ASSET PURCHASE AGREEMENT

 

TABLE OF CONTENTS

 

		Page
ARTICLE 1	DEFINITIONS	1
ARTICLE 2	PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES	9
2.1	Purchase of Assets and Assumption of Liabilities	9
2.2	Purchase Price	11
2.3	Purchase Price Adjustments	11
2.4	Calculation and Payment of the Closing Date Purchase Price	11
2.5	Holdback	12
2.6	Determination of Purchase Price Adjustments; Closing Statement of Assets and Assumed Liabilities; Final Payment	13
2.7	Closing and Closing Deliveries	16
ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	18
3.1	Organization	18
3.2	Business and Business Name	18
3.3	Due Authorization	18
3.4	No Breach	18
3.5	Clear Title	19
3.6	Condition and Sufficiency of Assets	19
3.7	Litigation	19
3.8	Labor Matters	20
3.9	DEA Compliance	20
3.10	Employee Benefits	20
3.11	Income Statement and Preliminary Statement of Assets and Assumed Liabilities	21
3.12	Absence of Certain Developments	21
3.13	Intellectual Property	23
3.14	Compliance with Laws	24
3.15	Operating Contracts	24
3.16	Real Estate	25
3.17	Books and Records	26
3.18	Employees and Employee Related Commitments	26
3.19	Permits	27

 

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TABLE OF CONTENTS

(continued)

 

		Page
3.20	Insurance	27
3.21	Brokers	27
3.22	Environmental Matters	27
3.23	Debt Instruments	28
3.24	Customers and Suppliers	28
3.25	Adequacy of Properties	28
3.26	Absence of Certain Business Practices	28
3.27	Trade Regulation	28
3.28	Inventories	29
3.29	Certain Arrangements	29
3.30	Tax Matters	29
ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	30
4.1	Organization	30
4.2	Due Authorization	30
4.3	No Breach	31
4.4	Brokers	31
ARTICLE 5	INDEMNIFICATION	31
5.1	Indemnification by the Company	31
5.2	Indemnification by the Purchaser	32
5.3	Procedure for Indemnification	32
5.4	Dispute Resolution	34
5.5	Effect of Insurance	35
ARTICLE 6	CERTAIN TAX MATTERS	36
6.1	Income and Transfer Taxes	36
6.2	Non-foreign Person Affidavit	36
6.3	Allocation of Purchase Price	36
6.4	Post-Closing Access and Cooperation	36
ARTICLE 7	PERFORMANCE FOLLOWING THE CLOSING DATE	37
7.1	Further Acts and Assurances	37
7.2	Non-Competition Agreement	37

 

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TABLE OF CONTENTS

(continued)

 

		Page
7.3	Non-Solicitation Agreement	38
7.4	Confidential Information	38
7.5	Reasonableness of Covenants	38
7.6	Injunctive Relief	38
7.7	Blue Pencil Doctrine	39
7.8	Employee Retention	39
7.9	Consents	40
7.10	Inventory Count and Pricing	40
7.11	Employee Restrictive Covenant Agreements	41
7.12	Excluded Trade Payables	41
7.13	New Operating Contracts; Shoreview Call Center	41
ARTICLE 8	MISCELLANEOUS	41
8.1	Survival of Representations and Warranties, Covenants and Agreements	41
8.2	Preservation of and Access to Records	42
8.3	Cooperation	42
8.4	Public Announcements	42
8.5	Notices	42
8.6	Entire Agreement	43
8.7	Remedies	43
8.8	Amendments	43
8.9	Successors and Assigns	43
8.10	Fees and Expenses	43
8.11	Governing Law and Jurisdiction	44
8.12	Counterparts and Facsimile Signatures	44
8.13	Headings	44
8.14	Scope of Agreement	44
8.15	Number and Gender	44
8.16	Severability	45
8.17	Parties in Interest	45
8.18	Waiver	45
8.19	Construction	45
8.20	Specific Performance	45

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of the 12th day of June, 2009, by and between PATTERSON MEDICAL SUPPLY, Inc., a Minnesota corporation (the “ Purchaser ”), and EMPI, INC., a Minnesota corporation (the “ Company ”).

 

RECITALS

 

A.            The Company operates a “Rehab Med + Equip” business under the name “RME” (the “ RME Division ”).

 

B.            The RME Division is a distributor of rehabilitation products to the physical therapy, chiropractic and other rehabilitation markets primarily though a catalog.

 

C.            The Purchaser desires to purchase and assume, as applicable, and the Company desires to sell, transfer, convey, assign and deliver, as applicable, (i) certain assets of the RME Division pursuant to this Agreement, and (ii) certain liabilities and obligations of the Company directly arising from the operation of the RME Division pursuant to the purchase of such assets.

 

D.            It is the intention of the parties hereto that, upon consummation of the transactions contemplated by and pursuant to this Agreement, the Purchaser shall own all of the assets of the Company associated with, utilized in and/or necessary to the operation of the RME Division other than the Excluded Assets.

 

AGREEMENT

 

In consideration of the foregoing Recitals and the mutual promises contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser and the Company agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

For purposes of this Agreement, the following terms have the meanings specified:

 

“5 /28/09 Income Statement ” has the meaning set forth in Section 3.11 of this Agreement.

 

“ Affiliate ” when used in reference to a specified Person, means any Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with the specified Person.

 

“ Agreement ” has the meaning set forth in the introductory paragraph hereof.

 

“ Ancillary Documents ” means the documents, instruments and agreements to be executed and/or delivered by the parties pursuant to this Agreement.

 

 

“ Applicable Laws ” means any and all laws, ordinances, constitutions, regulations, statutes, treaties, rules, codes, and Injunctions adopted, enacted, implemented, promulgated, issued, entered or deemed applicable by or under the authority of any Governmental Body having jurisdiction over a specified Person or any of such Person’s properties or assets.

 

“ Assets ” has the meaning set forth in Section 2.1(a)(i) of this Agreement.

 

“ Assumed Liabilities ” has the meaning set forth in Section 2.1(b)(i) of this Agreement.

 

“ Base Amount ” has the meaning set forth in Section 2.2 of this Agreement.

 

“ Basket Amount ” has the meaning set forth in Section 5.1 of this Agreement.

 

“ Benefit Plan ” means any and all “employee benefit plans” (within the meaning of Section 3(3) of ERISA), stock option, restricted stock, stock purchase, stock appreciation, phantom stock or plan maintained, sponsored or participated in by the Company.

 

“ Business ” as used in this Agreement means the business operated by the Company as its RME Division that is being purchased by Purchaser pursuant to this Agreement which is engaged in the purchase, marketing, sale (including telesales and telemarketing) and/or distribution of rehabilitation products.

 

“ CFO Certificate” has the meaning set forth in Section 2.6(a) of this Agreement.

 

“ Closing ” has the meaning set forth in Section 2.7(a) of this Agreement.

 

“ Closing Date ” has the meaning set forth in Section 2.7(a) of this Agreement.

 

“ Closing Date Net Assets” has the meaning set forth in Section 2.6(a)(ii) of this Agreement.

 

“ Closing Date Excluded Trade Payables ” has the meaning set forth in Section 2.6(a)(iii) of this Agreement.

 

“ Closing Date Purchase Price ” has the meaning set forth in Section 2.4(a) of this Agreement.

 

“ Closing Purchase Price Adjustment” has the meaning set forth in Section 2.6(a)(v) of this Agreement.

 

“ Closing Statement of Assets and Assumed Liabilities” has the meaning set forth in Section 2.6(a)(i) of this Agreement.

 

“ Code ” means the Internal Revenue Code of 1986, as amended, or rules and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

 

“ Company ” has the meaning set forth in the introductory paragraph hereof.

 

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“ Company Indemnified Parties ” has the meaning set forth in Section 5.2 of this Agreement.

 

“ Confidential Information ” means any information or compilation of information not generally known to the public or the industry or which the Company has not disclosed to third parties without a written obligation of confidentiality, which is proprietary to the Business, relating to the procedures, techniques, methods, concepts, ideas, affairs, products, processes and services of and with respect to the Business, including, but not limited to, information relating to marketing, merchandising, selling, research, development, manufacturing, purchasing, accounting, engineering, financing, costs, customers, plans, pricing, billing, needs of customers and products and services used by customers, all lists of customers and their addresses, prospects, sales calls, products, services, prices and the like as well as any specifications, formulas, plans, drawings, accounts or sales records, sales brochures, code books, manuals, trade secrets, knowledge, know-how, pricing strategies, operating costs, sales margins, methods of operations, invoices or statements and the like; provided , however , that the term “Confidential Information” shall not be deemed to include information which (i) becomes generally available to the public other than as a result of disclosure by the Company, or (ii) becomes available to the applicable party on a non-confidential basis and without any breach of an agreement of confidentiality from a source other than the Company or the Purchaser.

 

“ Contract ” means any agreement, lease of non-Real Estate, license agreement (other than a license granted by a Governmental Body), contract, consensual obligation, promise, commitment, arrangement, understanding or undertaking, (whether written or oral and whether express or implied) of any type, nature or description that is legally binding but excluding leases of Leased Real Estate.  As used herein, the word “Contract” shall be limited in scope if modified by an adjective specifying the type of contract to which this Agreement or a Section hereof refers.

 

“ Controlled Group ” has the meaning set forth in Section 3.10(a) of this Agreement.

 

“ Controlled Person ” when used in reference to a specified Person, means any Person that is directly or indirectly, through one or more intermediaries, controlled by a specified Person.

 

“ Disclose ” means to reveal, deliver, divulge, disclose, publish, communicate, show or otherwise make known or available to any other Person, or in any way to copy, any of the Company’s Confidential Information.

 

“ Encumbrance ” means and includes:

 

(i)            with respect to any personal property, any intangible property or any property other than real property, any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement or lease or use agreement in the nature thereof, whether voluntarily incurred or arising by operation of law, and including any agreement to grant or submit to any of the foregoing in the future; and

 

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(ii)           with respect to any real property, any mortgage, lien, easement, interest, right-of-way, condemnation or eminent domain proceeding, encroachment, any building, use or other form of restriction, encumbrance or other claim (including adverse or prescriptive) or right of third parties (including Governmental Bodies), any lease or sublease, boundary dispute, and agreements with respect to any real property including: purchase, sale, right of first refusal, option, construction, building or property service, maintenance, property management, conditional or contingent sale, use or occupancy, franchise or concession, whether voluntarily incurred or arising by operation of law, and including any agreement to grant or submit to any of the foregoing in the future.

 

“ Environmental Laws ” means any and all Applicable Laws (i) regulating the use, treatment, generation, transportation, storage, control or disposal of any Hazardous Material, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq .) (“CERCLA”), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et   seq .), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq .), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq .), the Clean Water Act (33 U.S.C. § 1251 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq .), and all state laws corollaries thereto, and/or (ii) relating to the protection of the environment and public or worker health and safety, all as existing, defined or interpreted as of the Closing Date.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ Employee Restrictive Covenant Agreements ” shall have the meaning set forth in Section 3.15 of this Agreement.

 

“ Estimated Excluded Trade Payables ” means One Million Eight Hundred Thirty Seven Thousand Sixty Five Dollars ($1,837,065), which is the Company’s good faith estimate of the trade accounts payable incurred by the Company with respect to the Business existing on the Closing Date as set forth on Exhibit A-3 hereto.

 

“ Excluded Assets ” has the meaning set forth in Section 2.1(a)(ii) of this Agreement.

 

“ Excluded Liabilities ” has the meaning set forth in Section 2.1(b)(ii) of this Agreement.

 

“ Excluded Trade Payables ” means the actual trade accounts payable incurred by the Company with respect to the Business existing on the Closing Date.

 

“ Excluded Trade Payables Adjustment ” has the meaning set forth in Section 2.3 of this Agreement.

 

“ Final Order” means an action or decision of the Governmental Body as to which (i) no request for a stay is pending, no stay is in effect, and any deadline for filing such request that may be designated by statute or regulation has passed, (ii) no petition for rehearing or reconsideration or application for review is pending and the time for the filing of such petition or application has passed, (iii) the Governmental Body does not have the action or decision under reconsideration on its own motion and the time within which it may effect such reconsideration has passed, and (iv) no judicial appeal is pending or in effect and any deadline for filing any such appeal that may be designated by statute or rule has passed.

 

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“ GAAP ” means generally accepted accounting principles in the United States.

 

“ Governmental Body ” means any:

 

(i)            nation, state, county, city, town, village, district or other jurisdiction of any nature;

 

(ii)           federal, state, local, municipal, foreign or other government;

 

(iii)          governmental or quasi-governmental authority of any nature (including any governmental agency, branch, board, commission, department, instrumentality, office or other entity, and any court or other tribunal);

 

(iv)          multi-national organization or body; and/or

 

(v)           body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

 

“ Hazardous Materials ” means any and all (i) toxic or hazardous pollutants, contaminants, chemicals, wastes, materials or substances listed or identified in, or regulated by, any Environmental Law, and (ii) any of the following, whether or not included in the foregoing:  polychlorinated biphenyls, asbestos in any form or condition, urea-formaldehyde, petroleum, including crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel or mixtures thereof, nuclear fuels or materials, chemical wastes, radioactive materials and explosives.

 

“ Holdback” has the meaning set forth in Section 2.5(a) of this Agreement.

 

“ Holdback Claim” has the meaning set forth in Section 2.5(c) of this Agreement.

 

“ Holdback Interest Rate” has the meaning set forth in Section 2.5(d) of this Agreement.

 

“ Holdback Termination Date” has the meaning set forth in Section 2.5(a) of this Agreement.

 

“ Indemnified Party ” has the meaning set forth in Section 5.3 of this Agreement.

 

“ Indemnifying Party ” has the meaning set forth in Section 5.3 of this Agreement.

 

“ Injunction ” means any and all writs, rulings, awards, directives, injunctions (whether temporary, preliminary or permanent), judgments, decrees or orders (whether executive, judicial or otherwise) adopted, enacted, implemented, promulgated, issued, entered or deemed applicable by or under the authority of any Governmental Body.

 

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“ Intellectual Property ” means any and all (i) inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations in part, revisions, extensions and reexaminations thereof; (ii) trademarks, service marks, trade dress, logos, trade names, assumed names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith; (iii) copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith; (iv) mask works and all applications, registrations and renewals in connection therewith; (v) trade secrets and confidential business information (including ideas, research and development, know-how, technology, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals); (vi) computer software (including data and related software program documentation in computer-readable and hard-copy forms); (vii) other intellectual property and proprietary rights of any kind, nature or description, including web sites, web site domain names and other e-commerce assets and resources of any kind or nature; and (viii) copies of tangible embodiments thereof (in whatever form or medium).

 

“ IRS ” means the United States Internal Revenue Service.

 

“ Knowledge ” or “ Best Knowledge ” means that an individual will be deemed to have “Knowledge” of a particular fact or other matter if such individual is aware of such fact or other matter, or could have become aware in the course of a reasonable investigation of the fact or other matter; provided , however , that Knowledge by the Company of a particular fact or other matter shall mean the knowledge of Allen Hughes, Barry Hix or William King.

 

“ Leased Real Estate ” has the meaning set forth in Section 3.16 of this Agreement.

 

“ Liability ” or “ Liabilities ” means any and all debts, liabilities and/or obligations of any type, nature or description (whether known or unknown, asserted or unasserted, secured or unsecured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due).

 

“ Loss ” or “ Losses ” has the meaning set forth in Section 5.1 of this Agreement.

 

“ Material Adverse Effect ” or “ Material Adverse Change ” means, in connection with any Person, any event, change or effect that is materially adverse, individually or in the aggregate, to the condition (financial or otherwise), properties, Assets, Liabilities, revenues, income, business, operations, results of operations of such Person, taken as a whole; provided , however , the foregoing shall not be deemed to include any event, change or effect which arises with respect to (i) conditions of change that are primarily the result of the national economy whereby the effect or change is generally universal upon businesses as a whole or within an industry as a whole, or (ii) uniformly applied legislative or judicial Applicable Laws or Final Orders that have general applicability to business as a whole or an industry as a whole.

 

“ Net Asset Adjustment” has the meaning set forth in Section 2.3 of this Agreement.

 

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“ Net Asset Threshold Amount ” means Three Million Nine Hundred Sixty One Thousand Five Hundred Dollars ($3,961,500), which is the minimum amount of Net Assets to be delivered to the Purchaser by the Company at and upon the Closing, as set forth on the Preliminary Statement of Assets and Assumed Liabilities.

 

“ Net Assets ” has the meaning set forth in Section 2.3 of this Agreement.

 

“ Operating Contracts ” has the meaning set forth in Section 3.15 of this Agreement.

 

“ Ordinary Course of Business ” means an action taken by a Person only if such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person.

 

“ Permits ” means all right, title and interest in and to any permits, licenses, certificates, filings, authorizations, approvals, or other indicia of authority (and any pending applications for approval or renewal of a Permit), to own, construct, operate, sell, inventory, disburse or maintain any asset or conduct any business as issued by any Governmental Body.

 

“ Permitted Encumbrances ” means such minor Encumbrances, charges and imperfections which do not, individually or in the aggregate detract from, in any material way, the value or use of any Asset, or otherwise interfere with, in any material way, the quiet enjoyment of any Asset under any lease or leasehold interest.

 

“ Person ” means any individual, corporation (including any non-profit corporation), general, limited or limited liability partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Body.

 

“ Preliminary Statement of Assets and Assumed Liabilities” has the meaning set forth in Section 3.11(b) of this Agreement.

 

“ Proceeding ” means any suit, litigation, arbitration, hearing, audit, investigation or other action (whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. “ Purchase Price ” has the meaning set forth in Section 2.2 of this Agreement.

 

“ Purchase Price Adjustments ” has the meaning set forth in Section 2.3 of this Agreement.

 

“ Purchaser ” has the meaning set forth in the introductory paragraph hereof.

 

“ Purchaser Indemnified Parties ” has the meaning set forth in Section 5.1 of this Agreement.

 

“ Real Estate ” has the meaning set forth in Section 3.16 of this Agreement.

 

“ Related Person ” or “ Related Persons ” means, with respect to a particular individual:

 

(i)            each other member of such individual’s Family (as hereafter defined); and

 

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(ii)           any Controlled Person of one or more members of such individual’s Family.

 

With respect to a specified Person other than an individual:

 

(i)            any Controlled Person of such specified Person; and

 

(ii)           each Person that serves as a director, governor, officer, manager, employee, general partner, executor or trustee of such specified Person (or in a similar capacity).  For purposes of this definition, the “ Family ” of an individual includes (i) such individual, (ii) the individual’s spouse, (iii) any lineal ancestor or lineal descendant of the individual, or (iv) a trust for the benefit of any of the foregoing.

 

“ RME Division ” has the meaning set forth in the Recitals to this Agreement.

 

“ Schedules ” has the meaning set forth in the introductory paragraph to Article 3 of this Agreement. “ Tax ” or “ Taxes ” means any and all net income, gross income, gross revenue, gross receipts, net receipts, ad valorem, franchise, profits, transfer, sales, use, social security, employment, unemployment, disability, license, withholding, payroll, privilege, excise, value-added, severance, stamp, occupation, property, customs, duties, real estate and/or other taxes, assessments, levies, fees or charges of any kind whatsoever imposed by any Governmental Body, together with any interest or penalty relating thereto.

 

“ Tax Return ” or “ Tax Returns ” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including, without limitation, any schedule or attachment thereto, any amendment thereof, and any estimated report or statement.

 

“ Third Party ” means a person not a party to this Agreement, excluding any Related Person.

 

“ Threatened ” means a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made in writing, or any notice has been given in writing that would lead a reasonably prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter will, with substantial certainty, be asserted, commenced, taken or otherwise pursued in the future; provided , however , that the foregoing shall not include customer billing disputes in the Ordinary Course of Business.

 

“ Transactional Expenses ” has the meaning set forth in Section 8.10 of this Agreement.

 

“ Use ” means to appropriate any of the Company’s Confidential Information arising from, in connection with or incident to the Business for the benefit of oneself or any other Person other than the Business.

 

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ARTICLE 2

 

PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES

 

2.1          Purchase of Assets and Assumption of Liabilities .  In reliance upon the representations, warranties and covenants contained in this Agreement as of the date hereof and on the Closing Date, the Purchaser agrees to (i) purchase the Assets (as defined below) from the Company and (ii) assume the Assumed Liabilities (as defined below), in each case on the terms and conditions set forth in this Agreement.  The sale, transfer, conveyance, assignment and delivery of the Assets by the Company shall convey (x) good and valid title to the Assets that are tangible assets, (y) all of the Company’s interests in and to the Assets that are intangible assets, and (z) good and valid title to the tangible portion and valid and enforceable interests in and to the intangible portion of the Assets that are mixed assets, free and clear of any and all Encumbrances, except for the Assumed Liabilities and the Permitted Encumbrances.

 

(a)           Assets .

 

(i)            Assets .  The Purchaser will purchase or assume, as applicable, all right, title and interest in and to all of the following assets of the Business as operated by the Company (collectively, the “Assets” ): (A) inventory and supplies, (B) property, equipment and other tangible personal property as set forth on Schedule 2.1(a)(i)(B) , (C) deposits as set forth on Schedule 2.1(a)(i)(C) , (D) prepaid expenses as set forth on Schedule 2.1(a)(i)(D) , (E) the Company’s right to use the name “RME” and any other names under which the Business conducts its businesses and operations, (F) those rights and interest in Intellectual Property and other intangible assets, including trade secrets, licenses, goodwill, and the corporate, assumed and trade names of the Company (and all derivatives thereof) used exclusively in the Business and as set forth on Schedule 2.1(a)(i)(F) , (G) all of the Company’s Permits to the extent transferable as set forth by site location and jurisdictional issuance on Schedule 2.1(a)(i)(G) , (H) the Company’s rights and benefits of and under the Operating Contracts and Leased Real Estate leases as set forth on Schedule 2.1(a)(i)(H) , and (I) the documents, books and records (financial or otherwise) relating solely to the Business, whether in tangible or intangible form, including ledgers, files, correspondence, lists, customer information, pricing and billing information, human resource policies, procedures manuals and the like, creative materials, advertising and promotional materials, studies, reports and other printed, written or electronic materials.

 

(ii)           Excluded Assets .  Notwithstanding anything to the contrary contained in Section 2.1(a) of this Agreement, the following assets of the Company (the “ Excluded Assets ”) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets, shall remain the property of the Company after the Closing and shall not be purchased or assumed by the Purchaser:  (A) cash and cash equivalents, (B) accounts receivable, (C) deferred income Taxes and credits of the Company, (D) ownership of insurance policies of the Company, (E) any claims and actions by the Company against the officers and directors of the Company which arise from the management or operation of the

 

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Business prior to or on the Closing Date, (F) all of the Company’s Permits not set forth on Schedule 2.1(a)(i)(G) , (G) the Contracts and Leased Real Estate leases set forth on Schedule 3.15 that are to be either terminated at and upon the Closing or retained by the Company, (H) the Company’s Tax returns and associated workpapers, and all claims for refunds of Taxes and other fees and charges of a Governmental Body, (I) any shares of capital stock of the Company, (J) the corporate charter of the Company, (K) the Company’s qualifications to conduct business, arrangements with registered agents, taxpayer and other identification numbers, seals, minute books, stock transfer books, and other documents relating to the organization, maintenance and existence of the Company, (L) those assets listed on Schedule 2.1(a)(ii)(L) , (M) any asset of the Company not used in the Business, and (N) any rights of the Company under this Agreement and the Ancillary Documents.

 

(b)           Liabilities .

 

(i)            Assumed Liabilities .  The Purchaser will assume the Liabilities of the Company which arise from the operation of the Business as follows:  (A) the obligations of the Company under the Operating Contracts and Leased Real Estate lease as set forth on Schedule 2.1(a)(i)(H) , except for any breach, defaults or non-current amounts owing under or arising pursuant to such Operating Contracts and Leased Real Estate lease on or prior to the Closing Date and (B) the obligations of the Company under any Permit transferred to the Purchaser as set forth on Schedule 2.1(a)(i)(G) , except for any breach, default or violation of Applicable Law arising pursuant to such Permit which has as its basis any event, act, occurrence or omission on or before the Closing Date; provided , however , that the Assumed Liabilities shall not include the Excluded Liabilities (the “ Assumed Liabilities ”).

 

(ii)           Excluded Liabilities .  The Purchaser shall not assume the following Liabilities of the Company:  any Liability arising from, in connection with or incident to (A) trade accounts payable incurred by the Company prior to or on the Closing Date, including but not limited to the Excluded Trade Payables, (B) any amount owed by the Business at Closing to any Affiliate or Related Person, other than obligations under the Leased Real Estate lease, (C) any Transactional Expenses paid by or relating to the Company, (D) any Tax Liability of or incurred by or in respect of the Company, any Related Person or Third Party, or the Assets which has as its basis any event, act, occurrence or omission on or before the Closing Date, (E) any Taxes, fees or penalties as described in Section 6.1 of this Agreement, (F) any Liability arising from, incident to or in connection with an Excluded Asset, (G) any breach, defaults, or violations of Contracts or Applicable Law which has as its or their basis any event, act, occurrence or omission prior to the Closing Date, (H) claims by current or former employees of the Company employed in the Business which have as their basis any event, act, occurrence or omission of or by the Company, (I) any Proceeding having as its basis any event, act, occurrence or omission occurring prior to the Closing Date, (J) any Liability arising from, in connection with or incident to any

 

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Benefit Plan, any breach of fiduciary duty under any Benefit Plan, any prohibited transaction under the Code or ERISA and any COBRA Liability which, in each case, has as its basis an event, act, occurrence or omission prior to the Closing Date, (K) any claim which arises from, in connection with or incident to any products liability claim that in any way arises from, without limitation, products sold, or distributed by the Business  on or prior to the Closing Date, (L) obligations associated with employees of the Company who are employed by the Business, including vacation and personal time off and sales commissions accrued to and through the date of Closing, and (M) any Liability that does not directly arise from the ownership of the Assets or operation of the Business and is not an Assumed Liability (the “ Excluded Liabilities ”).

 

2.2          Purchase Price.  The purchase price for the Assets and the assumption of the Assumed Liabilities shall be the aggregate of Twenty-One Million Dollars ($21,000,000) plus the Estimated Excluded Trade Payables (the “ Base Amount ”), plus or minus the Closing Purchase Price Adjustments, if any (collectively, the “ Purchase Price ”).

 

2.3          Purchase Price Adjustments .  The “ Net Asset Adjustment ” shall be equal to the amount by which the Assets minus the Assumed Liabilities (the “ Net Assets ”), each as reported on the Closing Statement of Assets and Assumed Liabilities, does not equal the Net Asset Threshold Amount.  The “ Excluded Trade Payables Adjustment ” shall be equal to the difference between the Closing Date Excluded Trade Payables and the Estimated Excluded Trade Payables.  The aggregate amount of the Net Asset Adjustment and the Excluded Trade Payables Adjustment shall be the “ Closing Purchase Price Adjustments .”

 

2.4          Calculation and Payment of the Closing Date Purchase Price .

 

(a)           Calculation of the Closing Date Purchase Price .  The Purchase Price to be paid to the Company on the Closing Date is the Base Amount less the Holdback (the “ Closing Date Purchase Price ”).  The Closing Date Purchase Price shall be subject to the Purchase Price adjustments defined and described in Section 2.6.

 

(b)           Payment of the Closing Date Purchase Price .  The Closing Date Purchase Price shall be remitted to the Company at and upon the Closing by wire transfer of immediately available funds to an account designated in writing by the Company at least three (3) business days prior to the Closing Date.

 

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2.5          Holdback .

 

(a)           Holdback of the Purchase Price .  At the Closing, the Purchaser shall retain One Million Dollars ($1,000,000) of the Base Amount to secure the due performance and payment of the indemnification obligations of the Company and any Closing Purchase Price Adjustment until fifteen (15) months following the Closing Date (the “ Holdback ”).  The Holdback is subject to the covenants (including all procedures) set forth in the provisions of this Section 2.5.  Subject to the provisions of Section 2.5(c) below, the Holdback shall terminate fifteen (15) months following the Closing Date (the “ Holdback Termination Date ”).

 

(b)           Deductions from the Holdback .  In the event that Purchaser reasonably determines after diligent, thorough and good faith inquiry that indemnification by the Company is required under Article 6 after applying the limitations on such indemnification set forth in Article 6, or if it is determined that any Closing Purchase Price Adjustment is owed to the Purchaser under Section 2.6, the Purchaser shall deliver written notice thereof to the Company, which notice shall contain a statement reasonably describing the nature of the indemnification obligation or objection to the CFO Certificate pursuant to the procedures in Section 2.6, as applicable, the identity of the Person (including the Purchaser) by whom it is being asserted, and the amount asserted as Losses as a result thereof or the Closing Purchase Price Adjustment, as applicable (the “ Holdback Claim ”).  If the Company does not notify the Purchaser in writing that it disputes the Holdback Claim within thirty (30) days after the delivery of written notice of Loss(es) by the Purchaser of an indemnification claim, or if it is determined that a Closing Purchase Price Adjustment is owed to Purchaser pursuant to Section 2.6, then the Purchaser shall have the right to deduct from the Holdback the full amount of the Holdback Claim (or the Closing Purchase Price Adjustment determined per Section 2.6) and such amount shall not be payable to the Company.  The Purchaser shall from time to time, prior to the final determination of a given Holdback Claim, amend the notice of such Holdback Claim to reflect any material change in the amount of Loss or Losses asserted and the Company shall have the same rights to dispute such  amendments as are reflected above.  The Purchaser shall deliver to the Company copies of all material documentation relating to the Holdback Claim, including (as applicable) any pleadings and amended pleadings filed in connection with any such Holdback Claim, and will provide the Company and its counsel with such further information concerning the Holdback Claim as the Company or such counsel may reasonably request.  If the Company disputes an Article 6 indemnification Holdback Claim in writing within thirty (30) days after the delivery of written notice by the Purchaser, such dispute shall be resolved in the manner set forth in Section 5.4 of this Agreement.

 

(c)           Holdback Fund Termination .  On the Holdback Termination Date, the Purchaser shall promptly, and in any event no later than five (5) days after the Holdback Termination Date, pay over to the Company the remaining amount of the Holdback, plus interest thereon pursuant to the provisions of Section 2.5(d),

 

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less any Unresolved Holdback Claims.  The Holdback shall not be terminated with respect to timely noticed Holdback Claims by the Purchaser, if any, which remain unresolved at the Holdback Termination Date (“ Unresolved Holdback Claims ”).  In the event that one or more Holdback Claims remains disputed on and after the Holdback Termination Date, the Purchaser shall retain the disputed amount of the Holdback Claim(s) until the Holdback Claim is either (i) resolved by the Purchaser and the Company, or (ii) there is an order of a court of competent jurisdiction that the amount of the Holdback Claim (and any other amount) shall be paid by the Purchaser to the Company.

 

(d)           Interest on Holdback .  On the Holdback Termination Date, the Purchaser shall pay to the Company interest on the amount of the remaining amount of the Holdback that is not subject to an Unresolved Holdback Claim accruing from and after the Closing Date at the rate of three percent (3%) per annum (the “ Holdback Interest Rate ”); provided , however , that if the Holdback shall remain in effect after the Holdback Termination Date as a result of any Unresolved Holdback Claims, then the Purchaser shall pay to the Company interest at the Holdback Interest Rate accruing from and after the Closing Date on the amount of the Holdback on the date of final settlement or determination of any such Unresolved Holdback Claims.  No interest will accrue or be payable on any amount of the Holdback retained by Purchaser due to a valid Holdback Claim.

 

2.6          Determination of Purchase Price Adjustments; Closing Statement of Assets and Assumed Liabilities; Final Payment .

 

(a)           Promptly following the Closing Date (but in any event within thirty (30) days after the Closing Date), the Company shall cause to be prepared and delivered to the Purchaser a certification by the Company’s Chief Financial Officer (the “ CFO Certificate ”).     The CFO Certificate shall include:

 

(i)              A statement (the “ Closing Statement of Assets and Assumed Liabilities” ) prepared in accordance with Section 2.6(c) of this Agreement;

 

(ii)           A calculation of the Net Asset Adjustment, if any, by comparison of the (x) Net Assets of the Company at the close of business on the Closing Date (the “ Closing Date Net Assets ”) as calculated on the Closing Statement of Assets and Assumed Liabilities, and (y) Net Asset Threshold Amount;

 

(1)           In the event that the Closing Date Net Assets are less than the Net Asset Threshold Amount, then the Purchase Price is decreased by the amount of the difference between the Closing Date Net Assets and the Net Asset Threshold Amount.  The foregoing decrease to the Purchase Price shall be summarized and computed as due to the Purchaser;

 

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(2)           In the event that the Closing Date Net Assets exceed the Net Asset Threshold Amount, then the Purchase Price is increased by the amount of the difference between the Closing Date Net Assets and the Net Asset Threshold Amount.  The foregoing increase to the Purchase Price shall be summarized and computed as due to the Company;

 

(iii)          A calculation of the Excluded Trade Payables Adjustment, if any, by comparison of the (x) Excluded Trade Payables of the Company at the close of business on the Closing Date (“ Closing Date Excluded Trade Payables ”), and (y) Estimated Excluded Trade Payables;

 

(1)           In the event that the Closing Date Excluded Trade Payables are less than the Estimated Excluded Trade Payables, then the Purchase Price is decreased by the amount of the difference between the Closing Date Excluded Trade Payables and the Estimated Excluded Trade Payables.  The foregoing decrease to the Purchase Price shall be summarized and computed as due to the Purchaser;

 

(2)           In the event that the Closing Date Excluded Trade Payables exceed the Estimated Excluded Trade Payables, then the Purchase Price is increased by the amount of the difference between the Closing Date Excluded Trade Payables and the Estimated Excluded Trade Payables.  The foregoing increase to the Purchase Price shall be summarized and computed as due to the Company;

 

(iv)          The increase or decrease, if any, to the Purchase Price determined pursuant to subsections (a)(ii) and (a)(iii) above shall be summarized and computed in the aggregate as either an amount (A) due to the Purchaser, or (B) due to the Company, with interest thereon computed in accordance with Section 2.6(g), and shall be paid to the applicable party by wire transfer within ten (10) business days of the determination of the net increase or decrease, if any;

 

(v)           The aggregate net amount determined pursuant to subsections (a)(ii) and (a)(iii) above shall be the “ Closing Purchase Price Adjustment ”;

 

(vi)          A statement that the Closing Date Excluded Trade Payables amount is true and correct and determined in accordance with GAAP consistently applied;

 

(vii)         Copies of all supplementary documents, work papers, and other data relating to the CFO Certificate; and

 

(viii)        Such other supplementary evidence as the Purchaser may reasonably require either prior to or after delivery of the CFO Certificate, including the evidence described in this Section 2.6 below.

 

(b)           In connection with the preparation of the Closing Statement of Assets and Assumed Liabilities and all other matters arising under the CFO Certificate, each of the Purchaser and the Company shall afford the other party and their respective representatives complete access to the books, records,

 

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personnel and facilities of or pertaining to the Business to prepare the CFO Certificate and to review such information as is necessary or desirable to confirm the accuracy of the Closing Statement of Assets and Assumed Liabilities and all other statements arising under the CFO Certificate.

 

(c)           The Closing Statement of Assets and Assumed Liabilities shall include only the Assets and the Assumed Liabilities and shall be prepared in accordance with GAAP.  The CFO Certificate shall state that the Closing Statement of Assets and Assumed Liabilities is in accordance with GAAP and without giving effect to the consummation of the transactions contemplated hereby; provided, however, that the Closing Statement of Assets and Assumed Liabilities shall be prepared in conformity with GAAP year-end audit accrual and estimation principles such that all pro-rata adjustments, accruals, reserves, allowances and similar year-end adjustments are prepared for and included in the Closing Statement of Assets and Assumed Liabilities, as if the Closing Statement of Assets and Assumed Liabilities were a year-end statement; provided, further, that in the event any accounting matter is not treated in conformity with GAAP in the Company’s historical financial statements relating to the Business, whether or not consistently applied in such non-conforming manner, the standard required by GAAP shall be followed regardless of materiality.  The inventories and supplies of the Business shall be priced in accordance with the provisions of Section 7.10 of this Agreement.  The expense of the preparation of the Closing Statement of Assets and Assumed Liabilities shall be borne by the Company.

 

The parties hereby agree that the Closing Statement of Assets and Assumed Liabilities shall be adjusted so that the Closing Statement of Assets and Assumed Liabilities shall not reflect:

 

(i)            accruals for the expenses associated with the preparation of the Closing Statement of Assets and Assumed Liabilities;

 

(ii)           accruals for Transactional Expenses;

 

(iii)          accruals for income Taxes arising from operating and other income of the Business;

 

(iv)          any Excluded Assets; nor

 

(v)           any Excluded Liabilities.

 

(d)           The itemized calculations required by the paragraphs of this Section 2.6 shall be presented and calculated in accordance with Exhibit A-2 hereto.

 

(e)           If the Purchaser concludes that any matter reported in the CFO Certificate is not accurate, the Purchaser shall, within thirty (30) days after its receipt of the CFO Certificate (the “ Response Period ”), deliver to the Company a written statement setting forth a specific description of each of its objections

 

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and each of any discrepancies believed to exist.  If no notice of any objections or discrepancies is given by the Purchaser within the Response Period, then the calculations set forth in the CFO Certificate shall be controlling for all purposes of this Agreement, and the Purchaser or the Company, as the case may be, shall pay the other the amount which it is obligated to pay in accordance with the CFO Certificate pursuant to Section 2.6(g) below.

 

(f)            The Purchaser and the Company shall use good faith efforts to jointly resolve the properly noticed objections and discrepancies within fifteen (15) days of the receipt of the Purchaser’s written statement of objections and discrepancies, which resolution, if achieved, shall be fully and completely binding upon the parties and not subject to further review, appeal, or dispute.  If the Purchaser and the Company are unable to resolve the objections and discrepancies to their mutual satisfaction within such fifteen (15) day period, then such dispute shall be resolved in the manner set forth in Section 5.4 of this Agreement.

 

(g)           Within five (5) days following the earlier to occur of (i) any failure to object to the CFO Certificate within the Response Period, or (ii) resolution of the dispute pursuant to Section 5.4 of this Agreement, if the Purchaser is determined to owe an amount to the Company, the Purchaser shall pay such amount in cash to the Company, and if the Company is determined to owe an amount to the Purchaser, the Company shall pay such amount in cash to the Purchaser.  All amounts owed by the Purchaser or the Company to the other in accordance with this Section 2.6 shall be paid by certified or bank cashier’s check or by wire transfer of immediately available funds with interest computed thereon from the Closing Date at the prime rate announced by, and charged on the Closing Date by, US Bank National Association, Minneapolis, Minnesota.

 

2.7          Closing and Closing Deliveries .

 

(a)           Closing and Closing Date .  The closing of the transactions contemplated by this Agreement (the “ Closing ”) is held on the date hereof at the offices of Briggs and Morgan, Professional Association, 2200 IDS Center, Minneapolis, Minnesota, 55402 and shall be effective as of the close of business on such day.  Such date is referred to in this Agreement as the “ Closing Date .”

 

(b)           Documents to be Delivered by the Company .  At the Closing, the Company shall execute, where necessary or appropriate, and deliver to the Purchaser each and all of the following:

 

(i)            An Assignment and Assumption Agreement executed by the Company;

 

(ii)           A Bill of Sale executed by the Company;

 

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(iii)          A copy of the duly adopted resolutions of the Board of Directors of the Company, certified by an officer of the Company approving this Agreement and authorizing the execution and delivery of this Agreement by the Company, including the Ancillary Documents to be executed and/or delivered by the Company pursuant hereto, and the consummation of the transactions contemplated hereby and thereby;

 

(iv)          Delivery and assignment of any and all documents relating to Permits which by their terms are assignable;

 

(v)           The Company shall execute and deliver to the Purchaser in blank (without completing the buyer insert) the assignment provision of all vehicle, equipment and other personal property title certificates (or reasonably acceptable transfer documentation which will be accepted by applicable Governmental Bodies and Third Parties, where applicable) with a detailed list thereto (organized by the Company site location) describing (A) the vehicle, equipment or personal property, (B) the vehicle, equipment or personal property identification number, and (C) the state issuing the title certificate;

 

(vi)          A Certificate of good standing for the Company dated within five (5) days prior to the Closing Date issued by the Secretary of State of Minnesota ;

 

(vii)         If required by Applicable Law, a non-foreign person affidavit duly executed by the Company;

 

(viii)        UCC-3 releases of all Encumbrances on the Assets by any financial institutions or other lenders of the Company;

 

(ix)           All consents set forth in Schedule 7.9 approving the transfer of any Asset or the assumption of any Assumed Liability required by the terms of any Contract or Permit (without charge to the Purchaser or material change to the terms of the Contract or Permit); and

 

(x)            Such other documents and items as are reasonably necessary or appropriate to effect the consummation of the transactions contemplated hereby or which may be customary under local law.

 

(c)           Documents to be Delivered by the Purchaser .  At the Closing, the Purchaser shall execute, where necessary or appropriate, and deliver to the Company each and all of the following:

 

(i)            Payment of the Closing Date Purchase Price pursuant to and determined in accordance with Section 2.4 hereof;

 

(ii)           A copy of the duly adopted resolutions of the Board of Directors of the Purchaser certified by an officer of the Purchaser approving this Agreement and authorizing the execution and delivery of this Agreement, including the Ancillary Documents to be executed and/or delivered by the Purchaser pursuant hereto, and the consummation of the transactions contemplated hereby and thereby;

 

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(iii)          The Assignment and Assumption Agreement executed by the Purchaser; and

 

(iv)          Such other documents and items as are reasonably necessary or appropriate to effect the consummation of the transactions contemplated hereby or which may be customary under local law.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

As an inducement to the Purchaser to enter into this Agreement and to consummate the transactions contemplated hereby, the Company represents and warrants to the Purchaser that each and all of the following representations and warranties (as modified by the Schedules to this Agreement (the “ Schedules ”)) are true and correct as of the date hereof.  The Schedules shall be arranged in paragraphs generally corresponding to the sections and subsections contained in this Article 3 and shall be presented in a manner that is reasonably contemplated to provide the disclosures requested by the Purchaser.

 

3.1          Organization .  The Company is a corporation duly incorporated, legally existing and in good standing under the laws of the State of Minnesota.  The Company has all requisite power and authority to own, operate and lease its properties and assets and to conduct the Business as it is now being conducted.  The Company is duly qualified to transact business as a foreign corporation and is in good standing under the laws of every state or jurisdiction in which the nature of its activities or of its properties owned, leased or operated makes such qualification necessary and in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect on the Business.

 

3.2          Business and Business Name .  Except as set forth in Schedule 3.2 , the Company operates the Business as a distinct division of the Company and no other division or subsidiary of the Company owns, holds, utilizes or requires the Assets in its operations.  The Company has not registered or filed to do business in lieu of its statutory name as “RME” in any jurisdiction.

 

3.3          Due Authorization .  The execution, delivery and performance of this Agreement and the Ancillary Documents including the documents, instruments and agreements to be executed and/or delivered by the Company pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action.  This Agreement and the Ancillary Documents to be executed and/or delivered by the Company pursuant to this Agreement have been duly and validly authorized, executed and delivered by the Company and the obligations of the Company hereunder and thereunder are or will be upon such execution and delivery valid, legally binding and enforceable against the Company in accordance with their respective terms.

 

3.4          No Breach .  The Company has full power and authority to sell, assign, transfer, convey and deliver to the Purchaser the Assets to be sold hereunder.  The Company has full power and authority to otherwise perform its obligations under this Agreement and the Ancillary Documents to be executed and/or delivered pursuant hereto.  The execution and delivery of this

 

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Agreement, including the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby will not:  (i) violate any provision of the Articles of Incorporation or Bylaws of the Company, (ii) violate any Applicable Laws or Injunction applicable to the Company, (iii) except as provided in Schedule 3.4 hereto, require any filing with, Permit from, authorization, consent or approval of, or the giving of any notice to, any Person, (iv) except as provided in Schedule 3.4 hereto, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give another party any rights of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, Permit (including, but not limited to, any Permits, approvals or authorizations of any Governmental Body), Leased Real Estate lease, Benefit Plan or other Contract to which the Company is a party, or by which it or any of its properties or assets may be bound, or (v) result in the creation or imposition of any Encumbrance on any of the Assets.

 

3.5          Clear Title .  On the Closing Date, (i) the Company holds good and valid title to all of the Assets that are tangible assets, (ii) all of the Company’s interests in and to the Assets that are intangible assets are valid and enforceable, (iii) the Company holds good and valid title to the tangible portion and valid and enforceable interests in the intangible portion of the Assets that are mixed assets, (iv) the Company holds valid and enforceable leasehold interests in all Leased Real Estate and all leased non-real estate Assets, and (v) the Assets and leasehold interests are free and clear of any and all Encumbrances, except for the Permitted Encumbrances, of any kind, nature and description whatsoever.  The sale of the Assets is a permitted disposition under the Company’s Credit Agreement, dated as of November 20, 2007, between the Company, Credit Suisse and the other lenders party thereto (“Credit Agreement”), and pursuant to the provisions of the Credit Agreement the Assets were transferred to the Purchaser at the Closing free and clear of any and all security interests or other liens held by Credit Suisse or any other party under the Credit Agreement or under any agreements entered into in connection with the Credit Agreement.

 

3.6          Condition and Sufficiency of Assets .  The Assets constituting property, plant, equipment and other personal property (i) have in all material respects been properly maintained and (ii) are in all material respects in good operating condition and repair, subject only to ordinary wear and tear.  Except for the Excluded Assets, the Assets are all of the assets that have been used in the Business.  Except as set forth on Schedule 2.1(a)(ii)(L) , the Assets are all of the assets used to operate and necessary or required to operate the Business in the Ordinary Course of Business.

 

3.7          Litigation .  There is no pending Proceeding with respect to the Business:

 

(a)           that has been commenced by or served upon the Company or of which the Company has Knowledge; or

 

(b)           to the Company’s Knowledge, that, as of the date of execution of this Agreement and the Closing Date, challenges, or that will have the effect of preventing, delaying, making il