each Public Report (together with all exhibits and schedules
thereto and as amended to date). The Public Reports filed by Parent include an
Annual Report on Form 10-K for the fiscal years ended June 30, 2000, July 2,
1999, July 3, 1998 and June 27, 1997 and Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 2000, December 31, 1999, October 1, 1999, April
2, 1999 and January 1, 1999.
(b) The financial statements included in or incorporated by reference
into the Public Reports (including the related notes and schedules) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly in all material respects the
financial condition of Parent, Seller and each of Parent's other Subsidiaries as
of the indicated dates and the results of operations of each Parent, Seller and
each of Parent's other Subsidiaries for the indicated periods; provided,
however, that (i) the interim statements are subject to normal year-end
adjustments and the absence of footnotes, and (ii) the Public Reports have been
prepared for Seller's business taken as a whole, and do not separately address
Seller's various businesses, including the Business.
2.5 FINANCIAL STATEMENTS FOR THE BUSINESS.
(a) Seller has previously delivered or made available to Newco its
balance sheets for the Business as of July 3, 1998 and July 2, 1999, and June
30, 2000 and the related statements of income and cash flows for the Business
for the fiscal years ended June 27, 1997, July 3, 1998, July 2, 1999 and June
30, 2000 (collectively, the "AUDITED BUSINESS Financials"), which were audited
by Ernst & Young LLP, certified public accountants, together with an unaudited
interim balance sheet for the Business as of September 29, 2000, and the related
unaudited statements of income and cash flows for the three month period then
ended (the "INTERIM BUSINESS FINANCIALS" and, together with the Audited Business
Financials, the "BUSINESS FINANCIALS"). Except as set forth in Section 2.5 of
the Disclosure Schedule, and except as set forth in the Business Financials, the
Business Financials, including in each case the notes thereto, were prepared in
accordance with GAAP applied consistently with past practice, except that the
Interim Business Financials are subject to normal year-end adjustments and the
absence of footnotes. To the knowledge of Parent and Seller, said year-end
adjustments will not be Adverse. Notwithstanding the foregoing, Parent and
Seller agree that said year-end adjustments not being Adverse shall be a
condition precedent to Buyer's and Newco's obligations to close the transactions
contemplated by this Agreement.
(b) Except as set forth in Section 2.5(b) of the Disclosure Schedule
and except as set forth in the Business Financials, and except that the Interim
Business Financials are subject to normal year-end adjustments and the absence
of footnotes, the Business Financials fairly
13
present, as of their respective dates, the assets and liabilities of the
Business and the results of operations of the Business for the periods
indicated. To the knowledge of Parent and Seller, said year-end adjustments will
not be Adverse. Notwithstanding the foregoing, Parent and Seller agree that said
year-end adjustments not being Adverse shall be a condition precedent to Buyer's
and Newco's obligations to close the transactions contemplated by this
Agreement.
(c) As of the date of the Interim Balance Sheet, neither Parent nor
Seller had any obligations or liabilities relating to the Business or the Assets
of a type, amount or nature which would be disclosed or disclosable under a
balance sheet of Seller prepared consistently with past practice in accordance
with GAAP (a "GAAP LIABILITY"), except as disclosed in such balance sheet, or
the notes thereto, and since such date neither Parent nor Seller (A) has
incurred any GAAP Liabilities relating to the Business or the Assets, other than
obligations and liabilities incurred in the ordinary course of business
consistent with past practice of the Business, and (B) have not Guaranteed any
obligation or liability of any other Person relating to the Business or the
Assets, except for endorsements of negotiable instruments for deposit in the
ordinary course of business, consistent with prior practice, or as disclosed in
the Interim Balance Sheet or the notes thereto.
2.6 BOOKS AND RECORDS. The minute books and stock record books of
Seller, all of which have been made available to Buyer and Newco, are complete
and correct and have been maintained in accordance with sound business
practices. The minute books of Seller contain accurate and complete records of
all meetings held of, and corporate action taken by, the stockholders, the board
of directors, and committees of the board of directors of Seller, and no meeting
of any stockholders, board of directors or committee has been held for which
minutes have not been prepared and are not contained in such minute books.
2.7 LITIGATION. Except as set forth in Section 2.7 of the Disclosure
Schedule, neither Parent nor Seller is a party to, or to either Parent's or
Seller's knowledge threatened with, any litigation, suit, action, investigation,
proceeding or controversy relating to or affecting the Assets, the Business or
the Assumed Liabilities. Neither Parent nor Seller is in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule of
any Authority relating to or affecting the Assets, the Business or the Assumed
Liabilities.
2.8 INSURANCE. Section 2.8 of the Disclosure Schedule sets forth a
true, correct and complete list of all fire, theft, casualty, general liability,
workers compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies relating to or affecting the
Assets or the Business and of all life insurance policies maintained by Parent
or Seller for any of its employees who work in the Business, specifying the type
of coverage, the amount of coverage, the deductibles and exclusions, the
premium, the insurer, any self insurance or risk assumption agreed to by either
Parent or Seller, as applicable, and the expiration date of each such policy
(collectively, the "INSURANCE POLICIES") and all claims made under such
Insurance Policies since June 27, 1997, together with a description of any
self-insurance program that is in effect. True, correct and complete copies of
all of the Insurance Policies have been previously delivered or made available
by Parent and Seller to Buyer and Newco. The Insurance Policies are in full
force and effect. All premiums due on the
14
Insurance Policies or renewals thereof have been paid and neither Parent nor
Seller is not in default under any of the Insurance Policies. Except as set
forth in the Disclosure Schedule, neither Parent nor Seller has received any
notice or other communication relating to or affecting the Assets or the
Business from any issuer of the Insurance Policies since July 3, 1998, canceling
or materially amending any of the Insurance Policies, materially increasing any
deductibles or retained amounts thereunder, or materially increasing the annual
or other premiums payable thereunder, and, to the knowledge of Parent and
Seller, no such cancellation, amendment or increase of deductibles, retainages
or premiums is threatened.
2.9 REAL PROPERTY.
(a) Neither Parent nor Seller owns any real property. Neither Parent
nor Seller lease any real property used in the Business other than pursuant to
the leases for the Bury Drive Location, for the Edina Location and for the
location at Red Circle Drive and the other leases listed in Section 1.1(a)(iv)
of the Disclosure Schedule (the "LEASES"). True and complete copies of the
Leases have been provided to or made available to Buyer and Newco for review.
(b) Each Lease or other occupancy or other agreement under which Parent
or Seller holds real or personal property used or useful in the Business has
been duly authorized, executed and delivered by each such party, as applicable,
and, to each of Parent's and Seller's knowledge, by each of the other parties
thereto; each such Lease is a legal, valid and binding obligation of each of
Parent and Seller, as applicable, and, to each such party's knowledge, of each
other party thereto, enforceable in accordance with its terms, subject to the
Enforceability Exceptions. Each of Parent and Seller, as applicable, has a valid
leasehold interest in and enjoys peaceful and undisturbed possession under the
Leases pursuant to which each such party holds any real property or tangible
personal property. To Parent's and Seller's knowledge, all of such Leases are
valid and subsisting and in full force and effect; and neither Parent or Seller,
on the one hand, nor to each of Parent's and Seller's knowledge, any other party
thereto, on the other hand, is in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any such
Lease.
(c) To the knowledge of Seller, all real property leased by Seller at
the Bury Drive Location and at the Edina Location conforms to and complies with,
in all material respects, all applicable title covenants, conditions,
restrictions and reservations and all applicable zoning, wetland, land use and
other applicable laws.
(d) Neither Parent nor Seller has any knowledge of any public plans or
proposals for changes in road grade, access or other municipal improvements
which would result in any assessment against the real property leased by Seller
at the Bury Drive Location and at the Edina Location or the ownership thereof,
and, to each such party's knowledge, no ordinance authorizing improvements, the
cost of which might be assessed against either Parent or Seller or the real
property leased at the Bury Drive Location and at the Edina Location by Seller,
is pending or contemplated.
(e) To Parent's and Seller's knowledge, there are no facts or
conditions that could result in the termination of the present access from the
real property leased by Seller at the
▇▇
▇▇▇▇ ▇▇▇▇▇ Location and at the Edina Location to any existing highways, streets
or roads, or in the termination or expiration of any conditional use permits,
tentative tract maps, sign permits or similar governmental permits or approvals
necessary for the ownership, development and/or operation of the real property
leased by Seller at the Bury Drive Location and at the Edina Location.
(f) Except as set forth in Section 2.2 of the Disclosure Schedule, no
consent is required under any of the Leases in connection with the transactions
contemplated by this Agreement.
2.10 INVENTORY. Section 2.10 of the Disclosure Schedule sets forth a
true, correct and complete list in all material respects of the Inventory of the
Business as of September 29, 2000, including a description and the book value
thereof. The Inventory is valued at the lower of cost or market using the
average cost method, in accordance with GAAP consistently applied, less the
reserve for obsolescence reflected on Section 2.10 of the Disclosure Schedule.
The quantity of inventory is sufficient to run the Business consistent with past
practice as the Business was conducted immediately prior to the date hereof.
2.11 TANGIBLE ASSETS. Section 2.11 of the Disclosure Schedule sets
forth a true, correct and complete list of all Tangible Assets as of September
29, 2000, including a description and the actual or estimated book value
thereof. Except as set forth in Section 2.11 of the Disclosure Schedule, and
except as would not have an Adverse Effect, all of the Tangible Assets currently
used in the Business are operating in a manner suitable to perform their
respective functions, and adequate maintenance has been performed with respect
to such Tangible Assets.
2.12 CHANGE IN FINANCIAL CONDITION AND ASSETS. To Seller's knowledge,
except as set forth in Section 2.12 of the Disclosure Schedule, since September
29, 2000, there has been no change specific to the Business (as opposed to
matters external to Seller, such as general economic conditions and changes in
the industry in which the Business operates) which has an Adverse Effect on, or
could reasonably be expected to have an Adverse Effect on, the Business, Assets
or Assumed Liabilities.
2.13 ACCOUNTS RECEIVABLE. Section 2.13 of the Disclosure Schedule sets
forth a true, correct and complete list of all Accounts Receivable, together
with a summary aging report as of September 29, 2000 and subject to the reserve
for uncollectable accounts. All Accounts Receivable arose out of the sales of
inventory or services in the ordinary course of business of the Business.
2.14 CONTRACTS AND COMMITMENTS.
(a) Section 2.14(a) of the Disclosure Schedule contains a true,
complete and correct list and description of all Contracts that primarily relate
to the Business or the Assets, whether written or oral, including, without
limitation, the following:
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(i) all loan agreements, indentures, mortgages and Guaranties
to which Parent or Seller is a party or by which Parent or Seller, any
of the Assets or the Business is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, personal
property leases and lease purchase agreements relating to any of the
Assets to which either Parent or Seller is a party or by which either
Parent or Seller or any of their respective properties is bound;
(iii) all contracts, agreements, commitments, purchase orders
or other binding understandings or arrangements to which Parent or
Seller is a party which (A) involve payments or receipts by Parent or
Seller, as applicable, of more than $50,000 in the case of any single
contract, agreement, commitment, binding understanding or arrangement
under which full performance (including payment) has not been rendered
by all parties thereto or (B) which could reasonably be expected to
result in an Adverse Effect.
(iv) all collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, pension plans, retirement plans,
employee stock option or stock purchase plans and group life, health
and accident insurance and other employee benefit plans, agreements,
binding arrangements or commitments to which Parent or Seller is a
party, which cover employees who work in the Business;
(v) all agency, distributor, sales representative and similar
agreements relating to the Business to which Parent or Seller is a
party;
(vi) all leases, whether operating, capital or otherwise,
under which Parent or Seller is lessor or lessee;
(vii) all material contracts, agreements and other documents
or information relating to past disposal of waste (whether or not
hazardous); and
(viii) any other material agreement, contract or arrangement
entered into by Parent or Seller.
(b) Except as set forth in Section 2.14(b) of the Disclosure Schedule
and except as could not reasonably be expected to have an Adverse Effect:
(i) each Purchased Contract is a valid and binding agreement
of Parent or Seller, as applicable, enforceable against such party in
accordance with its terms, subject to the Enforceability Exceptions and
neither Parent nor Seller, as applicable, has any knowledge that any
Purchased Contract is not a valid and binding agreement of the other
parties thereto;
(ii) to the knowledge of Parent and Seller, Parent and Seller
have fulfilled all obligations, other than insignificant matters which
will not, individually or in the aggregate, affect any such Purchased
Contract, required by each such party, as applicable,
17
pursuant to the Purchased Contracts to have been performed by each such
party prior to the date hereof;
(iii) neither Parent nor Seller, as applicable, is in breach
of or default under any Purchased Contract, and no event (to the
Parent's and Seller's knowledge in the case of events which relate to
the other party or parties thereto) has occurred which with the passage
of time or giving of notice or both would constitute such a default,
result in a loss of rights or result in the creation of any
Encumbrance, thereunder or pursuant thereto; and
(iv) to the Parent's and Seller's knowledge, there is no
existing breach or default by any other party to any Purchased
Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute a default by such other
party, result in a loss of rights or result in the creation of any
Encumbrance thereunder or pursuant thereto.
(c) Except as set forth in Section 2.14(c) of the Disclosure Schedule,
the continuation, legal validity and legal effectiveness of each Purchased
Contract will not be affected by the transfer thereof to Newco under this
Agreement, and all such Purchased Contracts are assignable to Newco without a
consent.
(d) True, correct and complete copies of all Purchased Contracts have
previously been delivered or made available by Parent and Seller to Newco.
2.15 ENVIRONMENTAL LAWS.
(a) Except as set forth on Section 2.15(a) of the Disclosure Schedule
and except as would not have an Adverse Effect, Seller, with respect to the
Business, is not and has not been in violation of or delinquent under, nor has
it received any notice of any violation of or delinquency with respect to any
applicable Environmental Laws (defined below) for the Business and Assets.
(b) There is no Environmental Claim (defined below) pending, or to the
knowledge of Seller, threatened against Seller, which relates to the Business,
the Assets, or the real property subject to Leases being assigned to Newco
hereunder.
(c) Except as set forth in Section 2.15(c) of the Disclosure Schedule,
there are no past or present actions, activities, circumstances, conditions,
events or incidents, to Seller's knowledge, in the case of action, activities,
circumstances, conditions, events or incidents not caused by Seller, including
without limitation the release, transportation, treatment, storage, recycling or
reclamation of any hazardous material at any location, that could form the basis
of any Environmental Claim against Seller, which relates to the Business, the
Assets or the real property subject to the Leases being assigned to Newco
hereunder.
(d) Neither Parent nor Seller has, and to their knowledge, no other
person has, caused a release of any hazardous material at, on, under, from or
otherwise affecting the soil,
18
surface water or groundwater at the real property subject to the Leases being
assigned to Newco hereunder.
(e) Except as disclosed on Section 2.15(e) of the Disclosure Schedule,
to Seller's knowledge, there are no underground or above ground storage tanks
located at any real property subject to Leases being assigned to Newco
hereunder. Seller has not installed, owned or operated any underground or above
ground storage tanks at any real property subject to Leases being assigned to
Newco hereunder.
(f) To Seller's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including without
limitation the release, transportation, treatment, storage, recycling or
reclamation of any hazardous material, and or otherwise relating to any
violation or alleged violation of law, that could form the basis of any
Environmental Claim which relates to the Business, the Assets or the real
property subject to the Leases being assigned to Newco hereunder.
(g) Except as set forth in Section 2.15(g) of the Disclosure Schedule,
and except as would not have an Adverse Effect, Seller has obtained all material
permits, authorizations or approvals required under applicable Environmental
Laws (defined below) for the Business and the Assets, and all such permits,
authorizations or approvals are valid and in good standing and transferable to
Newco as part of this transaction without consent of or notice to the Authority
issuing the permit, authorization or approval.
(h) "ENVIRONMENTAL LAWS" means all federal, state and local laws and
regulations relating to the pollution or protection of human health or the
environment including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of any pollutant,
contaminant, waste, toxic substance, hazardous substance or petroleum, or
otherwise relating to the use, treatment, storage, disposal, transport or
handling of any pollutant, contaminant, waste, toxic substance, hazardous
substance or petroleum. "ENVIRONMENTAL CLAIM" means any claim, action,
investigation or notice by any Person alleging potential liability arising out
of, based on, or resulting from (a) the presence, or release into the
environment, including, without limitation, the indoor environment, of any
pollutant, contaminant, waste, toxic substance, hazardous substance or petroleum
at any location, whether or not owned by Seller or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
2.15.A General Laws, Permits, and Reports.
Seller has all requisite licenses, permits and certificates, including
health and safety permits, from Authorities necessary to operate the Business,
except where the failure to have the same would not have an Adverse Effect
(collectively, the "PERMITS"). Section 2.15A(a) of the Disclosure Schedule sets
forth a true, correct and complete list of all such Permits, copies of which
have previously been delivered by Seller to Buyer. Except where there would not
be an Adverse Effect, Seller is not in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to building, zoning, land use or similar matters) relating to the
Assets or the Business. Except as would not result in an Adverse Effect,
19
the Business as presently conducted by Seller does not violate any federal,
state, local or foreign laws, regulations or orders (including, but not limited
to, any of the foregoing relating to employment discrimination or occupational
safety).
2.16 EMPLOYEE RELATIONS.
(a) Neither Parent nor Seller has any obligation or liability,
contingent or otherwise, under any Employment Arrangement with employees to whom
Newco will offer employment pursuant to this Agreement, other than those listed
in Section 2.16(a) of the Disclosure Schedule. Except as would not have an
Adverse Effect, Parent and Seller, with respect to employees employed in the
Business, are in compliance with all federal, state and municipal laws
respecting Parent's and Seller's employment and employment practices, terms and
conditions of employment, and wages and hours, and are not engaged in any unfair
labor practice involving Parent or Seller. There are no arrears by Parent or
Seller in the payment of wages.
(b) With respect to employees employed in the Business, whether
employed by Parent or Seller, except as set forth in Section 2.16(b) of the
Disclosure Schedule;
(i) none of such employees are represented by any labor union;
(ii) there is no unfair labor practice complaint against
Parent or Seller pending before the National Labor Relations Board or
any state or local agency relating to or affecting Parent or Seller;
(iii) there is no pending labor strike or other material labor
trouble affecting Parent or Seller (including, without limitation, any
organizational drive);
(iv) there is no material labor grievance pending against
Parent or Seller relating to such employees;
(v) there is no pending representation question respecting
such employees; and
(vi) there are no pending arbitration proceedings arising out
of or under any collective bargaining agreement to which Parent or
Seller is a party, or to the knowledge of Parent and Seller, any basis
reasonably likely to result in a significant adverse outcome for which
a claim may be made under any collective bargaining agreement to which
Parent or Seller is a party.
(c) Section 2.16(c) of the Disclosure Schedule sets forth a true,
correct and complete list of (a) the employee benefits provided by Seller to its
employees employed in the Business and all contracts or agreements between
Seller and such employees, and (b) Seller's current payroll, including the job
titles and salary or wage rates of each of its employees employed in the
Business, showing separately for each such person who received an annual
20
salary in excess of $50,000 the amounts paid or payable as salary and bonus
payments for the year ended June 30, 2000.
2.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as reflected in the
interim financial information delivered to Newco, and except as set forth in
Section 2.17 of the Disclosure Schedule, since June 30, 2000, no matter has
arisen which could reasonably be expected to result in an Adverse Change in the
Business and neither Parent nor Seller have entered into any transaction
relating to the Business or the Assets which is not in the usual and ordinary
course of business, and, without limiting the generality of the foregoing,
neither Parent nor Seller have:
(a) subjected any of the Assets to any Encumbrance (except Permitted
Encumbrances);
(b) sold or transferred any of the Assets, except for sales of
inventory in the ordinary course of business, and except for the sale, transfer
or scrapping of assets no longer used in the Business as listed on Section
2.17(b) of the Disclosure Schedule;
(c) except as reflected in the copies of the Purchased Contracts
provided to Newco, made any material amendment to or termination of any
Purchased Contract or done any act or omitted to do any act which would cause
the breach of any Purchased Contract;
(d) suffered any casualty losses involving the Assets or Business,
whether insured or uninsured, and whether or not in the control of Parent or
Seller, as applicable, in excess of $50,000 in the aggregate, or waived any
rights of substantial value;
(e) except in the ordinary course of business, made any changes in
compensation of its employees primarily employed in the Business;
(f) authorized or issued recall notices for any of its products for the
Business or initiated any safety investigations;
(g) other than in the ordinary course of the Business, cancelled any
debts or claims; or
(h) received notice of any litigation, warranty claim or products
liability claims relating to the Business.
2.18 CUSTOMERS. Section 2.18 of the Disclosure Schedule sets forth a
true, correct and complete list of the names and addresses and telephone/fax
numbers of the twenty (20) largest customers of the Business based on total
dollar volume of sales in the fiscal year ended June 30, 2000. As of the date of
this Agreement, none of such customers has notified Seller that it intends to
discontinue, or to change or alter in any Adverse manner, its relationship with
Parent or Seller, as applicable, and to Seller's knowledge, the consummation of
the transactions contemplated by this Agreement and related transaction
documents will not Adversely Affect the level of business
21
conducted with each such customer immediately prior to the Closing Date, except
as set forth in Section 2.18 of the Disclosure Schedule.
2.19 SUPPLIERS. Section 2.19 of the Disclosure Schedule sets forth a
true, correct and complete list of the names, addresses and telephone/fax
numbers of the nineteen (19) suppliers of the Business which accounted for the
largest dollar volume of purchases by Parent or Seller, as applicable, for the
fiscal year ended June 30, 2000. As of the date of this Agreement, none of such
suppliers has notified Parent or Seller, as applicable, that it intends to
discontinue, or to change or alter in any Adverse manner, its relationship with
Parent or Seller, as applicable, and to Seller's knowledge, the consummation of
the transactions contemplated by this Agreement and related transaction
documents will not Adversely Affect the level of business conducted with each
such supplier immediately prior to the Closing Date, except as set forth in
Section 2.19 of the Disclosure Schedule.
2.20 [Intentionally deleted.]
2.21 TRADE NAMES AND OTHER INTANGIBLE PROPERTY.
(a) The Disclosure Schedule sets forth a true, correct and complete
list and, where appropriate, a description of, all patents, patent applications,
registered trademarks and registered service marks and applications for the
registration of trademarks or service marks, and material tradenames which
constitute Intangible Property. True, correct and complete copies of all
licenses and other agreements relating to the Intangible Property have been
previously delivered by Parent or Seller to Buyer.
(b) Except as otherwise disclosed in Section 2.21(b) of the Disclosure
Schedule, except as would not have an Adverse Effect, and except for Intangible
Property which is licensed by or to Parent or Seller, Parent and Seller are the
sole owner of all registered Intangible Property, and neither Parent nor Seller
has received notice of any challenge to Parent's or Seller's respective rights
thereto. Except as would not have an Adverse Effect, the Intangible Property
owned or licensed by Parent and Seller is sufficient to conduct the Business as
presently conducted and, when transferred to Newco pursuant to this Agreement
(subject to any Required Consents), will be sufficient to permit Newco to
conduct the Business as presently conducted by Seller. Except as set forth in
Section 2.21(b) of the Disclosure Schedule, neither Parent nor Seller has
received notice of, or has knowledge of any basis reasonably likely to result in
an Adverse Effect as a result of, a claim against it that any of its operations,
activities, products or publications relating to the Business infringes on any
patent, trademark, trade name, copyright or other property right of a third
party, or that it is illegally or otherwise using in the Business the trade
secrets, formulae or any property rights of others. Neither Parent nor Seller
has any disputes with or, to Parent's and Seller's knowledge, claims against,
any third party for infringement by such third party of any Intangible Property.
2.22 ERISA AND EMPLOYMENT MATTERS.
(a) Section 2.22(a) of the Disclosure Schedule contains a true and
complete list of all Benefit Plans of Parent or Seller which cover employees
employed in the Business.
22
(b) Parent and Seller have delivered or made available to Newco a
current, accurate and complete copy of each such Benefit Plan and of any
material agreements or documents related to such Benefit Plan such as trust
agreements or funding instruments, the most recent determination letter, the
most recent summary plan description and, for the three (3) most recent years,
the Form 5500 and attached schedules.
(c) Except where there would be no Adverse Effect, (i) each such
Benefit Plan is administered in accordance with its terms and in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations; (ii) no actions, suits or claims,
other than the routine claims for benefits in the ordinary course of business,
are pending against any Plan, or, to the knowledge of Parent and Seller,
threatened, except as set forth in Section 2.22(c) of the Disclosure Schedule;
(iii) there have been no prohibited transactions, within the meaning of the Code
and ERISA, which would subject Parent or Seller to any material taxes, penalties
or other liabilities with respect to any Plan; and (iv) neither the Parent or
the Seller, nor to their knowledge, any trustee, administrator, or other
fiduciary of any Benefit Plan, or any agent of any of the foregoing has engaged
in any transaction or acted or failed to act in a manner that could subject the
Parent or the Seller to a liability for breach of fiduciary duty under ERISA or
any other applicable law.
(d) Neither Parent nor Seller have ever maintained or contributed to a
defined benefit pension plan or a multi-employer plan (within the meaning of
Section 4001(a)(3) of ERISA).
(e) Neither Parent nor Seller maintains any pension plan within the
meaning of Section 3(2)(A) of ERISA, except for The Chronimed Inc. 401(k) Plan
and the MEDgenesis Inc. 401(k) Plan (the "401(K) PLANS"). Each of the 401(k)
Plans is qualified within the meaning of Section 401(a) of the Code, subject to
the right to make amendments thereto where the time period to make such
amendments has not expired.
(f) Except as set forth in Section 2.22(f) of the Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not,
alone or together with any other event, (i) entitle any employee primarily
employed in the Business to a bonus, severance pay or any other payment, or (ii)
except as will or may occur under Parent's or Seller's stock option plans,
copies of which have been made available to Newco, accelerate the time of
payment or vesting of, or increase the amount of, compensation due to any such
employee.
(g) Except as set forth in Section 2.22(g) of the Disclosure Schedule,
no Benefit Plan contains any term that provides post-employment health or
welfare benefits, except as required by Sections 601-608 of ERISA.
2.23 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by Parent or Seller and which are necessary for the
execution and delivery by Parent and Seller of this Agreement and the documents
to be executed and delivered by Parent and Seller in connection herewith are set
forth at Section 2.23 of the Disclosure Schedule.
23
2.24 MATERIALITY. The matters and items excluded from the
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, could not reasonably be expected to be Adverse to Parent or Seller.
2.25 INAPPLICABILITY OF SPECIFIED STATUTES. Neither Parent, Seller nor
any of its or their Affiliates is a "holding company", or a "subsidiary company"
or an "affiliate" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or an "investment
company" or a company "controlled" by or acting on behalf of an "investment
company", as defined in the Investment Company Act of 1940, as amended. Neither
Parent, Seller nor any of its or their Affiliates is subject to regulation by
the Federal Energy Regulatory Commission.
2.26 TAXES. Except as set forth in Section 2.26 of the Disclosure
Schedule:
(a) Except for state or local tax returns that are not material to
Parent, Seller, the Business or the Assets, all returns, reports, statements or
estimates in respect of Taxes required to be filed with respect to Parent and
Seller (including the consolidated Federal income tax return of Seller and any
state return that includes Seller on a consolidated or combined basis), the
Business or the Assets have been timely filed (the "TAX RETURNS").
(b) All Taxes required to be shown on any Tax Return or otherwise due
have been timely paid.
(c) All Tax Returns (insofar as they relate to the activities or income
of Parent or Seller with respect to the Business or the Assets) are true,
correct and complete in all material respects.
(d) No adjustment relating to any Tax Return has been proposed formally
or informally by any Tax Authority (insofar as either relates to the activities
or income of Parent or Seller with respect to the Business or the Assets) and to
Parent's and Seller's knowledge no basis exists for any such adjustment.
(e) There are no pending or, to the knowledge of Parent or Seller,
threatened actions or proceedings for the assessment or collection of Taxes
against Parent or Seller with respect to the Business or the Assets.
(f) There are no Tax liens on any of the Assets or on the Business.
(g) There are no requests for information currently outstanding that
could affect the Taxes associated with the Business.
(h) With respect to the Business and Assets: the Parent and the Seller
have withheld all required amounts from their employees, agents, contractors,
nonresidents, creditors, stockholders and third parties and remitted such
amounts to the proper authorities; paid all employer contributions and premiums;
and filed all federal, state, local and foreign returns and
24
reports with respect to employee income Tax withholding, and social security and
unemployment Taxes and premiums, all in compliance with the withholding
provisions of the Code, or any prior provision of the Code and other applicable
Laws.
(i) There has been no outstanding waiver granted or requested
of any applicable statute of limitations or extension of the time for
the assessment of any Tax of the Parent or the Seller for which the
Parent or the Seller could be liable under any provision of federal,
state, local, or foreign law which relates to the Business or Assets.
(j) There are no outstanding requests for information made by a taxing
authority to the Parent or the Seller in respect of the Taxes of the Parent or
the Seller which relate to the Business or Assets. Since June 27, 1997, no
closing agreement (as defined in section 7121 of the Code) or any similar
provision of any state, local, or foreign law which relates to the Business or
Assets has been entered into by or with respect to the Parent or the Seller.
2.27 BULK SALES. No bulk sales law provisions of the Uniform Commercial
Code or of any local jurisdiction apply to all or any portion of the
transactions contemplated hereby.
2.28 REIMBURSABLE INVESTMENTS. Section 2.28 of the Disclosure Schedule
sets forth all capital expenditures and investments in fixed assets and
property, plant and equipment with respect to the Business which will be
incurred after the date of this Agreement and prior to the Closing Date, that
would properly be included under "investing activities" on Seller's statement of
cash flows in accordance with GAAP consistent with Seller's prior practice (such
expenditures and investments, collectively, "Reimbursable Investments").
2.29 AFFILIATED TRANSACTIONS. Except as set forth on Section 2.29 of
the Disclosure Schedule, since June 30, 2000, no present or former officer,
director, or Affiliate of Parent or Seller or, to the knowledge of Parent or
Seller, no individual in such officer's, director's, or Affiliate's immediate
family, is or was a party to any agreement, contract, commitment or transaction
relating to the Business or has any interest in any property used by the
Business, other than the payment of directors' fees and disbursements and other
customary matters incident to director or employment relationships.
2.30 INITIAL SHARES REPRESENTATIONS. Seller is acquiring the Initial
Shares for its own account and not as a nominee or agent for any other person.
Seller acknowledges and agrees that the Initial Shares have not been registered
under the Securities Act, in reliance upon an exemption therefrom, and that the
Initial Shares have not been approved or disapproved by the United States
Securities and Exchange Commission, by any federal or state agency or by any
Authority outside of the United States including, without limitation, any
Authority within the United Kingdom, save for the admission of the Initial
Shares to the official list of UKLA (the "OFFICIAL LIST") and to trading on the
London Stock Exchange. Seller is able to bear the economic risk of holding the
Initial Shares for an indefinite period and is able to afford the complete loss
of its investment therein. Notwithstanding the foregoing, subject to Section
6.3, it is Seller's intention to dispose of the Initial Shares as soon as
possible through sales on the London Stock Exchange to "Non-U.S. Persons" in
"Offshore Transactions" as each such term is
25
defined in Regulation S under the Securities Act, subject to the terms and
conditions of this Agreement and applicable laws.
2.31 SOLVENCY. After giving effect to the consummation of the
transactions contemplated by this Agreement, Parent and Seller are each solvent.
For purposes of this SECTION 2.31, "solvent" means that the sum of the value of
the person's or entity's assets, at both fair value or fair saleable value,
exceeds its indebtedness and other probable liabilities (including contingent
liabilities); "fair value" means the value that would be realized in an exchange
or series of exchanges between a willing buyer and a willing seller, within a
commercially reasonable period of time, neither being under compulsion, each
having reasonable knowledge of all relevant facts, and assuming the retention of
all operating assets by the Parent or Seller, as applicable, and continuation of
the operations as a going concern; and "fair saleable value" means the value
that would be realized from an interested purchaser aware of all relevant
information relating to the assets or group of assets being sold and who is
willing to purchase under ordinary selling conditions in an existing and not
theoretical market if the assets or group of assets are disposed of within a
period of six (6) months to one (1) year. The cash flow from the operations of
Parent and Seller, as applicable, after taking into account all other
anticipated uses of the cash, will be sufficient to provide cash necessary to
repay its indebtedness. In consummating the transactions contemplated by this
Agreement, neither Parent nor Seller intends to make any transfer or incur any
obligations, with the intent to disturb, delay, hinder or defraud either present
or future creditors. Upon the consummation of the transactions contemplated by
this Agreement, Parent and Seller will each have sufficient capital with which
to conduct their present or proposed business and their property will not
constitute unreasonably small capital with which to conduct their present or
proposed business, and neither Parent nor Seller will engage in a business or
transaction for which it has unreasonably small capital.
2.32 CHANGE OF CONTROL. Except as set forth in Section 2.32 of the
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated by this Agreement will trigger
any obligation of Parent or Seller to any third party, including without
limitation, (a) the obligation to make payment to any third party pursuant to
any contract or agreement to which Parent or Seller is a party or by which they
or their assets are bound, respectively, and (b) any obligation(s) which,
individually or in the aggregate, would reasonably be likely to have an Adverse
Affect on the Business, the Assets or the Assumed Liabilities.
2.33 WARRANTY AND PRODUCT LIABILITY. Except as set forth in Section
2.33 of the Disclosure Schedule, there is no pending or, to the knowledge of
Parent and/or Seller, threatened, litigation, suit, action, investigation,
proceeding or controversy against Parent or Seller with respect to warranty or
product liability claims (including liabilities and obligations for personal
injury and property damage as well as for repair and replacement) based upon or
alleged to arise out of the manufacture, sale or distribution of products in
connection with the Business on or before the Closing Date.
2.34 RIGHTS PLAN AGREEMENT. Parent and Seller agree that neither Newco
nor Buyer shall have any liability or obligation of any kind or nature
whatsoever in connection with that
26
certain Rights Plan Agreement, dated as of June 2, 2000, by and between Seller
and Norwest Bank Minnesota, a National Association (the "RIGHTS PLAN
AGREEMENT"), including, without limitation, in connection with (i) the
obligations set forth in Section 13(z) of the Rights Plan Agreement, and (ii)
any and all agreements, instruments or documents entered into or delivered in
connection with the Rights Plan Agreement. Parent and Seller further represent
and warrant that no rights have been triggered pursuant to the Rights Plan
Agreement on or prior to the date hereof or the Closing Date.
2.35 CERTAIN TAXES. To the knowledge of Parent and/or Seller, all
transfer, documentary, sales, use, stamp, registration and other similar
transfer Taxes and fees (including any penalties and interest) incurred or to be
incurred in connection with this Agreement under Minnesota or federal law
(including any tax imposed in any subdivision of Minnesota) and the consummation
of the transactions contemplated hereby shall be an aggregate obligation which
does not exceed $30,000.
2.36 NO OTHER REPRESENTATIONS. Except only for the representations
specifically set forth above, Seller makes no other representations or
warranties, express, implied, or otherwise.
2.37 DISCLOSURE. No representation or warranty by Parent or Seller
contained in this Agreement nor any certificate furnished or to be furnished to
Buyer or Newco in connection herewith or pursuant hereto, contains or will
contain any untrue statement of a material fact, or, to the knowledge of Parent
and Seller, omits or will omit to state any material fact required to make the
statements herein or therein contained not false or misleading.
2.38 LIMITATION ON REPRESENTATIONS AND WARRANTIES. If, to Buyer's or
Newco's knowledge, any of the Parent's or Seller's representations and
warranties in this Agreement are not true as of the Closing Date, and Buyer and
Newco elect nonetheless to close, Buyer and Newco shall be deemed to have waived
any claim for breach of such representation or warranty. This limitation shall
be in addition to, and not in substitution for any other limitations of Buyer's
and Newco's remedies or damages set forth in Articles IX and XI.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO.
Buyer and Newco represent and warrant to Parent and Seller as follows:
3.1 ORGANIZATION AND AUTHORITY. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Scotland, and has
requisite power and authority (corporate and other) to own its properties and to
carry on its business as now being conducted. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the United
Kingdom, and has requisite power and authority (corporate and other) to own its
properties and to carry on its business as now being conducted. Subject to
SECTION 3.2 hereof: (a) Buyer and Newco each have full power to execute and
deliver this Agreement, the Instrument of Assumption and the other agreements
and documents to be executed in connection herewith; and (b) to consummate the
transactions contemplated hereby and thereby. Certified copies of the Memorandum
and Articles of Association of Buyer, as amended to date, and the Memorandum
27
and Articles of Association of Newco, as amended to date, have been previously
delivered to Seller, are complete and correct, and no amendments have been made
thereto or have been authorized since the date thereof.
3.2 AUTHORIZATION. (a) The execution and delivery of this Agreement by
Buyer and Newco, and the agreements provided for herein, and the consummation by
Buyer and Newco of all transactions contemplated hereby, have been duly
authorized by all requisite corporate action; (b) this Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the valid and
legally binding obligations of each of Buyer and Newco, enforceable against each
such party in accordance with their respective terms, subject to the
Enforceability Exceptions; (c) the execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by each
of Buyer and Newco of the transactions contemplated hereby and thereby, will
not, with or without the giving of notice or the passage of time or both, (i)
violate the provisions of any law, rule or regulation applicable to either Buyer
or Newco; (ii) violate the provisions of either Buyer's Memorandum and Articles
of Association or Newco's Memorandum and Articles of Association; (iii) violate
any judgment, decree, order or award of any Authority; or (iv) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, any agreement or instrument to
which it or its properties is a party or by which either Buyer or Newco is or
may be bound.
3.3 BUYER COMMON STOCK AND NEWCO COMMON STOCK. The Buyer Common Stock
and Newco Common Stock to be issued pursuant to this Agreement will at the
Closing Date be duly authorized and, upon issuance and payment therefore, will
be validly issued, fully paid and non-assessable, and free of any preemptive
rights.
3.4 PUBLIC REPORTS.
(a) Buyer has filed all forms, reports and documents to comply in all
material respects with the requirements of the London Stock Exchange relating to
the listing of the Buyer's ordinary shares on the Alternative Investment Market
("AIM") of the London Stock Exchange for the period from 28 June 1997 to 15 June
2000 and thereafter to date, the UK Listing Authority ("UKLA") relating to the
listing of the Buyer's ordinary shares on the Official List (collectively, the
"BUYER'S PUBLIC REPORTS"). Each of the Buyer's Public Reports and any forms,
reports and other documents filed by Buyer (or on Buyer's behalf) with the UKLA
after the date of this Agreement and until the Closing Date (i) complied with or
will comply with the requirements of the AIM Admission Rules or the Listing
Rules of the UKLA (as applicable) in all material respects and (ii) did not
contain, at the time they were filed, or will not contain, at the time they are
filed, any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) No information has been withheld by Buyer from disclosure to the
Companies Announcements Office of the London Stock Exchange (the "CAO") in its
capacity
28
as the information dissemination provider of the UKLA that would be required
to be disclosed to the CAO in order to avoid the creation of a false market in
the ordinary shares of Buyer.
(c) The audited consolidated financial statements relating to the Buyer
for the period ended 30 September 1999 were prepared in accordance with the
historical cost convention and in accordance with all relevant Statements of
Standard Accounting Practice and Financial Reporting Standards issued by The
Accounting Standards Board and with generally accepted United Kingdom accounting
principles, practices and standards consistently applied and comply with
Companies ▇▇▇ ▇▇▇▇, as amended, and give a true and fair view of the state of
affairs of the Buyer as at 30 September 1999 and of the loss for such period.
The accounting policies and the presentation applied to the Buyer's unaudited
interim results for the six months ended 31 March 2000 were, except as otherwise
disclosed in the interim results statement, consistent with the audited
consolidated financial statements relating to the Buyer for the period ended 30
September 1999.
3.5 INVESTMENT COMPANY ACT OF 1940. Neither Buyer nor Newco is required
to be registered with the United States Securities and Exchange Commission as an
investment company under the 1940 Act, as of the date of this Agreement or on
the Closing Date.
3.6 SUBSIDIARIES. As of November 15, 2000, neither Buyer nor Newco had
any subsidiaries other than those identified in Buyer's Public Reports or in
Section 3.6 of the Disclosure Schedule. Subject to SECTION 1.3 of this
Agreement, Newco is a wholly-owned subsidiary of Buyer. Each Subsidiary of Buyer
listed in the Buyer's Public Reports or in Section 3.6 of the Disclosure
Schedule, has been duly organized, is validly existing and in good standing
under the laws of the jurisdiction of its organization, has the power and
authority to own its properties and to conduct its business and is duly
registered, qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the nature
of its properties requires such registration, qualification or authorization,
except where the failure to be in good standing, to have such power and
authority or to be so qualified or authorized and in good standing could not
reasonably be expected to have a Material Adverse Effect on Buyer, taken as a
whole. All of the outstanding capital stock, beneficial interests or other
equity interests of Buyer listed in Buyer's Public Reports or in Section 3.6 of
the Disclosure Schedule or of Newco listed in Section 3.6 of the Disclosure
Schedule, in each case, have been duly authorized and validly issued, are fully
paid and, in the case of corporate stock only, non-assessable except for such
failures as could not reasonably be expected to have a Material Adverse Effect.
3.7 CAPITALIZATION. As of November 6, 2000, the issued and outstanding
shares of capital stock of Buyer and Newco were as set forth in Section 3.7 of
the Disclosure Schedule.
3.8 COMPLIANCE WITH LAWS. To the knowledge of Buyer, as of the date
hereof and except as disclosed on Buyer's Public Reports, neither Buyer nor any
of Buyer's subsidiaries is in violation of any statute, law, ordinance,
regulation, rule, judgement, decree or order of any Authority applicable to its
business, properties or operations, except for such violations and
29
failure to comply as could not, in the aggregate, reasonably be expected to have
an Adverse Effect on Buyer's ability to perform its obligations under this
Agreement.
3.9 DISCLOSURE. No representation or warranty by Buyer or Newco
contained in this Agreement, nor any certificate furnished or to be furnished to
Parent or Seller in connection herewith or pursuant hereto, contains or will
contain any untrue statement of a material fact, or, to the knowledge of Buyer
and Newco, omits or will omit to state any material fact required to make the
statements herein or therein contained not false or misleading.
3.10 LIMITATION ON REPRESENTATIONS AND WARRANTIES. If, to Parent's
and/or Seller's knowledge, any of Buyer's and Newco's representations and
warranties in this Agreement are not true as of the Closing Date and Parent and
Seller elect nonetheless to close, Parent and Seller shall be deemed to have
waived any claim for breach of such representation or warranty. This limitation
shall be in addition to, and not in substitution for, any other limitations of
Parent's and/or Seller's remedies or damages set forth in Articles IX and XI.
ARTICLE IV. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS.
4.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS. From the date of this
Agreement until the Closing Date, Parent and Seller shall afford the officers,
attorneys, accountants and other authorized representatives of Buyer and Newco
free and full access upon reasonable notice and during normal business hours to
all management personnel, offices, properties, books and records of Parent and
Seller, so that Buyer and Newco may have full opportunity to make such
investigation as it shall desire to make of the management, business, properties
and affairs of Seller, the Business, the Assets and the Assumed Liabilities, and
Buyer and Newco shall be permitted to make abstracts from, or copies of, all
such books and records. Parent and Seller shall furnish to Buyer and Newco such
financial and operating data and other information as to the Assets, the
Business and the Assumed Liabilities of Seller as Buyer or Newco shall
reasonably request. Notwithstanding the foregoing, in the case of information
which is highly sensitive or where unrestricted access to Buyer or Newco might
result in significant damage to Parent or Seller, including but not limited to
cases where such information or access would provide to Buyer or Newco a
competitive advantage if the transactions provided for hereunder are not closed,
Parent and Seller may, with the consent of Buyer or Newco (which shall not be
unreasonably withheld) impose reasonable limitations or restrictions upon the
information or access provided.
4.2 CONFIDENTIALITY. All information not previously disclosed to the
public or generally known to Persons engaged in the respective businesses of
Parent, Seller, Buyer or Newco which shall have been furnished by Buyer or
Newco, on the one hand, or Parent or Seller on the other hand, to the other
party in connection with the transactions contemplated hereby or as provided
pursuant to this Article IV shall not be disclosed to any Person other than on a
confidential basis to their respective employees, directors, attorneys,
accountants or financial advisors, providers or potential providers of debt or
equity financing to Buyer or Newco for purposes of consummating the transactions
contemplated hereby or Persons whose consent or approval is required in order to
consummate such transactions or used in any fashion other than
30
for the evaluation of the transactions contemplated by this Agreement. In the
event that the transactions contemplated by this Agreement shall not be
consummated:
(a) all such information in written form shall be returned to the party
furnishing the same, including, to the extent reasonably practicable, all copies
or reproductions thereof which may have been prepared; all such information in
electronic form, including on computers, shall be deleted; and neither Buyer or
Newco, on the one hand, nor Parent or Seller, on the other hand, shall at any
time thereafter disclose to third parties, or use, directly or indirectly, for
its own benefit, or any other purpose, any such information, written or oral,
about the business of the other party hereto; and
(b) during the two year period commencing on the date hereof, neither
Buyer nor Newco shall solicit any individual who is employed by Parent or Seller
at any time from the date of this Agreement until its termination.
4.3 PUBLIC ANNOUNCEMENTS. The parties agree that prior to the Closing
Date, except as otherwise required by law or by any listing agreement with
Nasdaq as determined by Parent and Seller with respect to Parent and Seller's
obligations, and except as otherwise required by law or by regulation of the
UKLA or any other securities exchange or automated dealer quotation system as
determined by Buyer and Newco with respect to Buyer's and Newco's obligations,
any and all public announcements or other public communications concerning this
Agreement and the purchase of the Assets by Newco, shall be subject to the
approval of both parties, which approval shall not be unreasonably withheld.
ARTICLE V. PRE-CLOSING COVENANTS OF PARENT AND SELLER.
From and after the date hereof and until the Closing Date, Parent and
Seller, jointly and severally, covenant as follows:
5.1 CONDUCT OF BUSINESS. Parent and Seller shall carry on the Business
diligently and substantially consistent with past practice and shall not make or
institute any unusual new methods of manufacture, purchase, sale, shipment or
delivery, lease, management, accounting or operation, and shall not ship or
deliver any quantity of products in excess of normal shipment or delivery levels
for the orders received, except as consented to in writing by Buyer, such
consent not to be unreasonably withheld or delayed. All of the property of
Parent and Seller currently used in the Business shall be used, operated,
repaired and maintained in a manner consistent with Parent's and Seller's past
practice.
5.2 ABSENCE OF MATERIAL CHANGES. Without the prior written consent of
Buyer, such consent not to be unreasonably withheld or delayed, neither Parent
nor Seller shall:
(a) subject any of the Assets to any Encumbrance;
(b) sell, assign, or transfer any of the Assets, except for Inventory
sold in the ordinary course of business, and except for the sale, scrapping or
other disposition of assets no longer utilized in the Business;
31
(c) cancel any debts or claims of the Business, except in the ordinary
course of business, consistent with Parent's and Seller's past practices;
(d) except as set forth in Section 5.2(d) of the Disclosure Schedule,
with respect to employees primarily employed in the Business, make, accrue or
become liable for any bonus, profit sharing or incentive payment, except for
accruals under existing plans, if any, or increase the rate of compensation
payable or to become payable by it to any such employees, other than increases
in the ordinary course of business consistent with past practice;
(e) other than in the ordinary course of business, waive any rights of
material value that would be included in the Assets or otherwise related to the
Business;
(f) other than in the ordinary course of business, modify, amend, alter
or terminate any of its executory Contracts primarily related to the Business of
a material value or which are material in amount;
(g) other than in the ordinary course of business, take any act or
omission constituting a breach or default under any Contract related to the
Business;
(h) fail to operate the Business and maintain its books, accounts and
records in the customary manner and in the ordinary or regular course of
business;
(i) enter into any Contracts primarily related to the Business, other
than those entered into in the ordinary course of business, calling for payments
which in the aggregate exceed (A) $50,000 for each Contract, or (B) $250,000 for
all Contracts;
(j) engage any employee primarily employed in the Business (A) for a
salary in excess of $60,000 per annum, or (B) except as set forth in Schedule
5.2(j) of the Disclosure Schedule, which includes a severance obligation which
exceeds three months of base salary for each such employee;
(k) except as contemplated by this Agreement, materially alter the
terms, status or funding condition of any Employee Plan;
(l) commit or agree to do any of the foregoing in the future; or
(m) except as set forth in Section 5.2(m) of the Disclosure Schedule,
other than purchases of inventory in the ordinary course of business, purchase
or otherwise acquire, or become liable for or otherwise expend in connection
with maintenance costs or capital expenditures, in one or any series of related
transactions, assets or property in an amount that exceeds $25,000, whether or
not any such item represents a Reimbursable Investment (as defined in SECTION
2.28).
5.3 TAXES. Parent and Seller will, on a timely basis, file all Tax
Returns that become due on a timely basis in a manner consistent with past
practices and pay all Taxes which are on account of the operation of the
Business or the ownership of the Assets on or prior to the Closing
32
Date; provided, however, that Parent and Seller may contest in good faith the
imposition of any Tax after consultation with Buyer regarding the nature of such
contest.
5.4 COMMUNICATION WITH CUSTOMERS AND SUPPLIERS. Parent, Seller, Buyer
and Newco will cooperate in communications with suppliers and customers to
accomplish the transfer of the Assets to Buyer on the Closing Date. However,
prior to the Closing, no communication shall be made by Buyer or Newco or their
respective Affiliates to suppliers or customers without the prior written
consent of Seller.
5.5 COMPLIANCE WITH LAWS. Parent and Seller will use reasonable
commercial efforts to comply in all material respects with all laws and
regulations which are applicable to them, their ownership of the Assets or to
the conduct of the Business and will perform and comply in all material respects
with all contracts, commitments and obligations by which they are bound, in each
case consistent with Seller's past practices.
5.6 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF SELLER.
Neither Parent nor Seller will knowingly take any actions which would result in
any of the representations or warranties set forth in Article II hereof being
untrue or inaccurate.
5.7 CONTINUING OBLIGATION TO INFORM. From time to time prior to the
Closing, Parent and Seller will deliver or cause to be delivered to Buyer and
Newco supplemental information concerning events subsequent to the date hereof
that would render any statement, representation or warranty in this Agreement or
any information contained in any Disclosure Schedule inaccurate or incomplete in
any material respect at any time after the date hereof until the Closing Date.
However, Buyer and Newco acknowledge that all representations, warranties, and
information contained in any Schedule, are made by Parent and Seller as of the
date of execution of this Agreement. As provided in SECTION 7.1, the continued
truth of representations and warranties as of the Closing Date (with
representations or warranties which speak as of a certain date to continue to be
true as of the date as of which they speak) is a condition to Buyer's and
Newco's obligation to close, but matters which arise or occur after the date of
execution of this Agreement cannot be the basis for a claim for damages unless
and to the extent that Parent or Seller has violated the provisions of SECTION
5.6. Therefore, Parent and Seller will be providing such information to Buyer
and Newco solely for the purpose of assisting Buyer and Newco in keeping
informed regarding the Business, the Assets and Assumed Liabilities and in
connection with Buyer's rights under SECTION 7.1. In the event that a
representation or warranty of any party is true and accurate at the date of
execution of this Agreement and thereafter, not as a result of an intentional
act or failure to act in a manner consistent with Seller's past practices as
required by law or a contractual obligation, in each case, of such party,
becomes untrue or inaccurate subsequent to such date and prior to the Closing,
the breaching party shall have the right to fully and adequately remedy and cure
such breach to the satisfaction of the non-breaching party prior to the Closing,
provided that such breaching party promptly provides written notice to the other
parties hereto in sufficient detail to describe the nature and magnitude of such
breach; provided, however, that no such remedy or cure shall otherwise cause the
other representations and warranties contained herein to be untrue or inaccurate
or result in a failure of the conditions hereunder at the Effective Time or
otherwise affect the other rights or obligations of any party
33
hereunder. In the event such breach can not be fully and adequately remedied and
cured prior to the Closing, the non-breaching party shall have the right to
terminate this Agreement in accordance with SECTION 11.3(B).
ARTICLE VI. CERTAIN AGREEMENTS.
6.1 EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS. (a) Parent and
Seller, on the one hand, and Buyer and Newco, on the other hand, covenant and
agree to use reasonable commercial efforts to obtain the satisfaction of the
conditions specified in this Agreement. However, no such party shall be required
to pay fees or make other payments to third parties in connection with
satisfying such conditions, including but not limited to fees or charges in
connection with obtaining Required Consents.
(b) Each party hereto shall make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable after the date
hereof. Each such filing shall request early termination of the waiting periods
imposed by the HSR Act. Each party hereby agrees to use its reasonable best
efforts to cause a termination of the waiting period under the HSR Act without
the entry by a court of competent jurisdiction of an order enjoining the
consummation of the transactions contemplated hereby at as early a date as
possible. Each party also agrees to respond promptly to all investigatory
requests as may be made by any Authority. In the event that a "REQUEST FOR
ADDITIONAL INFORMATION" is issued under the HSR Act, each party agrees to
furnish all information required and to comply substantially with such Request
for Additional Information as soon as is practicable after its receipt thereof
so that any additional applicable waiting period under the HSR Act may commence.
Each party will keep the other party apprised of the status of any inquiries
made of such party by the Department of Justice, Federal Trade Commission or any
other Authority with respect to this Agreement or the transactions contemplated
hereby.
6.2 EMPLOYMENT OF EMPLOYEES OF THE BUSINESS.
(a) Promptly following the Closing, Buyer or Newco shall offer
employment to each employee of Seller listed in Section 6.2(a) of the Disclosure
Schedule. Any offer of employment to any employee shall be at the rates of
compensation, including incentive compensation, set forth in Section 6.2(a) of
the Disclosure Schedule. Seller shall terminate or accept the resignation of
each employee accepting such offer of employment and Parent and Seller shall
remain fully responsible for all compensation and other employment and
unemployment obligations of Parent or Seller immediately prior to Closing (both
with respect to employees listed in Section 6.2(a) of the Disclosure Schedule
and any and all other employees of Parent and Seller immediately prior to the
Closing), including, without limitation, (i) any and all obligations under any
and all Benefit Plans, (ii) employment agreements with Seller's officers and
employees and (iii) agreements with Seller's directors, with respect to each
director, officer or employee not receiving, or receiving but not accepting such
offer of employment, and (iv) any and all employment-based or other obligations
of Parent or Seller, as the case may be, to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇, whether
arising prior to the Closing Date or any time after the Closing Date.
Notwithstanding any provision in this Agreement to the contrary, Parent and
Seller shall
34
indemnify Buyer and Newco for any and all Losses (as defined in SECTION 9.2(A)
hereof) incurred by Buyer or Newco at any time and from time to time in
connection with or related to any and all employment-based or other obligations
of Parent or Seller, as the case may be, to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇, whether
arising prior to the Closing Date or any time after the Closing Date.
Notwithstanding any provision in this Agreement to the contrary, the
indemnification obligations of Parent and Seller pursuant to this SECTION 6.2(A)
shall not be subject to the Seller Indemnification Cap (as defined in SECTION
9.2(A)) set forth in SECTION 9.2(A).
(b) Seller shall promptly pay to each employee terminated by Seller
pursuant to SECTION 6.2(A) all accrued wages, salary, commission and other
employee compensation payments due for services prior to the Closing Date, and
in any event no later than such payments would have otherwise been due to said
employee; provided, however, that Newco shall pay accrued vacation or holiday
pay due to said employees. For each person hired by Buyer whose employment with
Seller will be (or has been) terminated as a result of the transactions
contemplated by this Agreement, Seller shall cause each such person's account
balances under the 401(k) Plans to (i) become fully vested and (ii) be credited
with any accrued but unpaid profit sharing contributions or contributions under
Section 401(K) or Section 401(m) of the Code. Any notification requirement (or
wage payment required because of a failure to provide such notification) under
the Worker Adjustment and Retraining Notification Act shall be borne by Seller.
For each person whose employment with Seller will be (or has been) terminated as
a result of the transactions contemplated by this Agreement, Seller shall comply
with all of the requirements of Section 4980B of the Code ("COBRA") and the
Health Insurance and Portability Accountability Act of 1996, as amended.
(c) After the Closing Date wherever any employee benefit plan, program
or policy is made available by Buyer to the former employees of Seller who are
now employed by Buyer: (i) service with Seller by any such employee prior to the
Closing Date shall be credited in determining such employee's eligibility,
vesting, vacation accruals and benefit levels under any such plan, program or
policy; and (ii) with respect to any welfare benefit plans for which such
employees may become eligible, Buyer shall, to the extent permitted by law,
cause such plans to provide credit for any applicable co-payments or deductibles
paid prior to the Closing Date by such employees and waive pre-existing
conditions, exclusions and waiting periods, other than exclusions or waiting
periods that would not have been satisfied or waived under any welfare plans
maintained by Buyer if employment with Seller prior to the Closing Date is
counted as employment with BUYER.
6.3 LOCK-UP AGREEMENT. Parent and Seller hereby agree that Seller shall
not directly or indirectly, sell, offer to sell, solicit an offer to buy,
contract to sell, grant any option to purchase, or otherwise transfer or dispose
(or enter into any transaction or device which is designed to, or could
reasonably be expected to, result in the disposition at any time in the future)
of any of the Initial Shares except for Initial Shares which have a value based
on the calculation set forth in SECTION 1.3(B) equal to five hundred thousand
dollars ($500,000) on the Closing Date; provided, however, that commencing on
the date which is the sixty (60) day anniversary of the Closing (the
"ANNIVERSARY DATE"), during each succeeding thirty (30) day period, Seller shall
have the right to sell, assign and transfer that number of Lock-Up Shares (as
defined in the
35
last sentence of this SECTION 6.3) which does not exceed 25% of the aggregate
number of Lock-Up Shares (rounded down to the nearest whole share); provided,
further, however, that any and all such sales shall be made by Seller, directly
or indirectly, through sales on the London Stock Exchange to "Non-U.S. Persons"
in "Offshore Transactions" as each such term is defined in Regulation S under
the Securities Act. Notwithstanding the foregoing, to the extent Seller agrees
to attempt to sell the Lock-Up Shares exclusively through Nomura International,
Buyer and Newco agree to use reasonable efforts to cause Nomura International to
place at such price as may be specified by Seller, any and all Lock-Up Shares as
promptly as possible in open market transactions either prior to or after the
Anniversary Date. Notwithstanding the foregoing, Seller shall be free to sell
any or all of the Lock-Up Shares at any time as part of:
(a) Accepting a general offer made for all of the issued share capital
of Buyer;
(b) Executing an irrevocable commitment to accept a general offer for
the whole of issued share capital of Buyer;
(c) A disposal or sale of shares in Buyer pursuant to a compromise or
arrangement between Buyer and its members or any class of them which was agreed
to by the members and sanctioned by the Court under the provisions of s.
425-427(A) of the Company's ▇▇▇ ▇▇▇▇ (as amended); and
(d) The renunciation of a provisional allotment of shares or the
transfer (in accordance with normal market practice) of any right to apply for
such shares by the Buyer.
For purposes of this Agreement, "LOCK-UP SHARES" shall mean the difference
between (i) the aggregate number of Initial Shares and (ii) that number of the
Initial Shares which have a value based on the calculation set forth in SECTION
1.3(B) equal to five hundred thousand dollars ($500,000) on the Closing Date.
6.4 ADDITIONAL AGREEMENTS. Parent and Seller, on the one hand, and
Buyer and Newco, on the other hand, covenant and agree to use reasonable
commercial efforts to negotiate and enter into or, as applicable to cause their
controlled Affiliates to negotiate and enter into a Termination Agreement,
pursuant to which Parent, Seller and Hypoguard Limited shall terminate the
license and ancillary rights currently granted under the agreement and other
documents listed in Section 6.4 of the Disclosure Schedule (the "TERMINATION
AGREEMENT").
6.5 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF BUYER AND
NEWCO. Neither Buyer nor Newco will knowingly take any actions which would
result in any of the representations or warranties set forth in Article III
hereof being untrue or inaccurate.
6.6 CONTINUING OBLIGATION TO INFORM. From time to time prior to the
Closing, Buyer and Newco will deliver or cause to be delivered to Parent and
Seller supplemental information concerning events subsequent to the date hereof
that would render any statement, representation or warranty in this Agreement or
any information contained in any Disclosure Schedule inaccurate or incomplete in
any material respect at any time after the date hereof until the Closing Date.
However, Parent and Seller acknowledge that all representations, warranties, and
36
information contained in any Schedule, are made by Buyer and Newco as of the
date of execution of this Agreement. As provided in SECTION 8.1, the continued
truth of representations and warranties as of the Closing Date (with
representations or warranties which speak as of a certain date to continue to be
true as of the date as of which they speak) is a condition to Parent's and
Seller's obligation to close, but matters which arise or occur after the date of
execution of this Agreement cannot be the basis for a claim for damages unless
and to the extent that Buyer or Newco has violated the provisions of SECTION
6.5. Therefore, Buyer and Newco will be providing such information to Parent and
Seller solely for the purpose of assisting Parent and Seller in keeping informed
regarding Buyer and Newco and in connection with Seller's rights under SECTION
8.1. In the event that a representation or warranty of any party is true and
accurate at the date of execution of this Agreement and thereafter, not as a
result of an intentional act or failure to act in a manner consistent with such
party's past practices as required by law or a contractual obligation, in each
case, of such party, becomes untrue or inaccurate subsequent to such date and
prior to the Closing, the breaching party shall have the right to fully and
adequately remedy and cure such breach to the satisfaction of the non-breaching
party prior to the Closing, provided that such breaching party promptly provides
written notice to the other parties hereto in sufficient detail to describe the
nature and magnitude of such breach; provided, however, that no such remedy or
cure shall otherwise cause the other representations and warranties contained
herein to be untrue or inaccurate or result in a failure of the conditions
hereunder at the Effective Time or otherwise affect the other rights or
obligations of any party hereunder. In the event such breach can not be fully
and adequately remedied and cured prior to the Closing, the non-breaching party
shall have the right to terminate this Agreement in accordance with SECTION
11.3(B).
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF BUYER AND NEWCO.
The obligations of Buyer and Newco under this Agreement are subject to
the fulfillment, on the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of Buyer and
Newco:
7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF PARENT AND
SELLER; COMPLIANCE WITH COVENANTS AND Obligations. The representations and
warranties of Parent and Seller shall be true and correct on the date of this
Agreement and as of the Closing Date as though such representations and
warranties were made on and as of each such date, except for any changes
permitted by the terms hereof or consented to in writing by Buyer and except
that representations and warranties which speak as of a certain date shall
continue to be true as of the date as of which they speak. Parent and Seller
shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
7.2 CORPORATE PROCEEDINGS. All corporate and other proceedings required
to be taken on the part of Parent and Seller to authorize this Agreement and the
transactions contemplated hereby shall have been taken.
37
7.3 GOVERNMENTAL AUTHORIZATIONS. All Governmental Authorizations
necessary under any applicable law, rule, order or regulation for the
consummation by Parent and Seller of the transactions contemplated by this
Agreement shall have been received. The waiting period (and any extension
thereof) applicable under the HSR Act shall have been terminated or shall have
expired.
7.4 PRIVATE AUTHORIZATIONS. Parent, Seller, Buyer and Newco shall have
each received all of the Private Authorizations and Required Consents listed in
Section 7.4 of the Disclosure Schedule.
7.5 ADVERSE PROCEEDINGS. No action, suit or proceeding by or before any
Authority shall have been instituted or threatened by any Authority or Person
whatsoever which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of Buyer or Newco
to own or use the Assets or operate the Business after the Closing.
7.6 OPINION OF COUNSEL. Buyer and Newco shall have received a written
legal opinion from ▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A., counsel to Parent
and Seller, in substantially the form attached hereto as Exhibit B.
7.7 BOARD OF DIRECTORS APPROVAL. The board of directors of Seller and
the board of directors of Parent, in Parent's capacity as sole stockholder of
Seller, in each case, shall have duly authorized the transactions contemplated
by this Agreement.
7.8 THE ASSETS. Except for the Permitted Encumbrances, at the Closing
Newco shall receive good, clear, record and marketable title to the Assets, free
and clear of all Encumbrances.
7.9 NO ADVERSE CHANGE. There shall have been no Adverse Change between
the date of this Agreement and the Closing Date.
7.10 EXECUTION OF ANCILLARY AGREEMENTS. Each of Parent and Seller shall
have executed and delivered to Buyer and Newco and the Termination Agreement.
7.11 FINANCIAL STATEMENTS. The conditions precedent to Buyer's and
Newco's obligations to close set forth in Sections 2.5(a) and 2.5(b) shall have
been fulfilled.
7.12 AGREEMENT WITH HAEMOFIX MEDICAL PRODUCTS AB. Buyer and Newco shall
have received an executed copy of that certain letter agreement, dated as of the
Closing Date, by and between Newco and Haemofix Medical Products AB,
substantially in the form previously delivered to each of the parties hereto
(the "HAEMOFIX LETTER AGREEMENT").
7.13 CLOSING DELIVERIES. Buyer and Newco shall have received at or
prior to the Closing each of the following documents:
(a) a ▇▇▇▇ of sale substantially in the form attached hereto as Exhibit
C;
38
(b) such instruments of conveyance, assignment and transfer, in form
and substance satisfactory to Buyer and Newco, acting reasonably, as shall be
appropriate to convey, transfer and assign to and to vest in Buyer or Newco,
good, clear, record and marketable title to the Assets, except for the Permitted
Encumbrances;
(c) [Intentionally deleted]
(d) a certificate of an executive officer of each of Parent and Seller
evidencing satisfaction of the conditions specified in this Article VII,
substantially in the form of Exhibit D;
(e) certificates of the Secretary of each of Parent and Seller
attesting to the incumbency of Parent's and Seller's respective officers and the
authenticity of the resolutions authorizing the transactions contemplated by the
Agreement;
(f) certificates of the Secretary of State of the State of Minnesota as
to the legal existence and good standing of Parent and Seller, including,
without limitation, a tax clearance document certified by the Secretary of State
of the State of Minnesota.
(g) where consent is required under a Lease, consents from each lessor
thereunder consenting to the assumption of such Lease by Buyer or Newco;
(h) delivery of a share certificate with a stock transfer form executed
in blank evidencing the Newco Common Stock;
(i) cross receipt executed by Newco and Seller; and
(j) cross receipt executed by Seller and Buyer.
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF PARENT AND SELLER.
The obligations of Parent and Seller under this Agreement are subject
to the fulfillment, on the Closing Date, of the following conditions precedent,
each of which may be waived in writing at the sole discretion of Parent and
Seller:
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF BUYER AND
NEWCO; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of Buyer and Newco in this Agreement shall be true on the date of
this Agreement and as of the Closing Date as though such representations and
warranties were made on and as of each such date, except for any changes
consented to in writing by Seller. Buyer and Newco shall have performed and
complied with all terms, conditions, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
8.2 CORPORATE PROCEEDINGS. All corporate and other proceedings required
to be taken on the part of Buyer and Newco to authorize or carry out this
Agreement shall have been taken.
39
8.3 GOVERNMENTAL AUTHORIZATIONS. All Governmental Authorizations
necessary under any applicable law, rule, order or regulation for the
consummation by Buyer and Newco, on the one hand, and by Seller and Parent, on
the other hand, of the transactions contemplated by this Agreement shall have
consented to, authorized, permitted or approved such transactions. The waiting
period (and any extension thereof) applicable under the HSR Act shall have been
terminated or shall have expired
8.4 PRIVATE AUTHORIZATIONS. Buyer and Newco, on the one hand, and
Parent and Seller, on the other hand, shall have each received all of the
Private Authorizations and Required Consents listed in Section 7.4 of the
Disclosure Schedule.
8.5 ADVERSE PROCEEDINGS. No action, suit or proceeding by or before any
Authority shall have been instituted or threatened by any Authority or Person
whatsoever which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of Parent and/or
Seller to transfer the Assets.
8.6 OPINION OF COUNSEL. Parent and Seller shall have received an
opinion of counsel to Buyer, dated as of the Closing Date in the form attached
hereto as Exhibit E.
8.7 CLOSING DELIVERIES. Parent and Seller shall have received at or
prior to the Closing each of the following documents:
(a) a certificate of an officer of Buyer and Newco evidencing
satisfaction of the conditions specified in this Article VIII, as Seller shall
reasonably request;
(b) copies of the certificate of incorporation and certificates of
incorporation on change of name of Buyer and Newco, in each case, together with
copies of the Memorandum and Articles of Incorporation of Buyer and Newco,
respectively, each certified by the Company Secretary of the Buyer as complete,
true and up to date;
(c) a certificate of the Secretary of Buyer and Newco attesting to the
incumbency of Buyer's and Newco's officers and the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement;
(d) the Instrument of Assumption executed by Newco and accepted by
Seller;
(e) payment of the Closing Installment to Seller;
(f) delivery of a share certificate evidencing the Newco Common Stock;
(g) delivery of a share certificate evidencing the Initial Shares;
(h) cross receipt executed by Newco and Seller;
(i) cross receipt executed by Seller and Buyer;
40
(j) a properly executed Resale Exemption Certificate with respect to
the Inventory; and
(k) where consent is required under a Lease, consents from each Lessor
thereunder consenting to the assumption of each such Lease by Buyer or Newco;
(l) a certified copy of the register of members of Newco which shows
Seller as a registered owner of the Newco Common Stock (it being understood that
in accordance with this Agreement, said Newco Common Stock is to be exchanged
for the Initial Shares).
8.8 OPINION OF FINANCIAL ADVISOR. Parent and Seller shall have received
the opinion of ▇.▇. ▇▇▇▇▇▇▇ & Co. which continues to be in effect (the "FAIRNESS
OPINION") to the effect that the consideration to be received by Seller
hereunder is fair to Seller from a financial point of view, and such Fairness
Opinion shall be acceptable in form and substance to Seller's board of
directors.
8.9 NO ADVERSE CHANGE. There shall have been no Adverse Change in the
business or prospects of Buyer or Newco.
ARTICLE IX. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the parties hereto (other than those contained in SECTIONS 2.1,
2.2, 2.3, 2.5, 2.15, AND 2.26) shall survive the Closing Date for a period of
twelve (12) months. The representations and warranties contained in: (i)
SECTIONS 2.1, 2.2, and 2.3 shall survive indefinitely; (ii) SECTION 2.5 shall
survive the Closing Date for a period of eighteen (18) months; (iii) SECTION
2.15 shall survive the Closing Date for a period of five (5) years; and (iv)
SECTION 2.26 shall survive the Closing Date for a period of six (6) years. The
representations and warranties contained herein shall survive for the periods
described in the foregoing two sentences notwithstanding any investigation made
by or on behalf of any party hereto or the participation of such party in the
Closing, but subject to the provisions of SECTIONS 2.38 and 3.10.
9.2 INDEMNIFICATION.
(a) Parent and Seller shall indemnify and hold harmless Buyer and Newco
and each of their respective Affiliates, and their respective officers,
directors, employees, stockholders, representatives and agents (each, a "BUYER
INDEMNIFIED PARTY" and collectively, the "BUYER INDEMNIFIED PARTIES"), from and
against all claims, damages, losses, liabilities, costs and reasonable expenses
including, without limitation, settlement costs and any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or threatened actions (each, a "LOSS" and collectively,
the "LOSSES") arising out of or caused by (i) any misrepresentation or breach of
any representation or warranty made by Parent or Seller in this Agreement, or
any schedule or exhibit annexed hereto, (ii) any breach of any covenant,
agreement or obligation of Parent or Seller contained in this Agreement, or any
schedule or exhibit annexed hereto, and (iii) any liability relating to the
Business and its operation prior to
41
the Closing Date, including without limitation the employment and/or severance
obligation relating to any employees of the Business prior to the Closing Date
or as otherwise described in SECTION 6.2 other than the Assumed Liabilities.
Notwithstanding the foregoing, Seller shall have no obligation hereunder to
indemnify and hold harmless any Buyer Indemnified Party for any Losses unless
and until Losses relating to all claims under this SECTION 9.2(A) exceed
$170,000 in the aggregate (the "SELLER DEDUCTIBLE"), and then Seller shall be
responsible for all such Losses only to the extent they exceed $170,000;
provided, however, that the maximum amount of Losses for which Seller shall be
liable under SECTION 9.2(A)(I) shall not exceed $5.875 million in the aggregate
(THE "SELLER INDEMNIFICATION CAP"). In addition, the indemnification obligations
of Seller are subject to each and all of the following provisions and
limitations:
(i) To the extent that a matter is taken into account in the
determination of Closing Date Net Working Capital, there shall be no
double recovery with respect to such matter to the extent that the
dollar amount associated with such matter is already reflected in the
Closing Date Net Working Capital calculation;
(ii) The conditions, restrictions and limitations set forth in
this SECTION 9.2, as well as in SECTION 9.1 and SECTION 2.38 shall
apply to all claims made by Buyer and any other parties claiming
indemnification from Seller under SECTION 9.2(A), other than with
respect to (A) claims made by Buyer or Newco to the extent determined
to arise from fraud, willful misconduct or other intentional tort by
Parent or Seller, or (B) claims made by Buyer or Newco pursuant to
SECTION 6.2(A) or ARTICLE XII, which claims arise under or in
connection with this Agreement or the agreements and documents entered
into in connection herewith, regardless of whether such claims are
styled as claims for indemnification under this Agreement (other than
with respect to claims made by Buyer or Newco pursuant to SECTION
6.2(A) or ARTICLE XII);
(b) Buyer and Newco shall indemnify and hold harmless Seller and each
of its Affiliates, and their respective officers, directors, employees,
stockholders, representatives and agents (each, a "SELLER INDEMNIFIED PARTY" and
collectively, the "SELLER INDEMNIFIED PARTIES"), from and against any Loss or
Losses arising out of or caused by (a) any misrepresentation or breach of any
representation or warranty made by Buyer and Newco in this Agreement or any
schedule or exhibit annexed hereto, (b) any breach of any covenant, agreement or
obligation of Buyer or Newco contained in this Agreement, or any schedule or
exhibit annexed hereto, (c) any Loss or Losses arising on or after, or relating
to the ownership or operation of the Business during any period on or after, the
Closing Date and (d) any Assumed Liability. Notwithstanding the foregoing,
neither Buyer nor Newco shall have any obligation hereunder to indemnify and
hold harmless any Seller Indemnified Party for any Losses unless and until
Losses relating to all claims under this SECTION 9.2(B) exceed $170,000 in the
aggregate, and then Buyer and Newco shall be responsible for all such Losses
only to the extent they exceed $170,000; provided, however, that the maximum
amount of Losses that Buyer and Newco shall be liable for under this SECTION
9.2(B) shall not exceed $5.875 million in the aggregate; provided, however, that
these two limitations shall not apply to Buyer's obligation to pay the Purchase
Price hereunder, or to deliver the Initial Shares, or to claims made by Parent
or Seller to the extent such claims are determined to arise from fraud, willful
misconduct or other intentional tort by Buyer or Newco;
42
(c) (i) In the event that any indemnified party is made a defendant in
or party to any action, suit, proceeding or claim, judicial or administrative,
instituted by any third party for Losses, or otherwise receives any demand from
any third party for Losses (any such third party action, suit, proceeding or
claim being referred to as a "CLAIM"), the indemnified party (referred to in
this clause (c)(i) as the "NOTIFYING PARTY") shall give the indemnifying party
prompt notice thereof. The failure to give such notice shall not affect whether
an indemnifying party is liable for reimbursement unless such failure has
resulted in the loss of substantive rights with respect to the indemnifying
party's ability to defend such Claim, and then only to the extent of such loss.
The indemnifying party shall be entitled to contest and defend such Claim;
provided, that the indemnifying party (A) has a reasonable basis for concluding
that such defense may be successful, (B) diligently contests and defends such
Claim and (C) acknowledges in writing that it will contest or defend such Claim,
it being understood that the indemnifying party may reserve its rights as to
whether or not it is in fact liable for indemnification hereunder. Notice of the
intention so to contest and defend shall be given by the indemnifying party to
the notifying party within twenty (20) Business Days after the notifying party's
notice of such Claim (but, in all events, at least five (5) Business Days prior
to the date that an answer to such Claim is due to be filed). Such contest and
defense shall be conducted by reputable attorneys employed by the indemnifying
party. The notifying party shall be entitled at any time, at its own cost and
expense (which expense shall not constitute a Loss unless the notifying party
reasonably determines that the indemnifying party is not adequately representing
or, because of a conflict of interest, may not adequately represent, any
interests of the indemnified parties, and only to the extent that such expenses
are reasonable), to participate in such contest and defense and to be
represented by attorneys of its or their own choosing. If the notifying party
elects to participate in such defense, the notifying party will cooperate with
the indemnifying party in the conduct of such defense. Neither the notifying
party nor the indemnifying party may concede, settle or compromise any Claim
without the consent of the other party, which consent will not be unreasonably
withheld. Notwithstanding the foregoing, if the indemnifying party fails to
acknowledge in writing its obligation to provide indemnification in respect of
such Claim, then the notifying parties alone shall be entitled to contest,
defend and settle such Claim in the first instance (in which case expenses
incurred in connection therewith shall constitute a Loss) and, only if the
notifying parties choose not to contest, defend or settle such Claim, the
indemnifying party shall then have the right to contest and defend (but not
settle) such Claim.
(ii) In the event any indemnified party has a claim against
any indemnifying party that does not involve a Claim, the indemnified
party shall deliver a notice of such claim with reasonable promptness
to the indemnifying party. Except as provided in SECTION 9.1, relating
to survival of representations and warranties, failure to give such
notice shall not affect whether an indemnifying party is liable for
reimbursement unless such failure has resulted in the loss of
substantive rights with respect to the indemnifying party's ability to
defend such claim, and then to the extent of such loss. If the
indemnifying party notifies the indemnified party that it does not
dispute the claim described in such notice or fails to notify the
indemnified party within thirty (30) days after delivery of such notice
by the indemnified party whether the indemnifying party disputes the
claim described in such notice, the Loss in the amount specified in the
indemnified party's notice will be conclusively deemed a liability of
the indemnifying
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party (subject to the limitations set forth in this SECTION 9.2) and the
indemnifying party shall pay the amount of such Loss to the indemnified party on
demand.
(iii) Subject to SECTION 10.1(B) and SECTION 10.3(B), after
the Closing, the rights set forth in this SECTION 9.2 shall be the
indemnified parties' sole and exclusive remedies against the other for
misrepresentation or breaches of covenants contained in this Agreement
or in any exhibit, schedule or other document delivered or to be
delivered pursuant to the terms of this Agreement or otherwise
referenced or incorporated in this Agreement. Notwithstanding the
foregoing, nothing herein shall prevent any of the indemnified parties
from bringing an action based upon allegations of fraud, bad faith or
willful misconduct in connection with this Agreement. In the event an
action is brought in accordance with this SUBSECTION (III), the
prevailing party's attorneys' fees and costs shall be paid by the
non-prevailing party.
ARTICLE X. POST-CLOSING AGREEMENTS.
Parent and Seller agree that from and after the Closing Date:
10.1 PROPRIETARY INFORMATION.
(a) During the three-year period commencing on the Closing Date, Parent
and Seller each shall hold in confidence, and use its best efforts to have all
of their respective officers, directors and personnel hold in confidence, all
knowledge and information of a secret or confidential nature with respect to the
Business and the Assets and shall not (i) disclose or publish the same without
the consent of Buyer and Newco, except to the extent that such information has
become public knowledge other than by breach of this Agreement by Parent, Seller
or any of their respective officers, directors or personnel, or (ii) use any
such knowledge and information, directly or indirectly, in whole or in part,
except as otherwise specifically authorized pursuant to the terms of this
Agreement.
(b) Parent and Seller agree that a remedy at law for any breach of this
SECTION 10.1 would be inadequate and that Buyer and Newco shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this SECTION 10.1.
10.2 NO SOLICITATION OR HIRING OF FORMER EMPLOYEES. Except as provided
by law, for a period of three (3) years after the Closing Date, neither Parent
nor Seller shall solicit any person who was an employee of Seller primarily
employed by the Business on the date hereof or on the Closing Date and who was
hired by Buyer or Newco, to terminate his or her employment with Buyer or Newco,
as applicable, or to become an employee of Parent, Seller, or any Affiliate of
Parent or Seller, or hire any person who was such an employee on the date hereof
or on the Closing Date.
10.3 NON-COMPETITION AGREEMENT.
(a) For a period of three (3) years after the Closing Date, neither
Parent, Seller nor any Affiliate of Parent or Seller shall engage in any
business competitive with the Business as conducted on the date hereof or on the
Closing Date, in the United States or any other country
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in which Seller conducted the Business during the two years prior to the Closing
Date; provided, however, that this restriction shall not prohibit the purchase
and resale of products of the type sold by the Business where such products are
readily available in the marketplace from third parties other than resales in
the long-term care market, which shall be prohibited. Notwithstanding the
foregoing, if a purchaser engaged in such a competitive business acquires,
merges, or combines with Seller, such purchaser may continue to engage in such
competitive business, provided that Seller does not provide material assistance
to, or materially participate in, the conduct of such competitive business by
the purchaser.
(b) The parties hereto agree that the duration and geographic scope of
the non-competition provision set forth in this SECTION 10.3 are reasonable. In
the event that any court determines that the duration or the geographic scope,
or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties hereto intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. Parent and Seller agree that damages are an inadequate remedy for any
breach of this provision and that Buyer and Newco shall, whether or not they are
pursuing any potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
10.4 SHARING OF DATA.
(a) Parent and Seller shall have the right for a period of six (6)
years following the Closing Date to have reasonable access to such books,
records and accounts, including financial and tax information, correspondence,
production records, employment records and other similar information as is
transferred to Newco pursuant to the terms of this Agreement for the limited
purposes of concluding its involvement in the Business prior to the Closing Date
and for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. Buyer and Newco shall
have the right for a period of six (6) years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
tax information, correspondence, production records, employment records and
other records which are retained by Parent or Seller pursuant to the terms of
this Agreement to the extent that any of the foregoing relates to the Business
transferred to Buyer and Newco hereunder or is otherwise needed by Buyer or
Newco in order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations.
(b) Parent and Seller, on the one hand, and Buyer and Newco, on the
other hand, agree that from and after the Closing Date they shall cooperate
fully with each other to facilitate the transfer of the Assets, the Business,
and the Assumed Liabilities from Seller to Buyer and Newco and the operation
thereof by Buyer and Newco.
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10.5 COOPERATION IN LITIGATION. Each of Parent and Seller, on the one
hand, and Buyer and Newco, on the other hand, will fully cooperate with the
other in the defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business or the use or
operation of the Assets prior to or after the Closing Date (other than
litigation arising out the transactions contemplated by this Agreement). The
party requesting such cooperation shall pay the reasonable out-of-pocket
expenses (including reasonable legal fees and disbursements) of the party
providing such cooperation and of its officers, directors, employees and agents
reasonably incurred in connection with providing such cooperation, but shall not
be responsible to reimburse the party providing such cooperation for such
party's time spent in such cooperation or the salaries or costs of fringe
benefits or similar expenses paid by the party providing such cooperation to its
officers, directors, employees and agents while assisting in the defense or
prosecution of any such litigation or proceeding.
ARTICLE XI. TERMINATION OF AGREEMENT.
11.1 TERMINATION BY LAPSE OF TIME. This Agreement shall terminate at
8:00 p.m., New York time, on the seventy-fifth day after the date of this
Agreement, if the transactions contemplated hereby have not been consummated.
11.2 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be
terminated by the mutual written agreement of the parties hereto.
11.3 TERMINATION BY REASON OF BREACH. (a) This Agreement may be
terminated by Seller if at any time prior to the Closing, there shall occur a
material breach not corrected by Buyer or Newco within fifteen (15) calendar
days of receipt of Seller's notice of such breach by Seller, of any of the
representations, warranties or covenants of Buyer and Newco or the failure by
Buyer or Newco to perform any condition or obligation hereunder, and may be
terminated by Buyer or Newco if at any time prior to the Closing, there shall
occur a material breach not corrected by Parent or Seller within fifteen (15)
calendar days of receipt of Buyer's or Newco's notice of such breach of any of
the representations, warranties or covenants of Parent and/or Seller or the
failure of Parent and/or Seller to perform any condition or obligation hereunder
and, in each such case, the non-breaching party shall have available to it all
applicable remedies for such violation or breach; provided, however, that except
to the extent due to a breach by Parent or Seller of SECTION 5.6, or to a breach
of SECTION 6.5 by Buyer or Newco, as applicable, if a breach arises or occurs
after the date of execution of this Agreement, the non-breaching party shall
have the right to terminate this Agreement in accordance with its terms, but
shall not be entitled to make any claim for damages with respect to the breach.
(b) This Agreement may be terminated by Seller or Buyer, as the case
may be, in the event of a breach by the other party of a type described in
SECTION 5.7, provided, however, that except where, due to the intentional act of
the breaching party, a breach arises or occurs after the date of this Agreement,
the non-breaching party shall have the right to terminate this Agreement in
accordance with its terms, but shall not be entitled to make any claim for
damages with respect to the breach.
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11.4 TERMINATION BY PARENT OR SELLER. This Agreement may be terminated
by Parent or Seller by giving written notice to Buyer and Newco at any time
prior to the Closing Date in the event that the Fairness Opinion addressed to
Seller is withdrawn, unless such withdrawal is the result of a breach by Parent
or Seller of any of its representations, warranties or covenants.
11.5 EFFECTS OF TERMINATION. In the event of termination in accordance
with Section 11.1, 11.2, 11.3, or 11.4, no party shall have any further
obligation or liability to the other parties except (i) as provided in SECTION
11.3(A) and (ii) that the provisions of SECTION 4.2, SECTION 13.1, SECTION 13.2,
and ARTICLE XIV shall survive any termination of this Agreement and shall
continue to be in full force and effect.
ARTICLE XII. TAX MATTERS.
The following provisions shall govern the allocation of responsibility
between Buyer and Newco, on the one hand, and Parent and Seller, on the other
hand, for certain tax matters following the Closing Date; it being agreed by the
parties hereto that notwithstanding any other provision in this Agreement the
obligations of each such party pursuant to this Article XII shall not be subject
to the Seller Indemnification Cap or the Seller Deductible set forth in Section
9.2(a) of this Agreement:
12.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Seller shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
relating to the Business for all periods ending on or prior to the Closing Date
that are filed after the Closing Date. Except in the case of income tax returns,
Seller shall within a reasonable time prior to filing give Buyer and Newco the
opportunity to review and comment upon each such Tax Return described in the
preceding sentence. Parent and Seller shall pay Taxes relating to the Business
due on such Tax Returns.
12.2 BUYER RETURNS INCLUDING PRE-CLOSING PERIODS. If Buyer is required
by law to file, and does timely file, a Tax Return (other than an income Tax
Return) that relates to the operations of the Business prior to the Closing and
which Tax Return shows an amount of Tax due, Seller shall pay to Buyer at least
fifteen (15) days before the date on which Taxes are paid by Buyer the portion
of the Taxes shown due on the Tax Return which are related to the operations of
the Business up to and including the Closing Date. For purposes of this SECTION
12.2, the Taxes related to the operations of the Business up to and including
the Closing Date shall (x) in the case of any Taxes other than Taxes based upon
or related to income or receipts, be deemed to be the amount of such Tax for the
entire Taxable period to which the Tax Return relates multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on and
including the Closing Date and the denominator of which is the number of days in
the entire Taxable period, and (y) in the case of any Tax based upon or related
to receipts be deemed equal to the amount that would be payable if the relevant
Taxable period ended on and included the Closing Date. Any credits relating to a
Taxable period shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Seller with respect to the Business. Buyer shall, within a reasonable
time
47
prior to filing, give Parent and Seller the opportunity to review and comment
upon each Tax Return for which Parent and Seller shall be required to make a
payment to Buyer under this SECTION 12.2.
12.3 COOPERATION ON TAX MATTERS.
(a) Buyer and Newco, on one hand, and Parent and Seller, on the other
hand, shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this
ARTICLE XII and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information that are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Buyer and Newco, on the one hand, and Parent
and Seller, on the other hand, agree (1) to retain all books and records with
respect to Tax matters pertinent to the Business relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer and Newco, on the one hand,
and Parent and Seller, on the other hand, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (2) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, Buyer and Newco, on
the one hand, and Parent and Seller, on the other hand, shall allow the other
party to take possession of such books and records.
(b) Buyer and Newco, on one hand, and Parent and Seller, on the other
hand, further agree, upon request, to use their best efforts to obtain any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby) unless the party requested to obtain such certificate or
other document would incur additional Tax liability by obtaining such
certificate or other document.
(c) Buyer and Newco, on one hand, and Parent and Seller, on the other
hand, further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations promulgated thereunder.
12.4 TAX SHARING AGREEMENTS. All tax sharing agreements or similar
agreements with respect to or involving the Business shall be terminated as of
the Closing Date and, after the Closing Date, neither Buyer nor Newco shall be
bound thereby or have any liability thereunder.
12.5 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 (including any tax imposed
in any state or subdivision), shall be paid one-half by Seller and one-half by
Buyer when due, and Seller shall, 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, Buyer shall, and
48
shall cause its affiliates to, join in the execution of any such Tax Returns and
other documentation.
ARTICLE XIII. BROKERS.
13.1 FOR PARENT AND SELLER. Parent and Seller represent and warrant
that neither has engaged any broker or finder or incurred any liability for
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement, except that Parent has retained, and will be
responsible for any fee owed, PaineWebber Incorporated. Parent and Seller agree
to indemnify and hold harmless Buyer and Newco against any claims or liabilities
asserted against them, jointly or severally, by any Person acting or claiming to
act as a broker or finder on behalf of Parent and Seller.
13.2 FOR BUYER AND NEWCO. Buyer and Newco agree to pay all fees,
expenses and compensation owed to any Person who has acted in the capacity of
broker or finder on its behalf in connection with the transactions contemplated
by this Agreement. Buyer and Newco agree to indemnify and hold harmless Seller
against any claims or liabilities asserted against them, jointly or severally,
by any Person acting or claiming to act as a broker or finder on behalf of Buyer
and Newco.
ARTICLE XIV. MISCELLANEOUS.
14.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that neither Buyer and Newco, on the one hand, nor Parent and
Seller, on the other hand, may assign their respective obligations hereunder
without the prior written consent of the other party; provided that after the
Closing Date Buyer and Newco may assign their respective rights under this
Agreement to any Affiliate of Buyer or any Person who acquires all or
substantially all of the assets of Buyer (including, without limitation, through
merger or otherwise).
14.2 ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS. (a) This Agreement,
together with all Schedules and Exhibits hereto, the Termination Agreement and
all other agreements and instruments to be delivered by the parties pursuant
hereto represent the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written and all contemporaneous oral negotiations, commitments and
understandings between such parties. Buyer and Seller, by the consent of their
respective boards of directors, or officers authorized by such boards of
directors, may amend or modify this Agreement, in such manner as may be agreed
upon, by a written instrument executed by Buyer and Seller.
(b) The Exhibits and Schedules attached hereto or to be attached
hereafter are hereby incorporated as integral parts of this Agreement.
14.3 EXPENSES. Except as otherwise expressly provided herein, Buyer and
Newco, on the one hand, and Seller and Parent, on the other hand, shall each pay
their own expenses in
49
connection with this Agreement and the transactions contemplated hereby. Buyer
shall pay one-half and Seller shall pay one-half of the HSR Act filing fee.
14.4 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the substantive laws of the State of Minnesota
without reference to its choice of laws provisions. Any actions brought to
enforce this Agreement shall be brought in courts of competent jurisdiction
sitting within the County of Hennepin, State of Minnesota. Said County of
Hennepin shall be the exclusive venue for any disputes arising under or in
connection with this Agreement.
14.5 SECTION HEADINGS. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
14.6 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
14.8 NO THIRD PARTY BENEFICIARIES. Except as otherwise set forth in
SECTION 9.2, nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their permitted successors and assigns.
14.9 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three (3) days after deposit in
United States post office facilities properly addressed with postage prepaid.
All notices to a party will be sent to the addresses set forth below or to such
other address or Person as such party may designate by written notice to each
other party hereunder:
TO BUYER: Medisys plc
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: 011-44-20-7663-5967
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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TO SELLER: Chronimed Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
3400 City Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice given hereunder may be given on behalf of any party by its
counsel or other authorized representatives.
14.10 NO PERSONAL LIABILITY. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of Parent or Seller, on the one hand, or
Buyer or Newco, on the other hand, or any officer, director, employee, agent,
representative or investor of any party hereto.
14.11 MUTUAL DRAFTING. This Agreement is the result of the joint
efforts of Seller and Buyer, and each provision hereof has been subject to the
mutual consultation, negotiation and agreement of the parties and there shall be
no construction against any party based on any presumption of that party's
involvement in the drafting thereof.
14.12 DEFINITIONS. As used in this Agreement the following terms shall
have the meanings set forth below:
(a) "AIM" shall have the meaning set forth in Section 3.4.
(b) "ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section
1.1(a)(ii).
(c) "ADVERSE," "ADVERSELY," when used alone or in conjunction with
other terms (including without limitation "Affect," "CHANGE" and "EFFECT") shall
mean, with respect to Seller, any event which could reasonably be expected to
(i) adversely effect the validity or enforceability of this Agreement or any
other agreement, document or instrument contemplated hereby or the likelihood of
consummation of the transactions contemplated hereby, (ii) adversely effect the
business, operations, properties, condition (financial or other), or results of
operation (including without limitation, the Assets, Assumed Liabilities or
earnings before interest, taxes, depreciation and amortization) either of Seller
or of the Business such that there is a material adverse effect on the Business
and Assets, taken as a whole, (iii) impair in any material respect
51
Seller's ability to fulfill its obligations under the terms of this Agreement or
any other agreement, document or instrument contemplated hereby or (iv) have an
adverse effect in any material respect on the aggregate rights and remedies of
Buyer or Newco under this Agreement or any other agreement, document or
instrument contemplated hereby.
(d) "AFFILIATE," "AFFILIATED" shall mean, with respect to any Person,
(a) any other Person at the time directly or indirectly controlling, controlled
by or under direct or indirect common control with such Person, (b) any other
Person of which such Person at the time owns, or has the right to acquire,
directly or indirectly, ten percent (10%) or more of any class of the capital
stock or beneficial interest, (c) any other Person which at the time owns, or
has the right to acquire, directly or indirectly, ten percent (10%) or more of
any class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
(e) "AGREEMENT" shall mean this Agreement as originally in effect,
including unless the context otherwise specifically requires, all schedules and
exhibits hereto, as the same may from time to time be supplemented, amended,
modified or restated in the manner herein or therein provided.
(f) "ASSETS" shall have the meaning set forth in Section 1.1(a).
(g) "ASSUMED LIABILITIES" shall have the meaning set forth in Section
1.4(b).
(h) "AUDITED BUSINESS FINANCIALS" shall have the meaning set forth in
Section 2.5(a).
(i) "AUTHORITY" shall mean any governmental or quasi-governmental
authority, whether administrative, executive, judicial, legislative or other, or
any combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, authority, board, body, branch, bureau, central bank
or comparable agency or Entity, commission, court, department, instrumentality,
or other political unit or subdivision or other Entity of any of the foregoing,
whether domestic or foreign.
(j) "BENEFIT PLAN" means any employee benefit plan, program,
arrangement and contract of Seller, including without limitation, any "EMPLOYEE
BENEFIT PLAN" as defined in Section 3(3) of ERISA and any stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, bonus,
incentive, deferred compensation, and all other employee benefit plans,
agreements or arrangements of Seller.
(k) "BURY DRIVE LOCATION" shall have the meaning set forth in Section
1.1(a)(iv).
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(l) "BUSINESS" shall mean the development, manufacture and sale of
proprietary blood- and urine-based diagnostic products.
(m) "BUSINESS DAY" means any day other than a day on which there is no
trading on Nasdaq.
(n) "BUSINESS FINANCIALS" shall have the meaning set forth in Section
2.5(a).
(o) "BUYER COMMON STOCK" shall have the meaning set forth Section
1.3(a).
(p) "BUYER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 9.2.
(q) "BUYER'S PUBLIC REPORTS" shall have the meaning set forth in
Section 3.4.
(r) "CLAIM" shall have the meaning set forth in Section 9.2(c).
(s) "CLOSING" shall have the meaning set forth in Section 1.1(a).
(t) "CLOSING DATE BALANCE SHEET" shall have the meaning set forth in
Section 1.7(b)(iii).
(u) "CLOSING DATE NET WORKING CAPITAL" shall have the meaning set forth
in Section 1.7(c).
(v) "CLOSING INSTALLMENT" shall have the meaning set forth in Section
1.3(a).
(w) "COBRA" shall have the meaning set forth in Section 6.2(b).
(x) "CODE" shall have the meaning set forth in Section 1.5.
(y) "CONTRACT," "CONTRACTUAL OBLIGATION" shall mean any term,
condition, provision, representation, warranty, agreement, covenant,
undertaking, commitment, indemnity or other obligation which is outstanding or
existing under any instrument, contract, lease, or other contractual undertaking
to which the obligee is a party or by which it or any of its business is subject
or property or assets is bound.
(z) "DISCLOSURE SCHEDULE" shall have the meaning set forth at the
beginning of Article II.
(aa) "EDINA LOCATION" shall have the meaning set forth in Section
1.1(a)(iv).
(bb) "EMPLOYMENT ARRANGEMENT" shall mean, with respect to any Person,
any employment, consulting, retainer or severance contract, agreement, plan,
arrangement or policy (exclusive of any which is terminable within thirty (30)
days without liability, penalty or payment of any kind by such Person or any
Affiliate (other than any such liability, penalty or payment of general
application to all Seller's employees), providing for severance, termination
53
payments, insurance coverage (including any self-insured arrangements), workers
compensation, disability benefits, life, health, medical, dental or
hospitalization benefits, supplemental unemployment benefits, vacation or sick
leave benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock purchase or appreciation rights or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits, or any collective bargaining or other labor agreement, whether or
not any of the foregoing is subject to the provisions of ERISA.
(cc) "ENCUMBRANCE" shall mean any of the following: mortgage; lien
(statutory or other); preference, priority or other security agreement,
arrangement or interest; hypothecation, pledge or other deposit arrangement;
assignment; charge; levy; executory seizure; attachment; garnishment;
encumbrance; conditional sale, title retention or other similar agreement,
arrangement, device or restriction; any financing lease involving substantially
the same economic effect as any of the foregoing; or the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
(dd) "ENFORCEABILITY EXCEPTIONS" shall have the meaning set forth in
Section 2.2.
(ee) "ENTITY" shall mean any corporation, firm, unincorporated
organization, association, partnership, limited liability company, trust (inter
vivos or testamentary) estate of a deceased, insane or incompetent individual,
business trust, joint stock company, joint venture or other organization, entity
or business, whether acting in an individual, fiduciary or other capacity, or
any Authority.
(ff) "ENVIRONMENTAL CLAIM" shall have the meaning set forth in Section
2.15(h).
(gg) "ENVIRONMENTAL LAWS" shall have the meaning set forth in Section
2.15(h).
(hh) "ERISA" means the Employee Retirement Income Securities Act of
1974, as amended.
(ii) "EXCHANGE ACT" shall have the meaning set forth in Section 2.4(a).
(jj) "EXCLUDED ASSETS" shall have the meaning set forth in Section
1.1(b).
(kk) "FAIRNESS OPINION" shall have the meaning set forth in Section
8.9.
(ll) "401(K) PLAN" shall have the meaning set forth in Section 2.22(e).
(mm) "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
(nn) "GAAP LIABILITY" or "GAAP LIABILITIES" shall have the meaning set
forth in Section 2.5(c).
54
(oo) "GOVERNMENTAL AUTHORIZATIONS" shall mean all approvals,
concessions, consents, franchises, licenses, permits, plans, registrations and
other authorizations of all Authorities.
(pp) "GUARANTY," "GUARANTEED" or "GUARANTEES" shall mean any agreement,
undertaking or arrangement by which Seller guarantees, endorses or otherwise
becomes or is liable, directly or indirectly, contingently or otherwise, upon
any indebtedness of any other Person including without limitation the payment of
amounts drawn down by beneficiaries of letters of credit (other than by
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business). The amount of the Seller's obligation under any Guaranty
shall be deemed to be the outstanding amount (or maximum permitted amount that
can be incurred without consent of Seller, if larger) of the indebtedness
directly or indirectly guaranteed thereby (subject to any limitation set forth
therein).
(qq) "HSR ACT" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder, all as from
time to time in effect.
(rr) "HAEMOFIX LETTER AGREEMENT" shall have the meaning set forth in
Section 7.12.
(ss) "INITIAL SHARES" shall have the meaning set forth in Section
1.3(a).
(tt) "INSTRUMENT OF ASSUMPTION" shall have the meaning set forth in
Section 1.4(c).
(uu) "INSURANCE POLICIES" shall have the meaning set forth in Section
2.8.
(vv) "INTANGIBLE PROPERTY" shall have the meaning set forth in Section
1.1(a)(viii).
(ww) "INTERIM BALANCE SHEET" shall have the meaning set forth in
Section 1.7(c).
(xx) "INTERIM BUSINESS FINANCIALS" shall have the meaning set forth in
Section 2.5(a).
(yy) "INVENTORY" shall have the meaning set forth in Section 1.1(a)(i).
(zz) "KNOWLEDGE" as used in this Agreement with respect to Seller,
shall be deemed to mean the actual knowledge (as opposed to constructive or
imputed knowledge) of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇.
(aaa) "LEASES" shall have the meaning set forth in Section 2.9(a).
(bbb) "LICENSES" shall have the meaning set forth in Section
1.1(a)(iii).
55
(ccc) "LOCK-UP SHARES" shall have the meaning set forth in Section 6.3.
(ddd) "LOSS" shall have the meaning set forth in Section 9.2(a).
(eee) "NEWCO COMMON STOCK" shall have the meaning set forth in Section
1.3(a).
(fff) "NOTIFYING PARTY" shall have the meaning set forth in Section
9.2(c).
(ggg) "NET WORKING CAPITAL" shall have the meaning set forth in Section
1.7(a).
(hhh) "PERMITS" shall have the meaning set forth in Section 2.15(a).
(iii) "PERMITTED ENCUMBRANCES" shall have the meaning set forth in
Section 1.4(a).
(jjj) "PERSON" shall mean any natural individual or any Entity.
(kkk) "PRELIMINARY CLOSING DATE BALANCE SHEET" shall have the meaning
set forth in Section 1.7(b).
(lll) "PRIVATE AUTHORIZATIONS" shall mean all approvals, concessions,
consents, franchises, licenses, permits, and other authorizations of all Persons
(other than Authorities) including without limitation those with respect to
patents, trademarks, service marks, trade names, copyrights, computer software
programs, technology and know-how, but not including those with respect to
Leases and other general contract rights.
(mmm) "PUBLIC REPORTS" shall have the meaning set forth in Section
2.4(a).
(nnn) "PURCHASE PRICE" shall have the meaning set forth in Section
1.3(a).
(ooo) "PURCHASED CONTRACTS" shall have the meaning set forth in Section
1.1(a)(iv).
(ppp) "RECORDS" shall have the meaning set forth in Section 1.1(a)(v).
(qqq) "REIMBURSABLE INVESTMENTS" shall have the meaning set forth in
Section 2.28.
(rrr) "RIGHTS PLAN AGREEMENT" shall have the meaning set forth in
Section 2.34.
(sss) "REQUIRED CONSENTS" shall have the meaning set forth in Section
2.2.
(ttt) "RETAINED LIABILITIES" shall have the meaning set forth in
Section 1.4(d).
56
(uuu) "REIMBURSABLE INVESTMENTS" shall have the meaning set forth in
Section 2.28.
(vvv) "SECURITIES ACT" shall have the meaning set forth in Section
2.4(a).
(www) "SELLER DEDUCTIBLE" shall have the meaning set forth in Section
9.2(a).
(xxx) "SELLER INDEMNIFICATION CAP" shall have the meaning set forth in
Section 9.2.
(yyy) "SELLER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 9.2(b).
(zzz) "STOCK CONSIDERATION" shall have the meaning set forth Section
1.3(a).
(aaaa) "SUBSIDIARY" shall mean, with respect to a Person, any Entity a
majority of the capital stock ordinarily entitled to vote for the election of
directors of which, or if no such voting stock is outstanding, a majority of the
equity interests of which, is owned directly or indirectly, legally or
beneficially, by such Person or any other Person controlled by such Person.
(bbbb) "TANGIBLE ASSETS" shall have the meaning set forth in Section
1.1(a)(vii).
(cccc) "TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs' duties, tariffs and
similar charges.
(dddd) "TAX RETURNS" shall have the meaning set forth in Section 2.26.
(eeee) "TERMINATION AGREEMENT" shall have the meaning set forth in
Section 6.4.
(ffff) "UKLA" shall have the meaning set forth in Section 3.4.
(gggg) "WARRANTY RIGHTS" shall have the meaning set forth in Section
1.1(a)(vi).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first-above written.
SELLER:
CHRONIMED INC.
By:______________________________________________
Name:
Title:
MEDgenesis INC.
By:______________________________________________
Name:
Title:
BUYER:
HYPOGUARD AMERICA LIMITED
By:______________________________________________
Name:
Title:
MEDISYS PLC
By:______________________________________________
Name:
Title: