Exhibit 10.13
ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated
as of the 17th day of November, 2004 (this
“Agreement”), is made and entered into by and among
Merit Medical Systems, Inc. (“Purchaser”),
MedSource Packaging Concepts LLC, a Virginia limited liability
company (“Seller”), and each of the following
individual residents of the Commonwealth of Virginia: Robert E.
Hale (“Hale”), Charles Long (“Long”), Gary
W. Kazee (“Kazee”), Willis P. Blackwood
(“Blackwood”), Robert C. Walker (“Walker”),
Tommy J. West (“West”), and David T. Richardson
(“Richardson”) (all such individuals collectively are
referred to as the “Members,” and individually each a
“Member”), relating to the sale of the assets of
Seller’s medical supplies and products packaging, marketing,
distribution, sales and services business to Purchaser.
Robert E. Hale shall serve as the “Member
Representative” for purposes of this Agreement.
WHEREAS, each of the board of
directors of Purchaser and the Members and managers of Seller has
approved, and deems it advisable and in the best interests of its
respective shareholders or members to consummate the sale by Seller
and acquisition by Purchaser of the Acquired Assets (as defined
herein), subject only to those liabilities expressly assumed herein
by Purchaser, upon the terms set forth herein.
WHEREAS, the Members are the sole
members of Seller, and each of the Members has approved of, and
consented to, the sale of the Acquired Assets to
Purchaser.
NOW, THEREFORE, in consideration of
the foregoing premises and the representations, warranties,
covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I- DEFINITIONS AND
INTERPRETATION
Section 1.1
Definitions
. For all purposes of this
Agreement, except as otherwise expressly provided or unless the
context clearly requires otherwise:
“Accounts Receivable”
means any and all trade accounts, notes and other receivables of
Seller in respect of the Business and all claims relating thereto
or arising therefrom.
“Affiliate” shall have
the meaning set forth in Rule 12b-2 of the Exchange
Act.
“Agreement” or
“this Agreement” shall mean this Asset Purchase
Agreement, together with the Exhibits hereto and the Disclosure
Schedule.
“Applicable Law” shall
mean any law, regulation, rule, order, judgment or decree to which
the Business, the Acquired Assets or Seller is subject.
“Acquired Assets” has
the meaning set forth in Section 2.1(a).
“Associate” shall have
the meaning set forth in Rule 12b-2 of the Exchange
Act.
“Assumed Contracts”
shall have the meaning set forth in
Section 2.1(a)(ii).
“Assumed Liabilities”
has the meaning set forth in Section 2.3.
“Business” shall mean
the medical supplies and products packaging, marketing,
distribution, sales and services business heretofore conducted by
Seller, including the Acquired Assets and all the goodwill
appurtenant to such business.
“Closing” shall mean the
closing referred to in Section 3.1.
“Closing Date” shall
mean the date of execution hereof.
“COBRA” shall mean
Sections 601 through 607 of ERISA, Section 4980B of the Code,
and any comparable state or foreign laws requiring the provision of
continuation coverage for former employees under any Seller group
health plan.
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
“Contract” shall mean
any agreement, contract, purchase or sale order, mortgage,
indenture, lease, franchise or other instrument relating to the
Business to which Seller is a party or by which the Business or any
of the Acquired Assets is bound.
“Computer Software”
shall mean computer software programs, databases and all
documentation related thereto.
“Defect” shall mean a
defect or impurity of any kind, whether in design, workmanship,
manufacture, processing, or otherwise, including any dangerous
propensity associated with any reasonably foreseeable use of an
item, or the failure to warn of the existence of any defect,
impurity, or dangerous propensity other than the dangerous
propensities inherent therein.
“Disclosure Schedule”
shall mean the disclosure schedule of even date herewith
prepared and signed by each of the Seller and the Members and
delivered to Purchaser simultaneously with the execution
hereof.
“Encumbrances” shall
mean any and all liens, charges, security interests, options,
claims, mortgages, charges, easements, restrictions on use of
enjoyment, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements imposing restrictions
on title or use or other restrictions on title or transfer of any
nature whatsoever.
“Environmental Claim”
shall mean any claim, action, cause of action, investigation or
notice (written or oral) by any Person alleging actual or potential
liability for investigatory, cleanup or governmental response
costs, or natural resources or property damages, or personal
injuries, attorneys’ fees or penalties relating to
(i) the presence, or release into the environment, of any
Materials of Environmental Concern at any location owned or
operated by Seller related to the Business, now or in the past, or
(ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
“Environmental Law”
shall mean each federal, state, local and foreign law and
regulation relating to pollution, protection or preservation of
human health or the environment, including ambient air, surface
water, ground water, land surface or subsurface strata, and natural
resources, and including each law and regulation relating to
emissions, discharges, releases or threatened releases of Materials
of Environmental
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Concern, or otherwise relating to
the manufacturing, processing, distribution, use, treatment,
generation, storage, containment (whether above ground or
underground), disposal, transport or handling of Materials of
Environmental Concern, or the preservation of the environment or
mitigation of adverse effects thereon and each law and regulation
with regard to record keeping, notification, disclosure and
reporting requirements respecting Materials of Environmental
Concern.
“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as
amended.
“ERISA Affiliate” shall
mean any trade or business, whether or not incorporated, that
together with Seller would be deemed a “single
employer” within the meaning of Section 4001(b) of
ERISA.
“Escrow Agreement” shall
have the meaning set forth in Section 2.5(b).
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.
“Financial Statements”
shall mean each of the Business’ (i) balance sheets as
of June 30, 2004, March 31, 2004, and each of
December 31, 2003, 2002 and 2001; (ii) statements of
operations for the three month and six month periods ending
March 31, 2004 and June 30, 2004, respectively, and for
the 12-month periods ended December 31, 2003, 2002 and 2001,
respectively; and (iii) statements of cash flows for the three
month and six month periods ending March 31, 2004 and
June 30, 2004, respectively, and for the 12-month periods
ended December 31, 2003, 2002 and 2001,
respectively.
“GAAP” shall mean United
States generally accepted accounting principles, as consistently
applied.
“Governmental Entity”
shall mean a court, arbitral, tribunal, administrative agency or
commission or other governmental or regulatory authority or agency
or any state, city, county, or other governmental or
quasi-governmental body having any jurisdiction over the Business,
Acquired Assets, Seller or Members.
“Indebtedness” shall
mean (i) all indebtedness for borrowed money or for the
deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (ii) any
other indebtedness that is evidenced by a loan agreement, note,
bond, debenture or similar instrument, (iii) all obligations
under financing leases, (iv) all liabilities secured by any
lien on any property, and (v) all guarantee
obligations.
“Intellectual Property”
shall mean all (i) trademarks (U.S. and foreign registered and
unregistered trademarks, trade dress, domain names, service marks,
logos, trade names, business names and all registrations and
applications to register the same), (ii) patents (issued U.S.
and foreign patents and pending patent applications, patent
disclosures, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and extensions
thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of
invention and like statutory rights), (iii) copyrights (U.S.
and foreign registered and unregistered copyrights, including those
in computer software and databases, rights of publicity and all
registrations and applications to register the same),
(iv) trade secrets (all categories of trade secrets as defined
in the Uniform Trade Secrets Act, including business information),
(v) licenses (all licenses and agreements pursuant to which
Seller has acquired rights in or to any trademarks, patents or
copyrights used by or for the benefit of the Business,
or
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licenses and agreements pursuant to
which Seller has licensed or transferred the right to use any
trademark, patent or copyright which constitutes a part of the
Acquired Assets), and (vi) all proprietary and confidential
information of Seller and all of Seller’s other information
and intangible property rights that are currently owned by Seller
or the Business for the benefit of the Business or used in the
Business or that is necessary to conduct the Business as presently
conducted, including, without limitation: (a) trade secrets,
technical information, know-how, designs, processes, patents,
patent applications, and copyrights, and all improvements thereof,
(b) all data, files, books and records, customer lists, and
order information, (c) the name “MedSource Packaging
Concepts” (and any derivatives of such name), and
(d) all Internet domain names and sites, email addresses,
telephone numbers (and related directory listings) and similar
information and rights.
“Knowledge of Seller”
concerning a particular area or aspect of the Acquired Assets,
Business or related affairs shall mean the knowledge of each Member
and of each of Seller’s management personnel of the Business
and all knowledge which was or could have been obtained upon
inquiry by such of Seller’s management level employees whose
duties would, in the normal course of Seller’s affairs,
result in such management level employees having knowledge
concerning such area or aspect.
“Lease” shall mean each
lease pursuant to which Seller (for the use or benefit of the
Business) leases any real or personal property.
“Liabilities” shall mean
the debts, liabilities, claims, demands, expenses, commitments and
obligations (whether accrued or not, known or unknown, disclosed or
undisclosed, fixed or contingent, asserted or unasserted,
liquidated or unliquidated, arising prior to, at or after the
Closing) of Seller (other than the Retained
Liabilities).
“Material Adverse
Effect” means an effect on the financial condition, results
of operations, prospects or business of the Business or the
Acquired Assets or Liabilities of the Business, each taken as a
whole (other than as a result of changes (a) in law or
applicable regulations or the official interpretations thereof, or
(b) in GAAP) that may reasonably be considered material by
Purchaser in its evaluation of Seller and the Business.
“Materials of Environmental
Concern” shall mean chemicals, pollutants, contaminants,
wastes, toxic or hazardous substances, materials and wastes,
petroleum and petroleum products, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead and lead-based paints
and materials, and radon.
“Multiemployer Plan” has
the meaning set forth in Section 3(37) of ERISA.
“Payoff Consideration”
has the meaning set forth in section 2.5(a).
“Permits” means permits,
certificates, licenses, filings, approvals and other authorizations
of any Governmental Entity.
“Person” shall mean a
natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or
organization.
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“Plan” shall mean each
deferred compensation and each incentive compensation, stock or
unit purchase, stock or unit option and other equity compensation
plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance
and other “welfare” plan, fund or program (within the
meaning of Section 3(1) of ERISA); each profit-sharing,
unit bonus or other plan, fund, or program that is a “pension
plan” (within the meaning of Section 3(2) of
ERISA); each employment, termination or severance agreement; and
each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or
contributed to, or required to be contributed to, by Seller or by
any ERISA Affiliate, or to which Seller or an ERISA Affiliate is
party or has any obligations, whether written or oral, for the
benefit of any Member, manager, consultant, employee or former
employee of the Business.
“Product” shall mean any
product or component thereof, built, designed, manufactured,
shipped, sold, marketed, distributed, packaged and/or otherwise
introduced into the stream of commerce by Seller on behalf of the
Business, including any product sold by Seller as the distributor,
agent, or pursuant to any other contractual relationship with a
third-party manufacturer or vendor.
“Purchase Price” has the
meaning set forth in Section 2.5(a).
“Purchaser” shall mean
Merit Medical Systems, Inc., a Utah corporation.
“Purchaser Indemnified
Persons” shall mean Purchaser and each of its
Affiliates.
“Purchaser Losses” shall
mean any and all actual losses, liabilities, damages, judgments,
settlements and expenses (including interest and penalties
recovered by a third party with respect thereto and reasonable
attorneys’ fees and expenses and reasonable
accountants’ fees and expenses incurred in the investigation
or defense of any of the same or in asserting, preserving or
enforcing any of the rights of Purchaser arising under
Article IX) incurred by any of the Purchaser Indemnified
Persons that arise out of:
(i)
any breach by any of Seller or
Members of any of their representations and warranties contained in
or made by or pursuant to this Agreement;
(ii)
any of the events, circumstances or
conditions described in Section 4.16 hereof, any pollution or
threat to human health or the environment that (A) is related
in any way to the Business or management, use, control, ownership
or operation of the properties of the Business prior to the
Closing, including all on-site and off-site activities involving
Materials of Environmental Concern, and (B) occurred, existed,
or arises out of conditions or circumstances that occurred or
existed, or was caused, in whole or in part, on or before the
Closing Date, whether or not the pollution or threat to human
health or the environment is described in the Disclosure Schedule;
or any Environmental Claim against the Business or any Person whose
liability for such Environmental Claim the Business has assumed or
retained either contractually or by operation of law;
(iii)
any breach by any of the Seller or
Members of any of their covenants in this Agreement that survive
the Closing;
(iv)
any of the Retained Liabilities;
or
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(v)
the waiver by the Parties of
Virginia’s “Bulk Sales” statute.
All statements contained in any
exhibit, schedule or other writing delivered by any of the
Seller or Members pursuant hereto or in connection with the
Transactions shall be deemed representations and
warranties.
“Real Property” shall
mean the real property that is the subject of the Real Property
Lease.
“Real Property Leases”
shall mean those two certain Leases, (a) the first, dated
4/25/01, between Seller and Carl York, Jr., and Richard Lert,
Trustees of the Ariana Austin Fairbanks of 1976 Waimalu Trust; Carl
York, Jr., and Richard Lert, Trustees of the Ariana Austin
Fairbanks Trust, dated April 28, 1978; Carl York, Jr.,
and Linda S. Dalby, Trustees of the 1976 Waimalu Mauku Trust; and
Carl York, Jr., and Linda S. Dalby, Trustees of the Waibalu
Mauko Trust, dated February 27, 1980 (Landlord), and
(b) the second, dated November 10, 2000, between Seller
and Eskimo Pie Corporation, which Lease was assigned, effective
May 15, 2003, to 901 Moorefield LLC (Landlord), and includes
all rights and appurtenances pertaining to such lease and property,
including all easements, rights, interests, tenements,
hereditaments and privileges.
“Required Consents”
shall mean consents related to agreements which involve the payment
or receipt by Seller of amounts in excess of $5,000 per annum or
other agreements that may be material or have a material impact on
the Business.
“Retained Assets” has
the meaning set forth in Section 2.2.
“Retained Liabilities”
has the meaning set forth in Section 2.4.
“Seller Indemnified
Persons” shall mean each of Seller and its
Affiliates.
“Seller Losses” shall
mean any and all actual losses, liabilities, damages, judgments,
settlements and expenses (including interest and penalties
recovered by a third party with respect thereto and reasonable
attorneys’ fees and expenses and reasonable
accountants’ fees and expenses incurred in the investigation
or defense of any of the same or in asserting, preserving or
enforcing any of Seller’s rights) incurred by any of the
Seller Indemnified Persons arising out of:
(i)
any breach by Purchaser of any of
its representations and warranties contained in or made by or
pursuant to this Agreement; or
(ii)
any breach by Purchaser of any of
its covenants in this Agreement that survive the
Closing.
“Tax” or
“Taxes” shall mean all taxes, charges, fees, duties,
levies, penalties or other assessments imposed by any federal,
state, local or foreign governmental authority, including income,
gross receipts, excise, property, sales, gain, use, license, custom
duty, unemployment, capital stock, unit or membership interest,
transfer, franchise, payroll, withholding, social security, minimum
estimated, profit, gift, severance, value added, disability,
premium, recapture, credit, occupation, service, leasing,
employment,
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stamp and other taxes, and shall
include interest, penalties or additions attributable thereto or
attributable to any failure to comply with any requirement
regarding Tax Returns.
“Tax Audit” shall mean
any deficiency, proposed adjustment, adjustment, assessment audit,
examination or other administrative or court proceeding, suit,
dispute or other claim.
“Tax Return” shall mean
any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any such document
prepared on a consolidated, combined or unitary basis and also
including any schedule or attachment thereto, and including
any amendment thereof.
“Title IV Plan” shall
mean a Plan that is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code.
“Transactions” shall
mean all the transactions provided for or contemplated by this
Agreement.
“Transfer Taxes” shall
mean all sales (including, without limitation, bulk sales), use,
transfer, recording, ad valorem , privilege, documentary,
gains, gross receipts, registration, conveyance, excise, license,
stamp, duties or similar Taxes and fees.
“Warrant” shall have the
meaning set forth in Section 2.5(a).
Section 1.2
Interpretation
.
(a)
Whenever the words
“include,” “includes” or
“including” are used in this Agreement they shall be
deemed to be followed by the words “without
limitation.”
(b)
The words “hereof,”
“herein” and “herewith” and words of
similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(c)
The meaning assigned to each term
defined herein shall be equally applicable to both the singular and
plural forms of such term, and words denoting any gender shall
include all genders. Where a word or phrase is defined
herein, each of its other grammatical forms has a corresponding
meaning.
(d)
A reference to any party to this
Agreement or any other agreement or document shall include such
party’s successors and permitted assigns.
(e)
A reference to any legislation or to
any provision of any legislation shall include any amendment to,
and any modification or re-enactment thereof, any legislative
provision substituted therefore and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(f)
As used in this Agreement, any
reference to any event, change or effect being material or having a
material adverse effect on or with respect to any entity (or group
of entities taken as a whole) means such event, change or effect is
materially adverse to (i) the prospects, consolidated
financial condition, businesses or results of operations of such
entity as a whole (or, if used with respect thereto, of
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such group of entities taken as a
whole) or (ii) the ability of such entity (or group) to
consummate the Transactions.
(g)
The parties have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by
the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.
ARTICLE II- PURCHASE AND SALE
OF ASSETS
Section 2.1
Sale and Transfer of
Assets .
(a)
On the terms set forth in this
Agreement, at the Closing, Seller shall sell, convey, assign,
transfer and deliver to Purchaser, and Purchaser shall purchase,
acquire and accept from Seller, free and clear of any Encumbrances,
all right, title and interest in and to the assets, properties and
rights of the Business as those assets exist on Closing, other than
the Retained Assets, as that term is defined in Section 2.2,
(collectively, the “Acquired Assets”), including,
without limitation, the following:
(i)
the assets set forth on
Section 2.1(a)(i) of the Disclosure Schedule;
(ii)
all of Seller’s rights and
benefits under those contracts, purchase orders, leases, proposals
or bids relating to the Business identified in
Section 2.1(a)(ii) of the Disclosure Schedule (the
“Assumed Contracts”);
(iii)
all of Seller’s books, files
and records relating to the Business, the Acquired Assets or
Assumed Liabilities, except for certain books and records described
on Section 2.1(a)(iii) of the Disclosure
Schedule;
(iv)
all personal computers and software
related to or used in connection with the Acquired Assets or
Business;
(v)
all inventory, supplies, and other
consumables related to or used in connection with the Acquired
Assets or Business (the “Inventory”);
(vi)
all Permits used or held for use in
connection with the Acquired Assets or Business, solely to the
extent such Permits may be assigned or transferred;
(vii)
all Accounts Receivable of the
Business;
(viii)
all rights under the Real Property
Lease and any other real property used or held for use by the
Seller or in connection with the Business, together with
(i) all buildings, other facilities and other structures and
improvements related thereto, (ii) all rights, privileges,
hereditaments and appurtenances appertaining thereto or to any of
such buildings or other facilities or other structures or
improvements, and (iii) all fixtures, leasehold improvements,
installations, equipment (including furniture, fax machines and
other office equipment) and other property attached thereto or
located thereon;
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(ix)
all prepayments, deposits or
advances related to Assumed Contracts;
(x)
all equipment, machinery, vehicles,
tools, equipment replacement and spare parts and supplies owned by
Seller and used or held for use in connection with the Acquired
Assets or Business;
(xi)
any advertising or promotional
materials related to or used in connection with the Acquired Assets
or Business;
(xii)
all goodwill related to the Business
and Acquired Assets including the name “MedSource Packaging
Concepts”;
(xiii)
all manufacturer’s warranties
to the extent related to the Acquired Assets or Business and all
claims under such warranties;
(xiv)
all prepaid expenses of the
Business;
(xv)
all promissory notes or notes
receivable in favor of the Business;
(xvi)
all security deposits, earnest
deposits, and all other forms of security placed with Seller
related to or in connection with the Acquired Assets or Business
for the performance of a contract or agreement;
(xvii)
all of Seller’s other tangible
and intangible assets and properties which are used in connection
with the Business; and
(xviii)
all right, title and interest in and
to the Intellectual Property of Seller used in connection with the
Business or the Acquired Assets including all of the Trade names
and Trademarks listed on Schedule 2.1(a)(xviii).
To the extent any Acquired Assets
are owned, managed or leased by any subsidiary of Seller,
(i) such items are included within the term “Acquired
Assets,” (ii) such subsidiary is deemed to be included
within the term “Seller,” and (iii) Seller shall
cause each such subsidiary, at the Closing, to convey such Acquired
Assets to Purchaser, or to Seller for conveyance to Purchaser, in
accordance with the provisions hereof.
Section 2.2
Retained Assets
. Notwithstanding
Section 2.1, all of Seller’s right, title and interest
in the following properties, assets and rights shall be excluded
from the Acquired Assets (collectively, the “Retained
Assets”):
(i)
the assets set forth in
Section 2.2 of the Disclosure Schedule;
(ii)
any assets and associated claims
arising out of Retained Assets or Retained Liabilities;
(iii)
all contracts between Seller and a
third party in which the third party or Seller is in material
default or breach or is the subject of bankruptcy, insolvency, or
similar proceedings;
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(iv)
any asset, offset, refund, insurance
proceeds, receipts and other benefits related to litigation for
which Seller is retaining the liability related to such
litigation;
(v)
all Tax refunds;
(vi)
all cash and cash equivalents of
Seller; and
(vii)
the record books of
Seller.
Section 2.3
Assumption of
Liabilities .
(a)
At the Closing, Purchaser shall
assume the following Liabilities of the Business (collectively, the
“Assumed Liabilities”):
(i)
all Liabilities set forth on
Section 2.3 of the Disclosure Schedules;
(ii)
all obligations under the Assumed
Contracts to be performed subsequent to the Closing Date;
and
(iii)
all obligations under the Real
Property Lease to be performed subsequent to the Closing
Date.
(b)
Nothing contained in this
Section 2.3 or in any instrument of assumption executed by
Purchaser at the Closing shall release or relieve Seller or the
Members from their representations, warranties, covenants and
agreements contained in this Agreement or any certificate,
schedule, instrument, agreement or document executed pursuant
hereto or in connection herewith, including, without limitation,
Seller’s and the Members’ indemnification obligations
in accordance with the provisions of Article IX
hereto.
Section 2.4
Retained Liabilities
. Notwithstanding anything in
this Agreement to the contrary, Purchaser shall not assume, and
shall be deemed not to have assumed, any Liabilities of Seller or
the Business except as provided in Section 2.3(a), and Seller
shall be solely and exclusively liable with respect to, and shall
pay, perform or discharge, and indemnify Purchaser against any
loss, liability, damage or expense arising from all Liabilities of
Seller and the Business to the extent such Liability would be
considered a Retained Liability under this Section 2.4,
whether disclosed or undisclosed, whether known or unknown, whether
asserted or unasserted, other than the Assumed Liabilities
(collectively, the “Retained Liabilities”), including,
without limitation, those Liabilities set forth below:
(i)
all Liabilities relating to the
Retained Assets;
(ii)
all Liabilities that Seller has
expressly agreed to retain, pay for or be responsible for pursuant
to this Agreement;
(iii)
all Liabilities of the Business
arising out of the conduct of the Business on or prior to Closing,
including, without limitation, all warranty, replacement or other
claims with
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respect to Products or Inventory
held by Seller or in process of being shipped as of the Closing
Date, unless otherwise expressly set forth herein;
(iv)
all Liabilities of the Business
under Environmental Laws arising from activities occurring on or
prior to the Closing;
(v)
all Liabilities of the Business for
Taxes attributable to any period (or portion thereof) ending on or
prior to Closing, including all Taxes arising out of the Business
or the Acquired Assets, including any ad valorem ,
real or personal or intangible property, sales, personal, social
security or other Taxes which are not due or assessed until after
Closing but which are attributable to any period (or portion
thereof) ending on or prior to Closing;
(vi)
all Liabilities of the Business to
the current or former employees of the Business or their family
members relating to or arising out of any period on or prior to the
Closing (including, without limitation, all Liabilities under or
with respect to Plans, and all Liabilities with respect to vacation
or sick or comp pay or benefits);
(vii)
all Liabilities of Seller arising
out of or related to any Encumbrances on any Acquired
Asset;
(viii)
all Liabilities for death, personal
injury, other injury to Persons or property damage relating to,
resulting from, caused by or arising out of, directly or
indirectly, use of or exposure to Acquired Assets or Products (or
any part or component) designed, manufactured, serviced, leased or
sold, or services performed, by the Seller or Business, including,
without limitation, any such Liabilities based on negligence,
strict liability, design or manufacturing Defect, conspiracy,
failure to warn, or breach of express or implied warranties of
merchantability or fitness for any purpose or use or allegations
concerning any of the foregoing related to events or activities
occurring on or prior to the Closing Date;
(ix)
all Liabilities arising from
contracts related to the Business entered into by Seller which, for
whatever reason, are not assignable to Purchaser as listed on
Section 2.4(a)(ix) of the Disclosure Schedule;
(x)
all Liabilities arising out of or
relating to the Business or Acquired Assets or Products of the
Business and arising from events or circumstances occurring on or
prior to the Closing (or any part or component) or services which
are performed by the Business which constitute, may constitute, or
are alleged to constitute a tort, breach of contract or violation
of, or noncompliance with any Applicable Law, including, without
limitation, relating to employment, workers’ compensation,
occupational health and safety, occupational disease, occupational
injury, toxic tort or Environmental Law;
(xi)
any retrospective premiums,
reinsurance payments, payments under reimbursement contracts or
other adjustments under any insurance policy maintained for the
benefit of the Business or its respective predecessors covering any
Liability that is a Retained Liability;
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(xii)
all Liabilities of Seller under any
guaranties issued, granted or provided in connection with the
Business for activities, sales or services performed on or prior to
the Closing Date;
(xiii)
all tort claims or other claims of
any kind or nature related to the Products sold by Seller on or
prior to the Closing Date; and
(xiv)
all other Liabilities to the extent
relating to or arising out of the operations or businesses of
Seller other than the Assumed Liabilities.
Section 2.5
Purchase Price; Warrant; Escrow
Agreement .
(a)
Subject to the terms of this
Agreement, in consideration of the aforesaid assumption of the
Assumed Liabilities and the sale, conveyance, assignment, transfer
and delivery to Purchaser of the Acquired Assets, at the Closing,
Purchaser shall (i) pay on behalf of Seller those certain
liabilities of Seller set forth on Exhibit A attached hereto
(such liabilities are collectively referred to as the “Payoff
Consideration”) according to the payment instructions set
forth on such exhibit, and (ii) deliver seven separate
warrants to purchase an aggregate of 100,000 shares of common stock
of the Purchaser, in a form substantially similar to that set forth
as Exhibit B attached hereto (the “Warrant,” and
collectively with the Payoff Consideration, the “Purchase
Price”) to the Escrow Agent (as such term is defined in the
Escrow Agreement). The exercise price of the shares issuable
upon exercise of the Warrant shall be equal to the average closing
price of Purchaser’s common stock as reported by the Nasdaq
stock market for the ten trading days immediately preceding the
Closing Date.
(b)
On the Closing Date, the Warrant
shall be placed in escrow, and be subject to the terms of that
certain Escrow Agreement, a form of which is attached hereto as
Exhibit C, in addition to the terms of this Agreement.
The Warrant shall remain in escrow for a period of 12 months from
the Closing Date and shall be a source of recovery for the
Purchaser against any Purchaser Losses. In the event of each
and any Purchaser Losses, Seller and Member Representative, on
behalf of the Members, may elect, within 15 days from the initial
notice related thereto by Purchaser to Seller according to the
Escrow Agreement, either of the following methods to repay such
Purchaser Losses: (i) to have the number of shares issuable
upon exercise of the Warrant reduced by the amount of any Purchaser
Losses, according to the following formula: (A) each amount of
Purchaser Losses shall be divided by the amount by which each share
issuable upon exercise of the Warrant exceeds the exercise price
thereof (if any) on the date when any amount of Purchaser Losses is
established, and (B) the quotient determined according to
(A) above shall be the number of shares issuable under the
Warrant that are canceled as of such date; or (ii) Seller,
Member Representative or any of the Members, as determined among
themselves, may pay to Purchaser the amount of such Purchaser
Losses in cash. If Purchaser has not received such amount in
cash according to (ii) above within 15 days of the initial
notice by Purchaser to Seller according to the Escrow Agreement,
Seller and the Member Representative, on behalf of the Members,
shall conclusively be deemed to have accepted the reduction in
shares issuable under the Warrant as set forth in
(i) above. Upon each event resulting in a reduction in
the number of shares exercisable upon issuance of the Warrant, the
Warrant shall be canceled and Purchaser shall deliver a new
warrant, containing terms identical to the Warrant other than the
reduction in the number of shares issuable upon exercise according
to this Section 2.5(b), to the Escrow Agent.
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(c)
In the event that the shares
issuable upon exercise of the Warrant, according to the terms of
this Agreement and the Warrant, become exercisable during the term
in which the Warrant is subject to the Escrow Agreement, then
Seller and the Member Representative, on behalf of the Members, may
elect to (i) choose to exercise all or a part of the Warrant
(according to the terms of the Warrant) and receive the shares
issuable upon such exercise, and (ii) if a registration
statement with respect to such shares filed with the Securities and
Exchange Commission has been declared effective, sell such shares
according to all applicable laws, rules and regulations.
Notwithstanding the foregoing, each of Seller, the Member
Representative and the Members acknowledge and agree that all such
shares issued upon exercise of the Warrant, and all such proceeds
received upon sale of any such shares, shall be made payable to the
Escrow Agent and subject to the Escrow Agreement in the same manner
that the Warrant was held in the Escrow Agreement.
Section 2.6
Allocation of Purchase Price; Tax
Filings . Purchaser
and Seller shall allocate the Purchase Price plus Assumed
Liabilities among the Acquired Assets in the manner to be
determined by Purchaser in the exercise of its reasonable
discretion. Each of Purchaser and Seller shall
(i) timely file all forms (including Internal Revenue Service
Form 8594) and Tax Returns required to be filed in connection
with such allocation, (ii) be bound by such allocation for
purposes of determining Taxes, (iii) prepare and file, and
cause its Affiliates to prepare and file, its Tax Returns on a
basis consistent with such allocation, and (iv) take no
position, and cause its Affiliates to take no position,
inconsistent with such allocation on any applicable Tax Return, in
any audit or proceeding before any taxing authority, in any report
made for Tax, financial accounting or any other purposes, or
otherwise. In the event that such allocation is disputed by
any taxing authority, the party receiving notice of such dispute
shall promptly notify the other party hereto concerning the
existence and resolution of such dispute.
ARTICLE III- THE
CLOSING
Section 3.1
The Closing
. Upon the terms of this
Agreement, the consummation of the transactions contemplated by
this Agreement (the “Closing”) shall take place on the
date of execution of this Agreement, unless another date or place
is agreed in writing by each of the parties hereto. The
Closing shall occur at the offices of Parr Waddoups, Brown,
Gee & Loveless at 10:00 a.m. local time, or at such
other place or time as the parties shall agree.
Section 3.2
Deliveries by Seller
. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser (unless previously
delivered), the following:
(a)
duly executed Bills of Sale for the
personal property in customary form reasonably acceptable to
Purchaser;
(b)
duly executed Assignment of
Contracts for the Assumed Contracts in customary form reasonably
acceptable to the Purchaser;
(c)
all documents of title and
instruments of conveyance necessary to transfer record and/or
beneficial ownership to Purchaser of all vehicles and any other
property owned by Seller which are included in the Acquired Assets
as part of the Business and which require execution, endorsement
and/or delivery of a document in order to vest record or beneficial
ownership thereof in Purchaser;
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(d)
assignments of all Intellectual
Property which is listed in Section 3.2(e) of the
Disclosure Schedule as owned by Seller for the benefit of the
Business;
(e)
assignment of the Real Property
Lease;
(f)
executed copies of the Required
Consents referred to in Section 4.5 hereof;
(g)
all documents containing or relating
to “know-how” to be acquired by Purchaser pursuant
hereto;
(h)
all of the books and records of
Seller relating to the Business, except as otherwise required by
law and except as are set forth in Section 2.1(a)(iii) of
the Disclosure Schedule;
(i)
a certification of non-foreign
status for Seller in the form and manner which complies with the
requirements of Section 1445 of the Code and the regulations
promulgated thereunder;
(j)
all Permits referred to in
Article 2.1(a)(vi) hereof;
(k)
any other certifications from Seller
or any of its Affiliates which may be required under Applicable Law
necessary to establish that no Taxes are due to any taxing
authority for which the Purchaser could have liability to withhold
and pay with respect to the transfer of the Business;
(l)
all such other deeds, endorsements,
assignments and other instruments as, in the reasonable opinion of
Purchaser’s counsel, are necessary to vest in Purchaser good
and marketable title to the Acquired Assets;
(m)
all other previously undelivered
documents required to be delivered by Seller to Purchaser at or
prior to the Closing in connection with the Transactions;
and
(n)
the opinion of counsel referred to
in Section 7.2(b) hereof.
Section 3.3
Deliveries by
Purchaser . At the
Closing, Purchaser shall deliver or cause to be delivered to Seller
(unless previously delivered), the following:
(a)
evidence of payment in full of each
item of the Payoff Consideration;;
(b)
executed copy of the
Warrant;
(c)
executed copies of any assumption or
assignment document related to the Assumed Liabilities that
Purchaser is required (in its reasonable judgment) to execute ;
and
(d)
such other documents as are required
to be delivered by Purchaser to Seller pursuant to this
Agreement.
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ARTICLE IV- REPRESENTATIONS AND
WARRANTIES
OF THE SELLER AND
MEMBERS
Except as specifically set forth in
the Disclosure Schedule prepared and signed by Seller and
Members and delivered to Purchaser simultaneously with the
execution hereof, Seller and Members, jointly and severally,
represent and warrant to Purchaser that all of the statements
contained in this Article IV are true and complete as of the
date hereof. Each exception set forth in the Disclosure
Schedule and each other response to this Agreement set forth
in the Disclosure Schedule is identified by reference to, or
has been grouped under a heading referring to, a specific
individual section of this Agreement and, except as otherwise
specifically stated with respect to such exception, relates only to
such section. In the event of any inconsistency between
statements in the body of this Agreement and statements in the
Disclosure Schedule (excluding exceptions expressly set forth
in the Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body
of this Agreement shall control.
Section 4.1
Authorization
. Seller has full power and
authority to execute and deliver this Agreement and to consummate
the Transactions. The execution, delivery and performance by
Seller of this Agreement and the consummation by it of the
Transactions have been duly authorized and unanimously consented to
by Seller’s manager(s), if any, and the Members, and no other
member action on the part of Seller is necessary to authorize the
execution and delivery by Seller of this Agreement or the
consummation by it of the Transactions.
Section 4.2
Binding Agreement
. This Agreement has been duly
executed and delivered by Seller, Members and, assuming due and
valid authorization, execution and delivery thereof by Purchaser,
this Agreement is a valid and binding obligation of Seller and
Members enforceable against such persons in accordance with its
terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application affecting enforcement of
creditors’ rights generally, and (ii) the availability
of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any
proceeding therefore may be brought.
Section 4.3
Organization; Qualification of
Seller . Seller
(i) is a limited liability company organized, validly existing
and in good standing under the laws of the Commonwealth of
Virginia; (ii) has full power and authority to carry on the
Business as it is now being conducted and to own the Business; and
(iii) is duly qualified or licensed to do business as a
foreign entity in good standing in every jurisdiction in which the
conduct of the Business requires such qualification or, if not so
qualified in any such jurisdiction, it can become so qualified in
such jurisdiction without any material adverse effect (including
assessment of state taxes for prior years) upon its business and
properties. Seller has heretofore made available to Purchaser
complete and correct copies of the certificate or articles of
organization and operating agreement of Seller as presently in
effect or other organizational documents.
Section 4.4
Subsidiaries and
Affiliates .
Section 4.4 of the Disclosure Schedule sets forth the
jurisdictions in which Seller is qualified to do business, the
authorized and outstanding capital of Seller, along with the
membership interest owned by each Member.
Section 4.5
Required Consents and Approvals;
No Violations .
Except as set forth on Section 4.5 of the Disclosure
Schedule none of the execution, delivery or performance of
this Agreement by Seller or any Member, the consummation by Seller
of the Transactions or compliance by Seller or any Member with any
of the provisions hereof will (i) conflict with or result in
any breach of any provision of
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the certificate or articles of
organization, operating agreement or similar organizational
documents of Seller, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity or
other Person (including, without limitation, consents from parties
to loans, contracts, leases and other agreements to which any of
Seller or a Member is a party), (iii) require any consent,
approval or notice under, or result in a violation or breach of, or
constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any contract, agreement, arrangement or
understanding to which Seller or any Member is a party or by which
the Business or Acquired Assets are bound, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, the Business, the Acquired Assets, or any of
their properties or assets.
Section 4.6
Financial Statements
. True and complete copies of
the Financial Statements, together with the related auditors
reports (if applicable), are included in Section 4.6 of the
Disclosure Schedule. The Financial Statements have been
prepared from, are in accordance with and accurately reflect, the
books and records of Seller, comply in all material respects with
applicable accounting requirements and income tax filing
requirements, have been prepared on a consistent basis during the
periods involved (except as may be stated in the notes thereto) and
fairly present the financial position and the results of operations
and cash flows (and changes in financial position, if any) of
Seller and the Business as of the times and for the periods
referred to therein (subject, in the case of unaudited statements,
to normally recurring year-end audit adjustments which are not
material either individually or in the aggregate).
Section 4.7
Books and Records
. Seller’s books of
account and other records relating to the Business are complete and
correct in all material respects and have been maintained in
accordance with sound business practices.
Section 4.8
Liabilities
. Seller has sufficient assets
(including without limitation the Retained Assets) apart from the
Acquired Assets to satisfy all liabilities of Seller that are not
being assumed or paid off by Purchaser pursuant to this Agreement
(including without limitation the Retained Liabilities).
Seller and Members represent and warrant that the assets of Seller
not being sold to Purchaser will be used by Seller and Members to
satisfy all liabilities of the Seller that are not being assumed by
Purchaser in this Agreement or satisfied by the Payoff
Consideration. Except as disclosed in the Financial
Statements and as set forth in Section 4.8 of the Disclosure
Schedule, the Business has no liability or obligation of any
nature, (including, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, liquidated or
unliquidated, secured or unsecured) that has, or would be
reasonably likely to have, a Material Adverse Effect. The
liabilities to be paid by Purchaser as part of the Purchase Price
are all of the liabilities of Seller and there are no other
liabilities of Seller. Upon Purchaser paying the Purchase
Price, by Purchaser waiving the requirements of Virginia’s
“Bulk Sales” statute, no party will have any claim
against the Acquired Assets or against Purchaser for failure to
comply with Virginia’s Bulk Sales statute and Seller and the
Members, jointly and severally, will indemnify and hold Purchaser
harmless against all such liability, loss, cost or
expense.
Section 4.9
Accounts Receivable
. All Accounts Receivable of
the Business represent sales actually made in the ordinary course
of business. Each of the Accounts Receivable to be included
in the Acquired Assets will be collected in full, within 90 days
from the Closing Date.
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Section 4.10
Material Contracts
.
(a)
Section 4.10(a) of the
Disclosure Schedule sets forth the following, including any
legally binding oral agreements or arrangements covered by the
following:
(i)
each agreement that materially or
adversely affects or materially restricts the freedom of Seller to
compete in its lines of business or with any Person or in any
geographical area, for any length of time, or otherwise to conduct
its business as presently conducted or materially and adversely
affect or materially restrict, the business, operations, assets,
properties or condition (financial or other) of the Business as
currently conducted;
(ii)
each of Seller’s collective
bargaining or union contract or agreement and each employment or
severance contract or agreement which constitutes a part of the
Acquired Assets related to an employee of the Business;
(iii)
each contract or agreement for the
receipt of maintenance, consulting or other services which
constitutes a part of the Acquired Assets, except those contracts
or agreements terminable without penalty on 30 or fewer days’
notice or those involving the receipt or payment of less than
$5,000;
(iv)
each contract or agreement for the
purchase of equipment, materials or supplies which constitutes a
part of the Acquired Assets, except those contracts or agreements
terminable without penalty on 30 or fewer days’ notice or
those involving the receipt or payment of less than
$5,000;
(v)
each contract or agreement with any
employee or third party which constitutes a part of the Acquired
Assets which is not terminable without penalty on 30 or fewer
days’ notice;
(vi)
other than this Agreement, each
agreement for the acquisition or disposition of Acquired Assets in
an amount of $5,000 or more;
(vii)
all leases and loans, capitalized or
other, for Acquired Assets which are leased, or owned, by Seller
and which are not Retained Liabilities;
(viii)
each indemnification agreement
entered into by Seller in the last two years from the date hereof
which constitutes a part of the Acquired Assets and each such
agreement entered into prior thereto if Seller has any continuing
obligations to p
