This Asset Purchase Agreement (the “Agreement”) is made
and entered into as of this 16th day of June, 2005 (the
“Effective Date”), by and between Sonus-USA, Inc., a
Washington corporation (“Buyer”) and HearUSA, Inc., a
Delaware corporation (“Seller”).
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A.
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Seller owns and operates certain
retail hearing aid sales and service outlets in the States of
Minnesota, Wisconsin, and Washington at the locations (the
“Premises”) listed on the attached
Exhibit A (the “Business”).
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B.
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Seller desires to sell and Buyer
desires to purchase certain assets of Seller used in the Business
in accordance with the terms and conditions contained
herein.
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1.
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Assets to
be Purchased. Subject to the terms and the
conditions set forth in this Agreement, on the Closing Date, Seller
shall sell, transfer and assign to Buyer and Buyer agrees to
purchase, receive and accept from Seller, all of Seller’s
right, title and interest in and to the following assets (the
“Assets”):
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(a)
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All
of the customer files, customer histories, and customer records
associated with the Business (collectively, the “Customer
Records”);
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(b)
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The
personal property listed on the attached Exhibit B (the
“Personal Property”);
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(c)
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All
of the goodwill and going concern value associated with the
Business (the “Goodwill”);
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(d)
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To
the extent transferable, Seller’s rights, if any, to any
leasehold improvements located at the Premises (the
“Leasehold Improvements”);
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(e)
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All
the rights and interests of Seller in, or pursuant to, the Assumed
Contracts (as herein defined) and leasehold interests in the
Premises and leases therefore set forth on Exhibit E
(“Leases”); and
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(f)
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To
the extent transferable, all licenses and permits held by Seller
relating to the Business or operations of the Premises.
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2.
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excluded
assets. Notwithstanding anything contained
in Section 1, Buyer is not purchasing Seller’s cash,
bank deposits, promissory notes, certificates of deposit, and
marketable securities; Seller’s accounts receivable arising
from and accounts payable incurred for, the operation of the
Business for the period prior to the Closing Date; any of
Seller’s right, title and interest in and to any patents,
copyrights, trademarks, know-how, trade secrets, confidential or
proprietary information, technical information, internet websites,
service marks, trade names including the trade name
“HearUSA” or “HEARx” and any variation
thereof, licenses computer software, internet domain names, permits
and other intangible property rights and interests applied for,
issued to or owned by Seller, whether registered or unregistered,
or under which Seller is licensed; or any other assets owned by
Seller that are not used solely in connection with the Business.
Buyer acknowledges that Seller shall retain all rights to use the
trade names “HearUSA” and “HEARx”, and any
variations thereof, and any related service marks and trademarks
and agrees that Buyer shall not use such trade names, service marks
or trademarks following the Closing Date.
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3.
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Purchase
Price. As
consideration for its purchase of the Assets, Buyer shall pay to
Seller a total price of One Million One Hundred Thousand Dollars
($1,100,000) , which amount shall be subject to adjustment
under certain circumstances as set forth herein (the
“Purchase Price”). Subject to Section 12(e), Buyer
shall pay the Purchase Price at the Closing by wire transfer of
immediately available
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funds in accordance with the written instructions of Seller. The
Purchase Price shall be allocated among the Assets as
follows:
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(a)
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For
the Customer Records, $108,000;
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(b)
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For
the Personal Property, $120,000;
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(c)
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For
the Leasehold Improvements, $10,000;
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(d)
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For
the Assumed Contracts and licenses and permits, $1.00
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(e)
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For
the Restrictive Covenant set forth in Section 12(b), $200,000;
and
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(f)
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For
the Seller’s Goodwill $661,999.
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The parties agree to report this transaction for federal and state
tax purposes in accordance with the allocations set forth in this
Section 3.
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4.
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prorations.
The income and expenses
attributable to the operation of the Business before the Effective
Time (as defined below in Section 13) shall be for the account
of Seller, and the income and expenses attributable to the
operation of the Business on and after the Effective Time shall be
for the account of Buyer. All prorations of income and expense
between Seller and Buyer shall be made in accordance with generally
accepted accounting principles as of the Effective Time, the
proration to be estimated (such estimate to be provided to Buyer by
Seller in writing five (5) days prior to the Closing Date) and
paid, insofar as feasible, on the Closing Date, with a final
settlement ninety (90) days after the Closing Date. For
purposes of calculating such prorations of income and expenses,
income and expenses for products delivered before the Effective
Time shall be for the account of Seller and income and expenses for
products delivered after the Effective Time (whether ordered before
or after the Effective Time) shall be for the account of
Buyer.
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5.
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accounts
receivable. Seller’s accounts receivable
arising or accruing before the Effective Time shall remain the
property of Seller, and Buyer shall not acquire any right or
interest therein. Notwithstanding the foregoing, Seller’s
accounts receivable shall not include any customer accounts where
product has been ordered by a customer of Seller but has not been
delivered as of the Effective Time. For example, Seller’s
accounts receivable shall not include hearing aid sales where a
customer has made a down payment, but the hearing aid has not been
delivered as of the Effective Time. For a period of ninety
(90) days after Closing Date (the “Collection
Period”), Buyer and Seller shall cooperate with each other
and use their respective commercially reasonable efforts to collect
the account receivables of the Business in the ordinary course of
business. All amounts collected from the Business’s account
debtors shall be applied to the oldest account first, unless such
account debtor disputes an older account and designates the payment
to a newer account. Any amounts relating to the accounts receivable
of Seller that are paid directly to Seller shall be retained by
Seller. Buyer shall not discount, adjust or otherwise compromise
any account receivable of Seller and Buyer shall refer any disputed
account receivable to Seller. Within ten (10) days after the
end of each month, Buyer shall deliver to Seller a report showing
account receivable collections for the prior month and Buyer shall
make a payment to Seller equal to the amount of all such
collections. At the end of the Collection Period, any remaining
accounts receivable of Seller shall be returned to Seller for
collection.
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6.
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Representations
and Warranties of Seller. Seller hereby represents and
warrants to Buyer as follows:
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(a)
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Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware and has full corporate power and authority to
enter into and perform its obligations under this Agreement. Seller
is duly qualified to transact business as a foreign corporation and
is in good standing in the states of Minnesota, Wisconsin and
Washington. All documents executed and to be executed by Seller and
delivered in accordance with the terms of
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this Agreement have been duly
authorized and are and will be valid obligations of Seller,
enforceable in accordance with their respective terms.
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(b)
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Seller owns the Assets to be sold
hereunder and has good, valid and marketable title to such Assets
free and clear of all liens, encumbrances, claims, third-party
interests and charges whatsoever, except for (i) the security
interests set forth on Exhibit C . Except as set forth
on Exhibit C , Seller has the free and unrestricted
right to sell, transfer and assign such Assets in accordance with
the terms of this Agreement without the consent or approval of any
other person, except for the Assumed Contracts which require
third-party consent for assignment to Buyer.
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(c)
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Except as set forth in
Exhibit D , this Agreement, the transactions
contemplated hereby and the performance hereof by Seller does not
and will not result in the violation of any contract, undertaking
or agreement to which Seller is a party or by which the Assets or
the Business is bound.
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(d)
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There is no litigation or proceeding
pending or, to Seller’s knowledge, threatened against or
relating to Seller, the Assets or the Business, nor does Seller
know of, or have any reasonable grounds to know of, any basis for
any such action or of any governmental investigation relating to
Seller, the Assets or the Business.
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(e)
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No
third parties have or have been granted any rights to inspect or
use the Customer Records (other than the customers
themselves).
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(f)
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Exhibit E
contains an accurate and
complete list of all agreements, contracts, Leases and commitments
to which the Seller is a party which are material to the financial
condition or operations of the Business (the
“Contracts”). By way of example, and not limitation,
Exhibit E shall list all leases and payer contracts and
agreements including those for private insurance, workers’
compensation, state medical, unions, or employer contracts
(“Payer Agreements”). Except as expressly disclosed in
Exhibit E , (i) each of the Contracts is freely
assignable without the consent of any third party; (ii) Seller
has performed all material obligations required to be performed by
Seller to date under each such Contract; (iii) to
Seller’s knowledge, neither Seller nor any other party is in
default under any Contract; (iv) no event has occurred which,
after the giving of notice or the lapse of time or otherwise, would
constitute a default, or result in a breach by Seller or, to
Seller’s knowledge, any other party, under any Contract;
(v) each Contract is considered valid and binding on the
parties to it in accordance with its respective terms; and
(vi) each Contract is terminable according to its terms
without penalty, cost of liability (whether, express, implied or by
operation of law) on notice not exceeding 30 calendar days. True,
complete and correct copies of all Contracts referred to in the
exhibits have been delivered to Buyer; there are no amendments to
or modifications of, or agreements of the parties relating to, any
such Contracts which have not been delivered to Buyer.
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(g)
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Seller has provided to Buyer a true
and complete copy of unaudited profit and loss statements for the
Business for the period of September 2002 through May 31,
2005, copies of which are attached hereto as Exhibit F
(the “Financial Statements”). The Financial Statements
fairly present in all material respects the profits and losses of
the Business as of the represented dates thereof.
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(h)
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Seller possesses all material
permits and licenses that are necessary to conduct the Business in
its present form. Exhibit H contains an accurate and
complete list of all licenses and permits of the Seller which are
material to the financial condition or operations of the Business
(the “Permits”). All of the Permits are in full force
and effect, Seller is not in violation of any of the Permits and
Seller has not received any notice that any of the Permits will
lapse or be terminated by action of any governmental authority or
otherwise.
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(i)
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All
purchase orders signed prior to the Closing Date for delivery of
products after the Effective Time, which are being assumed by
Buyer, arose out of bona fide, arms length transactions in the
ordinary course of business.
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(k)
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Without limiting the representations
and warranties as to specific classes of assets, the Assets are
sufficient for the continued conduct of the Business immediately
after the Closing in substantially the same manner as conducted
prior to the Closing. All of the tangible personal property
included in the Assets has been maintained in accordance with
normal industry practice and in compliance in all material respects
with all applicable laws and requirements of applicable contracts
and are in good operating condition, normal wear and tear
excepted.
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The
foregoing representations and warranties shall survive the
execution and delivery of this Agreement and the Closing in
accordance with Section 15(a).
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7.
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Representations
and Warranties of Buyer. Buyer hereby represents and warrants
to Seller as follows:
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(a)
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Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Washington, and has full corporate power and authority
to enter into and perform its obligations under this
Agreement.
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(b)
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All
documents executed and to be executed by Buyer and delivered in
accordance with the terms of this Agreement have been duly
authorized and are and will be the valid obligations of Buyer
enforceable in accordance with their respective terms.
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The
foregoing representations and warranties shall survive the
execution and delivery of this Agreement and the Closing in
accordance with Section 15(a).
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8.
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Conditions
to Obligations of Buyer. The obligations of Buyer hereunder
shall be subject to the following:
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(a)
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The
representations and warranties of Seller set forth in
Section 6 shall be true and correct in all material respects
on the Closing Date;
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(b)
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Seller shall have, from the
Effective Date through the Closing Date, conducted the Business
only in the ordinary course, shall pay obligations of the Business
as they become due, and shall use its reasonable best efforts to
preserve the goodwill of the Business;
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(c)
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There shall have occurred no
material loss of, or damage or destruction to, any of the
Assets;
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(d)
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No
event shall have occurred between the Effective Date and Closing
Date that has a material adverse effect on the business, assets,
results of operations and condition (financial or otherwise) of the
Business or the Assets;
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(e)
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Seller shall have delivered all
items pursuant to Section 13(b) hereof; and
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(f)
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Seller shall have caused the valid
termination of all employees of the Business in accordance with the
provisions of Section 14.
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9.
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Condition
to Obligations of Seller. The obligations of Seller hereunder
shall be subject to the following:
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(a)
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The
representations and warranties of Buyer set forth in Section 7
hereof shall be true and correct in all material respects on the
Closing Date;
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(b)
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Buyer shall have delivered all items
pursuant to Section 13(a) hereof.
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10.
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Liabilities.
At the Closing, Buyer
shall assume, and shall from the Closing Date thereafter pay,
perform and discharge the following, but no other, liabilities and
obligations of Seller (such liabilities and obligations hereinafter
collectively called the “Assumed
Liabilities”):
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(a)
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Contracts . All liabilities and obligations of
Seller arising or accruing after the Effective Time under the
Contracts specifically set forth on the attached
Exhibit K (together, the “Assumed
Contracts”);
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(b)
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Purchase Orders
. Commitments of Seller
to fill all orders for hearing aids and other products that are
specifically set forth on the attached Exhibit L ;
and
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(c)
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Exchanges . All obligations of Seller with
respect to patient exchanges of hearing aids and other products
sold prior to the Effective Time; provided that Seller shall remain
liable for patient refunds for hearing aids or other products sold
and delivered prior to the Effective Time that are returned in
accordance with Seller’s normal return policy. For purposes
hereof, an “exchange” shall include any return by a
patient of a hearing aid or other product for a refund for which
Seller would be responsible hereunder if such patient purchases a
hearing aid or other replacement product from Buyer within thirty
(30) days of such return.
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Buyer shall not assume any other
liabilities, obligations or undertakings of Seller of any kind or
nature whatsoever, whether fixed or contingent, known or unknown,
determined or determinable, due or not yet due. Seller shall be and
remain responsible for all liabilities and obli
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