EX-2.1 ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

 

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement” ) is made as of April 8, 2004 by and between Digital Angel Corporation, a Delaware corporation (“Seller”) and MedAire, Inc., a Nevada corporation (“Buyer”).

 

BACKGROUND

 

The Buyer wishes to purchase substantially all of the assets and business of Seller’s “Medical Advisory Systems” division, and the Seller wishes to sell, convey, assign and transfer such assets to the Buyer, all in the manner and subject to the terms and conditions set forth in this Agreement.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows:

 

ARTICLE 1 DEFINITIONS

 

ARTICLE 1.1 Definitions . Capitalized terms used in this Agreement, unless otherwise expressly provided, have the following meanings:

 

(a)           “ Assets ” means the assets specifically identified in Article 2.1 .

 

(b)                                     “ Assumed Contracts ” has the meaning ascribed to that term in Article 2.1(c) .

 

(c)           “ Business ” means the business conducted by Seller relating to the operation of its maritime clinic service, maritime advice service, pharmaceutical supply and maritime training business and the selling of products and services in support of those operations.

 

(d)           “ Business Day ” means any day other than a Saturday, Sunday, Arizona state or United States federal holiday.

 

(e)                                   “ Governmental Authority ” means any court or governmental authority or agency or public or regulatory unit, agency or body.

 

(f)            Legal Requirements   means any and all laws (statutory, judicial or others) ordinances, regulations, judgments, orders, directives, injunctions, writs, decrees or awards of, and any contracts with, any Governmental Authority, in each case and to the extent applicable to such person or such person’s businesses, operations or properties.

 

(g)           “ Lien ” means any mortgage, lien, pledge, security interest, charge, right of setoff, debt, obligation, claim, restriction, or encumbrance of any kind or nature whatsoever.

 

(h)           Permits means any and all permits, rights, approvals, licenses, authorizations, legal status, orders or contracts under any Legal Requirement or otherwise granted by any Governmental Authority.

 

(i)            “ Purchase Price ” has the meaning ascribed to that term in Article 3.1 .

 

 

ARTICLE 2 PURCHASE AND SALE

 

ARTICLE 2.1 Agreement to Purchase and Sell . Subject to the terms and conditions of this Agreement, at the Closing, Seller and its affiliates will grant, sell, assign, transfer and deliver to Buyer, and Buyer will purchase and acquire from Seller, all right, title and interest in and to the following assets (the “Assets”), free and clear of any and all Liens:

 

(a)           the tangible and intangible intellectual property developed for the operation of the Business, including but not limited to, the systems, procedures, manuals, training materials,(curriculum manuals, books, etc.), customer deliverables and systems specifically described in Schedule 2.1(a) ;

 

(b)           all of Seller’s pharmaceutical supplies and other inventory items generally described on Schedule 2.1(b)(1) , provided that Buyer and Seller hereby agree that certain items listed on Schedule 2.1(b)(2) as “excluded” shall not be considered “Assets”;

 

(c)           all right, title and interest of Seller in the specific customer and supplier written contracts, agreements and instruments, and descriptions of any customer and supplier relationships that are not contained in a written contract,  described on Schedule 2.1(c ) (the “ Assumed Contracts” );

 

(d)           the computer software licenses, applications and databases specifically described in Schedule 2.1(d) ;

 

(e)           all right, title and interest of Seller in the internet website, domain name and address (URL) for Medical Advisory Systems known as www.mas1.com (the “Domain Name”);

 

(f)            the goodwill and customer lists of the Business, and all right, title and interest of Seller in any phone, facsimile and telex numbers currently utilized exclusively for the Business listed on Schedule 2.1 (f) ;

 

(g)                                  to the extent transferable at no cost to Seller, all guarantees, warranties, indemnities and similar rights in favor of the Seller relating to the Assets;

 

(h)                                  copies of all customer medical, account and contract files, publications, records, data and contracts primarily related to the Assets or the Business or necessary for the conduct of, or otherwise material to, the Business, as described and listed on Schedule 2.1(h) ;

 

(i)                                      all Permits held by Seller for the operation of the Business which are assignable or otherwise transferable to Buyer at no cost to Seller, as described and listed on Schedule 2.1(i) ;

 

(j)            to the extent transferable at no cost to Seller, all Seller’s right in its mailing addresses used by customers to mail payment, correspondence and other communication; and

 

(k)           all trademarks, tradenames, service marks, brands and copyrights, whether registered or not relating to the Assets or the Business as described and listed on Schedule 2.1(k).

 

ARTICLE 2.2 Excluded Assets . Notwithstanding anything to the contrary set forth in this Agreement or any other agreement, instrument or document entered into or delivered by Seller pursuant to hereto, Seller will not and is not obligated to sell, assign, convey or transfer to Buyer, and Buyer has no right, title or interest in or to, any property or assets of Seller or any of its affiliates that are not expressly described in Article 2.1 , specifically including, but not limited to, any assets related to the [ERT litigation] and any right to any

 

 

award resulting from such litigation.

 

ARTICLE 2.3 Assumption of Assumed Liabilities . Effective as of the Closing Date, Buyer will assume and agree to pay, discharge or perform, as appropriate, and otherwise be exclusively liable for, the liabilities and obligations of Seller that arise from and after the Closing Date under the Assumed Contracts and use of the Assets (the “Assumed Obligations”). Except as expressly provided elsewhere in this Agreement, Buyer will not assume any other claim, liability or obligation of Seller or any of its affiliates.

 

ARTICLE 2.4 Excluded Liabilities . Notwithstanding anything to the contrary set forth herein, the Assumed Liabilities shall not include, and in no event shall Buyer assume, agree to pay, discharge or perform or incur any liability or obligation under this Agreement or otherwise become responsible in respect of, the following (together with all other liabilities of Seller and/or its affiliates that are not Assumed Liabilities, the “ Excluded Liabilities”) :

 

(a)           all federal, state or local taxes payable by Seller and/or its affiliates and all interest and penalties with respect thereto directly or indirectly arising out of the Business on or prior to the

Closing Date;

 

(b)           all franchise or other taxes payable by Seller and/or its affiliates and all interest and penalties with respect thereto directly or indirectly arising out of the Business on or prior to the Closing Date;

 

(c)           all liability of Seller and/or its affiliates for any sales tax and interest and penalties with respect thereto payable as a result of the consummation of the transactions contemplated hereby;

 

(d)           all liability of Seller and/or its affiliates with respect to any employee or former employee of Seller arising with respect to any period of employment with Seller on or prior to the Closing Date, including without limitation, any liability for salaries, severance compensation or accrued but unpaid vacation or any liability arising under any employee benefit plan of Seller and/or its affiliates;

 

(e)           all liability arising out of the failure of Seller and/or its affiliates to comply with any Legal Requirement including, without limitation, any antitrust, customs or environmental laws or regulations arising out of the Business on or prior to the Closing Date;

 

(f)             all legal proceedings (and any debt, obligations and liabilities with respect thereto) now pending or hereafter instituted against Seller and/or its affiliates that relate to the operation of the Business on or prior to Closing Date;

 

(g)           all liabilities, debts and obligations of Seller and/or its affiliates with respect to Excluded Assets;

 

(h)           all liabilities, debts and obligations of Seller and/or its affiliates arising or incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby and any fees and expenses of counsel, accountants, brokers, financial advisors or other experts of Seller and/or its affiliates;

 

(i)            all claims, liabilities or obligations owed to any affiliate of the Seller on or prior to the Closing Date.

 

 

ARTICLE 3 PURCHASE PRICE

 

ARTICLE 3.1 Purchase Price . The purchase price (the “ Purchase Price” ) for the Assets, in addition to Buyer’s assumption of the Assumed Liabilities, will be Four Hundred Twenty Thousand Dollars ($420,000) plus any pre-paid deposits transferred with the Assumed Contracts and the cost of the pharmaceutical inventory and supplies purchased pursuant to Article 2.1(b), and reduced by any pre-billing to or pro-rata prepayment by Seller’s customers. The parties agree to allocate the Purchase Price and the Assumed Liabilities to the Assets with a view to complying with the requirements of Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”). Both Seller and Buyer will use said allocations for all federal and state income tax reporting purposes that may affect the federal and state income tax liability of either party to this Agreement.

 

ARTICLE 3.2 Payment of Purchase Price . At the Closing, Buyer will pay the Purchase Price to Seller, by certified check or wire transfer of immediately available funds to an account designated by Seller.

 

ARTICLE 4 CLOSING

 

ARTICLE 4.1 Closing . Closing of the transactions contemplated by this Agreement and the delivery of the documents, instruments and certificates contemplated herein (the “Closing”) will take place at the offices of MedAire, Inc., in Tempe, Arizona at 10:00 a.m., Phoenix time, on or before April 19, 2004 (being referred to herein as the “ Closing Date ” and the time of the Closing hereunder being referred to herein as the “ Closing Time”) .  Notwithstanding the foregoing, the parties hereby acknowledge that the transfer of portions of the pharmaceutical inventory and supplies purchased pursuant to Article 2.1(b) may take place before and after the Closing Date, as further described in Article 4.4 of this Agreement.

 

ARTICLE 4.2 Closing Deliveries of Seller . At the Closing Time, Seller will deliver or cause to be delivered to Buyer the following:

 

(a)           a certificate of Seller, duly executed by the Chief Executive Officer of Seller, stating that (i) the representations and warranties of Seller set forth in this Agreement are true, accurate and complete as of the Closing Time, and (ii) all of Seller’s covenants and obligations to be satisfied and performed by it at or before the Closing Time have been satisfied and performed;

 

(b)           the Bill of Sale, Assignment and Assumption Agreement in the form of Exhibit A to this Agreement (the “ Bill of Sale, Assignment and Assumption Agreement”) , duly executed by Seller;

 

(c)           such other instruments and documents as Buyer may reasonably request before the Closing Date to properly effectuate and evidence the sale, assignment, transfer and delivery of the Assets from Seller to Buyer;

 

(d)           all books, records, files and customer lists of the Business as described on Schedule 2.1(h) .

 

4.2.1                In addition, on or before Closing, Seller shall provide all necessary information to Buyer as may be reasonably required to transfer the Domain Name with any registration authority accredited by the Internet Committee on Names and Numbers (ICANN) and to update information stored in the Internet WHOIS database. A transfer agreement published by Network Solutions Inc. shall be executed by Seller in favor of Buyer at Closing. Seller further agrees to take any additional actions (including updating database entries with the ICANN or any name provider accredited by the ICANN) reasonably

 

 

necessary to consummate the assignment of the Domain Name to Buyer.

 

ARTICLE 4.3 Closing Deliveries of Buyer . At the Closing Time, Buyer will deliver or cause to be delivered to Seller the following:

 

(a)           a certificate of Buyer, duly executed by the Chief Operating Officer of Buyer, stating that (i) the representations and warranties of Buyer set forth in this Agreement are true, accurate and complete as of the Closing Time, and (ii) all of Buyer’s covenants and obligations to be satisfied and performed by it at or before the Closing Time have been satisfied and performed;

 

(b)           the Bill of Sale, Assignment and Assumption Agreement, duly executed by Buyer; and

 

(c)           payment of the Purchase Price by certified check or wire transfer of immediately available funds.

 

ARTICLE 4.4 Transfer of Pharmaceutical Inventory and Supplies .  Buyer hereby acknowledges and agrees that on or about April 15, 2004, Seller shall conduct a physical inventory of the pharmaceutical inventory and supplies to be purchased by Buyer pursuant to this Agreement, and on or about April 17, 2004 (the “Date of Initial Shipment”), Seller shall ship approximately eighty percent (80%) of such inventory to Seller, together with an invoice setting forth the cost of such goods, which shall be payable upon receipt by Buyer.  Buyer also acknowledges and agrees that between the Date of Initial Shipment and April 26, 2004 (the “Date of Final Shipment”), Seller shall continue to service Buyer’s customer’s pharmaceutical needs in connection with the Business, and that in order to service such needs, Seller may need to purchase additional pharmaceutical inventory.  On the Date of Final Shipment, Seller shall ship all of Seller’s remaining pharmaceutical inventory and supplies relating to the Business to Buyer, together with an invoice setting forth (i) the cost of such goods, plus (ii) the cost of all pharmaceutical supplies which were shipped to Seller’s customers between the Date of Initial Shipment and the Date of Final Shipment, which invoice shall be payable upon receipt by Buyer.

 

 

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER

 

The Seller hereby represents and warrants to Buyer that:

 

ARTICLE  5.1 Corporate Existence and Qualification .  The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; the Seller has the corporate power to own, manage, lease and sell the Assets and to carry on the Business as and where such Assets are presently located and such Business is presently conducted.

 

ARTICLE 5.2 Authority, Approval and Enforceability .  This Agreement has been duly executed and delivered by the Seller and the Seller has all requisite power and legal capacity to execute and deliver this Agreement to consummate the transactions contemplated hereby, and to perform its obligations hereunder.  This Agreement upon execution and delivery will constitute the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as such enforcement may be limited by general equitable principles or by applicable bankruptcy, insolvency, moratorium, or similar laws and judicial decisions from time to time in effect which affect creditors’ rights generally.

 

ARTICLE 5.3 No Seller Defaults or Consents .  Except as otherwise set forth in Schedule 5.3 attached hereto, neither the execution and delivery of this Agreement nor the carrying out of any of the transactions contemplated hereby will:

 

 

a)             violate or conflict with any of the terms, conditions or provisions of the charter or bylaws of the Seller;

 

b)            violate any Legal Requirements applicable to the Seller;

 

c)             violate, conflict with, result in a breach of, constitute a default under (whether with or without notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or give any other party the right to terminate, any contract or license binding upon or applicable to the Seller relating to the Assets being conveyed;

 

d)            result in the creation of any Lien, charge or other encumbrance on any Assets; or

 

e)             cause the Seller to obtain or make any material waiver, consent, action, approval or authorization of, or registration, declaration, notice or filing with, any private non-governmental third party or any Governmental Authority.

 

ARTICLE 5.3.2 No Proceedings .  No suit, action or other proceeding is pending or, to the knowledge of the Seller, threatened before any Governmental Authority seeking to restrain the Seller or prohibit its entering into this Agreement or prohibit the Closing, or seeking damages against the Seller or the Assets as a result of the consummation of this Agreement.

 

ARTICLE 5.4 Financial Statements; Liabilities; Accounts Receivable; Inventories .

 

(a)           The Seller has delivered to Buyer true and complete copies of the following financial information with respect to the Business (collectively, the “Financial Information”):

 

(i)            1998 - 2003 financial information - Schedule 5.4(a);

 

(ii)           Accounts Receivable as of 12/31/2003 - Schedule 5.4(b);

 

(iii)          Inventory as of 12/31/2003 - Schedule 5.4(c); and

 

(iv)          Deferred (Unearned) Revenue - Schedule 5.4(d).

 

All of the Financial Information presents fairly the financial condition and results of operations of the Business for the dates or periods indicated thereon.  All of the Financial Information has been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated.

 

(b)           Except for (i) the liabilities reflected on the Seller’s December 2003 financial statements included with the Financial Information attached as Schedule 5.4(a), (ii) trade payables and accrued expenses incurred since December 31, 2003 in the ordinary course of business of the Business, none of which are material, (iii) executory contract obligations under (x) contracts listed on Schedule 5.8, and/or (y) contracts not required to be listed on Schedule 5.8, and (iv) the liabilities set forth in Schedule 5.4(e) attached hereto, the Business does not have any material liabilities or obligations (whether accrued, absolute, contingent, known, unknown or otherwise, and whether or not of a nature required to be reflected or reserved against in a balance sheet in accordance with GAAP).

 

(c)           Except as otherwise set forth in Schedule 5.4(f), the inventory of the Business as of the Closing Date shall be usable and saleable in the ordinary and usual course of business for the purposes for which intended.  Except as otherwise set forth in Schedule 5.4(f), Seller’s inventory is valued on Seller’s books of

 

 

account in accordance with GAAP (on an average cost basis) at the lower of cost or market, and the value of obsolete materials, materials below standard quality and slow-moving materials have been written down in accordance with GAAP.

 

(d)           Except as described in Schedule 5.4(g), the Seller has and will have as of the Closing Date legal and beneficial ownership of the Assets, free and clear of any and all Liens.

 

ARTICLE 5.5 Absence of Certain Changes .

 

(a)           Except as otherwise set forth in Schedule 5.5(a) attached hereto, since December 31, 2003 there has not been:

 

(i)    any event, circumstance or change that had or might have a material adverse effect on the operations, prospects, or Assets of the Business;

 

(ii)   any damage, destruction or loss (whether or not covered by insurance) that had or might have a material adverse effect on the  operations, prospects, or Assets of the Business:

 

(iii)        any material adverse change in the Seller’s sales patterns, pricing policies, accounts receivable or accounts payable, in each case, of the Business:

 

(b)           Except as otherwise set forth in Schedule 5.5(b) attached hereto, since December 31, 2003 the Seller has not done any of the following with regard to the Assets or the Business:

 

(i)                                      created, incurred, assumed, guaranteed or otherwise become liable or obligated with respect to any indebtedness, or made any loan or advance to, or any investment in, any person, except in each case in the ordinary course of business;

 

(ii)                                   made any change in any existing election, or made any new election, with respect to any tax law in any jurisdiction which election could have an effect on the tax treatment of the Assets or the Business;

 

(iii)          amended or terminated any material agreement;

 

(iv)                               sold, transferred, leased, mortgaged, encumbered or otherwise disposed of, or agreed to sell, transfer, lease, mortgage, encumber or otherwise dispose of, any Assets except (i) in the ordinary course of business, or (ii) pursuant to any agreement specified in Schedule 5.8 ;

 

(v)                                  settled any claim or litigation, or filed any motions, orders, briefs or settlement agreements in any proceeding before any Governmental Authority or any arbitrator;

 

(vi)                               maintained its books of account other than in the usual, regular and ordinary manner in accordance with generally accepted accounting principles and on a basis consistent with prior periods or made any change in any of its accounting methods or practices that would be required to be disclosed under generally accepted accounting principles;

 

(vii)                            suffered any extraordinary losses or waived any rights of material value;

 

(viii)                      A) liquidated Inventory or accepted product returns other than in the ordinary course, (B) accelerated receivables, (C) delayed payables, or (D) changed in any material respect the Seller’s practices in connection with the payment of payables and/or the collection of receivables;

 

 

(ix)                                 engaged in any one or more activities or transactions with an affiliate or outside the ordinary course of business;

 

(x)                                    committed to do any of the foregoing.

 

ARTICLE 5.6 Compliance with Laws .  Except as otherwise set forth in Schedule 5.6 (1 ), the Seller is and has been in compliance in all material respects with any and all Legal Requirements applicable to the Business and the Assets, other than failures to so comply that would not have a material adverse effect on the business, operations, or financial condition of the Business and the Assets..  Except as otherwise set forth in Schedule 5.6(2), the Seller (x) has not received or entered into any citations, complaints, consent orders, compliance schedules, or other similar enforcement orders or received any written notice from any Governmental Authority or any other written notice that would indicate that there is not currently compliance with all such Legal Requirements, except for failures to so comply that would not have a material adverse effect on the business, operations, or financial condition of the Business, and (y) is not in default under, and no condition exists (whether covered by insurance or not) that with or without notice or lapse of time or both would constitute a default under, or breach or violation of, any Legal Requirement or Permit applicable to the Business.

 

ARTICLE 5.7 Litigation .  Except as otherwise set forth in Schedule 5.7 , there are no claims, actions, suits, investigations or proceedings against the Seller  with regard to the Business or the Assets pending or, to the knowledge of the Seller, threatened in any court or before or by any Governmental Authority, or before any arbitrator, that might have a material adverse effect (whether covered by insurance or not) on the Business, or Assets of the Seller and there is no reasonable basis for any such claim, action, suit, investigation or proceeding.

 

ARTICLE 5.8 Commitments .

 

a)             Except as otherwise set forth in Schedule 5.8 , the Seller is not a party to or bound by any of the following, with regard to the Business or the Assets whether written or oral:

 

(i)            any contract that cannot by its terms be terminated by the Seller with 30 days’ notice without penalty;

 

(ii)           contract or commitment for capital expenditures by the Seller in excess of $5,000 per calendar quarter in the aggregate;

 

(iii)          lease or license with respect to any Assets whether as licensor or licensee;

 

(iv)          agreement, contract, indenture or other instrument relating to the borrowing of money or the guarantee of any obligation or the deferred payment of the purchase price of any Assets;

 

(v)           partnership agreement;

 

(vi)          contract with any affiliate of the Seller (including the Seller) relating to the provision of goods or services of the Business by or to the Seller;

 

(vii)                            agreement for the sale of any Assets that in the aggregate have a net book value on the Seller’s books of greater than $5,000; or

 

(viii)        agreement that purports to limit the Seller’s freedom to compete freely in any line of business or in any geographic area.

 

 

b)                All of the contracts listed or required to be listed in Schedule 2.1(c) are, to Seller’s knowledge, valid, binding and in full force and effect, and the Seller has not been notified or advised by any party thereto of such party’s intention or desire to terminate or modify any such contract in any respect, except as disclosed in Schedule 5.8.  Neither the Seller nor, to the knowledge of the Seller, any other party is in breach of any of the terms or covenants of any contract listed or required to be listed in Schedule 2.1(c).

 

ARTICLE 5.9 Intangible Rights.   Set forth on Schedule 2.1(k) is a list and description of all material foreign and domestic patents, patent rights, trademarks, service marks, trade names, brands and copyrights relating to the Assets or the Business (whether or not registered and, if applicable, including pending applications for registration) owned, used, licensed or controlled by the Seller and all goodwill associated therewith.  The Seller owns or has the right to use and shall as of the Closing Date own or have the right to use any and all information, know-how, trade secrets, patents, copyrights, trademarks, tradenames, software, formulae, methods, processes and other intangible properties that are necessary or customarily used by the Seller for the ownership, management or operation of the Assets and the Business (“Intangible Rights”) including, but not limited to, the Intangible Rights listed on Schedule 5.9.  Except as set forth on Schedule 5.9, (i) the Seller is the sole and exclusive owner of all right, title and interest in and to all of the Intangible Rights, and has the exclusive right to use and license the same, free and clear of any claim or conflict with the intellectual property rights of others; (ii) no royalties, honorariums or fees are payable by the Seller to any person by reason of the ownership or use of any of the Intangible Rights; (iii) there have been no claims made against the Seller asserting the invalidity, abuse, misuse, or unenforceability of any of the Intangible Rights and no grounds for any such claims exist; (iv) the Seller has not made any claim of any violation or infringement by others of any of its Intangible Rights or interests