Exhibit 10.36
STOCK PURCHASE AGREEMENT
------------------------
Stock Purchase Agreement dated effective as of June 1, 1997 (this "Agreement"),
by and between NSI Asia Pacific Ltd. a Cayman Islands corporation (the
"Buyer"), and Papnet (Far East) Ltd., a Cayman Islands corporation (the
"Seller") and each of the stockholders of the Seller set forth on the signature
page hereto (collectively the "PFEL Stockholders"). Capitalized terms in this
Agreement shall have the meanings set forth in Section 9 herein.
WHEREAS New System International, Ltd., a Hong Kong corporation (the "Company")
is in the business of providing PAPNET (R) Pap smear testing services in Hong
Kong
WHEREAS the total authorized capital stock of the Company consists of 10,000
ordinary shares of HK$1 par value per share, all of which have been issued and
are fully paid
WHEREAS the Seller beneficially owns all 10,000 issued shares of the Company
(the "Shares") of which 9,999 shares are registered in the name of the Seller
and 1 share is registered in the name of Rose Beauty Ltd. which holds the same
as nominee for the Seller
WHEREAS the Company is indebted to the Seller in the amount of the Loan
WHEREAS the Buyer desires to purchase from the Seller and the Seller desires to
sell to the Buyer the Shares and the Loan on the terms and conditions of this
Agreement
Now, therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained of which the adequacy and sufficiency of such consideration is
expressly acknowledged by the Buyer and the Seller, the parties hereto agree as
follows.
1. BASIC TRANSACTION.
------------------
(a) Purchase and Sale of Shares and Loan.
------------------------------------
On and subject to the terms and conditions of this Agreement, the Buyer agrees
to purchase from the Seller the Shares and the Loan, and the Seller agrees to
deliver and transfer to the Buyer, the Shares and the Loan free and clear of all
claims, liens or encumbrances at the Closing for the consideration specified in
paragraph (c) below in this Section 1.
(b) Effective Time.
--------------
The time of the Closing shall be "the Effective Time".
(c) Purchase Price.
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(i) The amount payable by the Buyer shall be calculated in accordance with the
following: the base value of the Shares and the Loan shall be US$1,409,000 (One
Xxxxxxx Xxxx Xxxxxxx
0
Xxxxxxxx Xxxxxx Xxxxxx Dollars) (the "Base Purchase Price"), which shall be
adjusted in accordance with the calculations set forth on the pro-forma balance
sheet of the Company as at May 30, 1997 (the "Pro-Forma Closing Accounts")
attached hereto as Exhibit A, to reflect (1) addition to the Base Purchase Price
of amounts equal to operating losses of the Company since December 1, 1996, such
amount not to exceed US$50,000 per month; (2) addition to the Base Purchase
Price of amounts equal to cash balances remaining in the Hong Kong and Beijing
bank accounts of the Seller; (3) deduction from the Base Purchase Price of
Liabilities payable by the Company (excluding the Loan) and (4) addition or
deduction, as the case may be, of the net increase or decrease in the Company's
book value of its Accounts Receivable balance from December 1, 1996 through May
30, 1997. The Base Purchase Price as adjusted in accordance with Exhibit A shall
be referred to hereinafter as the "Adjusted Purchase Price" which shall be
apportioned US$10,000.00 to the Shares and US$1,765,113.00 to the Loan.
(ii) The Buyer shall be entitled to retain a sum equal to the Outstanding
Receivables or US$200,000, whichever is the lesser amount (the "Retention Fund")
as security for the receipt by the Company of the Outstanding Receivables. The
Buyer shall use its best endeavours to recover payment of the Outstanding
Receivables within a 180 day period from Closing. Buyer shall render monthly
statements to Seller as to the payment status of such Outstanding Receivables
and shall with each such statement remit to the Seller any Outstanding
Receivable amounts paid to the Company during the period covered by such
statement. The Buyer shall not be obliged to take further action to recover any
amount not paid within the period of 180 days from the Closing Date and shall be
entitled to apply any remaining balance in the Retention Fund as consideration
for the assignment of the remaining Outstanding Receivables from the Company to
the Seller. The Company shall execute an assignment thereof to the Seller so
that the Seller may take action to recover the same in its own name.
(iii) In the event that the Company's year-end audit discloses that the
Liabilities (excluding the Loan) are found to exceed those stated in the Pro-
Forma Closing Accounts, there shall be a reduction of the Adjusted Purchase
price by the total amount of such excess. The Seller shall promptly deliver to
the Buyer any balance due thereof. If such audit discloses a greater cash
balance and/or a lesser amount of Liabilities payable at Closing than as set
forth in the Pro-Forma Closing Accounts, the Buyer shall promptly remit to the
Seller the difference of any such amounts.
(d) The Closing.
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The closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of the Company in Hong Kong upon the execution
of this Agreement, but the rights of the Buyer to the Shares shall be deemed to
have accrued as from 1st June 1997.
(e) Deliveries at the Closing.
-------------------------
At the Closing, (i) the Seller will execute, acknowledge and deliver to the
Buyer the various Exhibits, Schedules, certificates, instruments, and documents
referred to herein, such other instruments of sale, transfer and conveyance
satisfactory to the Buyer as shall be effective for Buyer to take full, valid
and enforceable right, title and ownership interest of the Shares and the Loan
and such other documents that Buyer may reasonably request and (ii) Buyer will
deliver to the Seller the consideration specified in Section 1(c) above.
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2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
--------------------------------------------
The Seller represents and warrants to the Buyer as of the Closing Date, the
following statements are correct and complete in all respects except where
otherwise qualified or as may be set forth in a disclosure schedule arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 2 and attached hereto (each, a "Disclosure Schedule") and the
Seller has no Knowledge that any of the following statements contains a material
misstatement or omission:
(a) Organization and Authorization.
------------------------------
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of Hong Kong. The Company has the full corporate power
and authority to conduct its business as and where such business has been and is
now being conducted.
(b) Authorization of Transaction.
----------------------------
The Seller has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and all related documents and
to perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the board of directors of the Seller have duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions. The
Company and the Seller have obtained all waivers, consents and approvals, a list
of which appear on the attached Schedule 2(b), which are required or necessary
for the consummation of all aspects of this transaction.
(c) Noncontravention.
-----------------
The execution and the delivery of this Agreement and any related documents, and
the consummation of the transactions contemplated hereby and thereby, and all
waivers, consents and permits obtained in connection herewith and therewith,
will not materially (i) violate any organizational, governmental or contractual
obligation of the Seller or the Company or (ii) conflict with, result in a
breach of, constitute a default under any agreement or other arrangement to
which the Seller or the Company is a party or by which any of them is bound.
(d) Title to Assets and Good Repair.
--------------------------------
The Company owns or is otherwise legally entitled to the use and possession of
the Assets, free and clear of any Security Interest other than those listed on
Schedule 2(d) attached hereto and, with respect to tangible assets, the Assets
are in good working order and repair, ordinary wear and tear excepted.
(e) Joint Ventures and Operating Units.
-----------------------------------
The Company has no subsidiary companies. There are no Partnerships or Joint
Ventures in effect as of Closing Date as between the Company and any third party
Persons. CompuScreen has all licenses, permits and authorizations necessary to
carry on in Hong Kong the business in which it is engaged. The Company's
representative offices in the People's Republic of China have all requisite
licenses, permits and authorizations necessary for such representative offices.
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(f) Financial Statements and Receivables.
-------------------------------------
Attached hereto as Schedule 2(f) are the following financial statements of the
Company:
(i) Audited Financial Statements for the period ended February 28, 1997,
including: Auditors' Report, Profits and Loss account, balance sheet and notes
to financial statements, audited by E&Y, referred to herein as the "Most Recent
Financial Statements"; (ii) Audited Financial Statements for the fiscal years
ended September 30, 1995 and 1996 including: Auditors' Report, Profit and Loss
account, balance sheet and notes to financial statements, audited by Y.L. Xxxx &
Company, referred to herein as the "Most Recent Fiscal Year End"; and (iii) A
Proforma Balance Sheet of the Company as of May 30, 1997, Proforma Profit and
Loss account for the Month of May, Unaudited Financial Statements for the period
March 1, 1997, through April 30, 1997, referred to herein as the "unaudited
interim financial statements for the period up to the Closing Date". The
documents referred to in the foregoing clauses (i), (ii) and (iii) of this
paragraph (f) are collectively referred to hereinafter as the "Financial
Statements".
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistence basis throughout the periods
covered thereby, present fairly the financial condition of the Company as of
such dates. The results of operations of the Company for such periods are
consistent with the books and records of the Company. All material notes and
accounts receivable of the Company are reflected properly on their respective
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectable in accordance with their terms at their recorded
amounts.
The Financial Statements including the unaudited interim financial statements
for the period up to the Closing Date fairly present the information purported
to be included therein. Such Financial Statements were prepared from the books
and records of the Company in conformity with generally accepted accounting
principles, in each case applied on the same basis unless otherwise indicated in
the notes thereto, and reflect all adjustments necessary for a fair presentation
of the interim financial statements. All material transactions have been
properly recorded in the accounting records underlying these financial
statements.
There have been no significant changes in the internal control structure or
manner in which transactions are recorded, classified, and summarized in the
preparation of the interim financial information from internal control structure
and accounting systems in effect during the preceding period up to the Closing
Date.
There have been no significant changes in the capital accounts, long-term debt,
or net current assets (or liabilities) from the Most Recent Financial Statements
date up to the Closing Date.
No events or transactions have occurred since February 28, 1997, that would have
a material effect on the interim financial statements up to the Closing Date
that are such of significance in relation to the Company's affairs to require
mention in a note to the audited financial statements in order to make them not
misleading regarding the financial position, results of operation, or cash flows
of the Company.
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To the knowledge of Seller, all accounts receivable as of Closing Date are fully
collectable. In accordance with the terms and conditions set forth under
Section one herein with respect to the Adjusted Purchase Price, Seller
undertakes to indemnify the Buyer for all Outstanding Receivables which are not
collected within 180 days from the Closing Date.
(g) Legal Compliance.
----------------
The Company has (i) complied and is in compliance with all applicable laws and
regulations in Hong Kong, and (ii) no Material Adverse Consequences are known,
filed or commenced against the Company with respect to any failure so to comply,
unless singly or in the aggregate noncompliance would not have Material Adverse
Consequences for the Company.
(h) Tax Matters.
-----------
The Company has filed all Tax Returns that it was required to file in Hong Kong.
All such Tax Returns were correct and complete in all material respects. All
Taxes owed by the Company (whether or not shown on any Tax Return) in Hong Kong
have been paid. The Company is not currently the beneficiary of any extension
of time within which to file any Tax Return. No Company director or officer (or
employee responsible for Tax matters) of the Company expects any authority to
assess any additional Taxes for any period for which Tax Returns have been
filed. Except as set forth on Disclosure Schedule 2(h), there is no audit,
dispute or claim concerning any Tax Liability of any of the Company and there is
no Basis for any such action. The Company has delivered to the Buyer materially
correct and complete copies of all income Tax Returns filed by the Company
since December 31, 1994. The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency. The Company has not entered into any tax sharing or
similar agreements.
(i) Business Operation and Preservation.
-----------------------------------
Since September 30, 1996, the Company has operated its business in good faith in
the Ordinary Course of Business; the Company has not engaged in any practice,
taken any action, or entered into any transaction outside the Ordinary Course of
Business.
(j) Real Property.
-------------
(i) Disclosure Schedule 2(j) lists all real property that any of the Company
owns.
(ii) Disclosure Schedule 2(j) lists and describes briefly all real property
leased or subleased to the Company (including the duration of each such lease).
The Company has delivered to the Buyer materially correct and complete copies of
the leases and subleases listed in Disclosure Schedule 2(j). With respect to
each lease and sublease listed in Disclosure Schedule 2(j): (a) the lease or
sublease is legal, valid, binding, enforceable, and in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (c) all facilities
leased or subleased thereunder have received all waivers, consents and approvals
of any third parties or governmental authorities (including licenses and
permits), as the case may be, required in connection with the operation thereof;
(d) all such facilities have been operated and maintained in accordance with
applicable laws, rules, and regulations in all material respects; and
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(e) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the lease agreement.
(k) Intellectual Property.
---------------------
(i) The Company owns or has the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property reasonably necessary for the
operation of the businesses of the Company as presently conducted;
(ii) The Company does not know of any Person who has, interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties.
(l) Contracts.
----------
Disclosure Schedule 2(l) lists all material contracts, agreements and other
understandings to which any of the Company is a party (including oral
agreements). The Company has delivered to the Buyer a materially correct and
complete copy of each written agreement listed in Disclosure Schedule 2(l)
(each, as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Disclosure Schedule 2(l). In
all material respects, each such agreement:
(a) is legal, valid, binding, enforceable, and in full force and effect;
(b) will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby;
(c) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and
(d) all waivers, consents and approvals of any third parties or governmental
authorities have been obtained (including any licenses and permits required
directly or indirectly in connection therewith) with respect to any such
agreements.
(m) Insurance.
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Disclosure Schedule 2(m) briefly describes each material insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety or similar arrangements) to which the
Company is a party, a named insured, or otherwise the beneficiary of coverage at
any time since inception. With respect to the material aspects of each such
insurance policy: (a) the policy is legal, valid, binding, enforceable, and in
full force and effect; (b) the policy will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (c) the Company is not
in breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (d) all waivers, consents
and approvals of any third parties and/or governmental authorities have been
obtained (including any licenses and permits required directly or indirectly in
connection therewith) with respect to the transfer and assumption of any such
insurance. Disclosure Schedule 2(m) describes any self-insurance arrangements
affecting the Company.
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(n) Litigation.
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Disclosure Schedule 2(n) sets forth each instance in which any of the Company
is subject to any material outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or, to the Knowledge of the Company, is
threatened to be made a party to any material action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(o) Employees and Employee Benefits.
-------------------------------
Disclosure Schedule 2(o) sets forth the name of each employee, consultant, agent
or representative of the Company and the principal place of business of such
person. Disclosure Schedule 2(o) lists each material employee non-cash
compensation plan, retirement plan, material fringe benefit plan or similar
program, other than ordinary cash compensation, that the Company maintains or
to which the Company contributes.
(p) Environment, Health, and Safety.
-------------------------------
Except as set forth on Disclosure Schedule 2(p), (i) the Company has materially
complied with all Environmental, Health, and Safety Laws, and such has no
Knowledge or Basis for Knowledge that any material action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed, commenced or is threatened against the Company alleging any failure so to
comply.
(q) Capitalization, Stock Ownership and Records
-------------------------------------------
The authorized capital stock of the Company consists of 10,000 ordinary shares
of HK$1 par value per share, all of which have been issued and are fully paid
up. The Company's corporate minutes, books and records are complete and correct
in all material respects and have been maintained in accordance with good
business practice and all applicable material laws, regulations and other legal
requirements. Prior to the execution and delivery of this Agreement, the
Company has made available to Buyer all of these books and records and all other
documents relating to the business of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
-------------------------------------------------
The Buyer represents and warrants to the Company that the statements contained
in this Section 3 are correct and complete in all respects as of the Closing
Date except where qualified otherwise and the Buyer has no Knowledge that any of
the following statements contains a material misstatement or omission:
(a) Organization of the Buyer.
-------------------------
The Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction.
----------------------------
The Buyer has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and all related documents and
to perform its obligations hereunder
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and thereunder. Without limiting the generality of the foregoing, the board of
directors of the Buyer have duly authorized the execution, delivery, and
performance of this Agreement by the Buyer.
(c) Noncontravention.
-----------------
The execution and the delivery of this Agreement, and the consummation of the
transactions contemplated hereby, and all consents and permits obtained in
connection herewith and therewith, will not materially (i) violate any
organizational, governmental or contractual obligation of the Buyer (ii)
conflict with, result in a breach of, constitute a default under any agreement
or other arrangement to which the Buyer is a party or by which it is bound or
to which any of its assets is subject or (iii) or result in Material Adverse
Consequences with respect to the Buyer .
4. CONDITIONS TO OBLIGATION TO CLOSE.
-------------------------------------
(a) Conditions to Obligation of the Buyer.
---------------------------------------
The obligation of the Buyer to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties of Section 2 above shall be true,
correct and complete in all respects, except where otherwise qualified or as may
be set forth in a Disclosure Schedule attached hereto and none of such
statements or disclosures shall contain a material misstatement or omission as
of the Closing Date;
(ii) The Seller shall have performed and complied with all of their covenants
hereunder through the Closing;
(iii) the Seller shall have procured any and all material third party or
governmental consents or authorizations required to consummate the transactions
contemplated herein;
(iv) no material action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any jurisdiction
against the Company;
(v) The individuals listed on the attached Schedule A shall have entered into
Employment Agreements and each of the same shall be in effect simultaneously at
the Closing;
(vi) the Company shall have paid any and all of its outstanding Liabilities
except for the Loan and the accounts payable and accrued expenses recorded under
Current Liabilities in the Closing Accounts;
(vii) the Company shall have delivered to Buyer an officer's certificate in
the form of Exhibit X attached hereto;
(iix) the Seller shall have delivered such other documents as the Buyer may
reasonably request on or prior to the Closing Date to consummate the Closing of
this Agreement and the transactions contemplated herein including termination of
the management services agreement between the Buyer and PFEL.
(b) Conditions to Obligation of the Company.
---------------------------------------
The obligation of the Seller to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
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(i) the representations and warranties set forth in Section 3 above shall be
true, correct and complete in all respects, except where otherwise qualified and
none of such statements or disclosures shall contain a material misstatement or
omission as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) the Buyer shall deliver the Purchase Price; and
(iv) the Buyer shall deliver such other documents as the Company may
reasonably request on or prior to the Closing Date to consummate the Closing of
this Agreement and the transactions contemplated herein.
5. REPRESENTATIONS AND WARRANTIES OF THE PFEL STOCKHOLDERS
------------------------------------------------------------
Each PFEL Stockholder warrants to the Buyer individually, not jointly, that as
of Closing Date:
(a) The PFEL Stockholder is not aware of any legal Liability of the Company
that has not been disclosed in writing to the Buyer.
(b) Where a PFEL Stockholder has acted in an executive capacity on behalf of
the Company, he has not, except in the Ordinary Course of Business, taken
any action to create any legal Liability on behalf of the Company.
(c) Where a PFEL Stockholder has not acted in an executive capacity on behalf
of the Company, he has not taken any action to create any legal Liability
on behalf of the Company.
(d) If the PFEL Stockholder is a corporation, the PFEL Stockholder is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(e) In the event that any PFEL Stockholder breaches any of its representations,
warranties or covenants contained in this Agreement, such PFEL Stockholder
individually, not jointly, such that one PFEL Stockholder agrees to
indemnify hold harmless and defend the Buyer from and against the entirety
of any Material Adverse Consequences the Buyer may suffer so long as
provided the Buyer makes a written claim for indemnification against such
PFEL Stockholder and such Material Adverse Consequences arise during the
survival period of this Agreement, resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach),
provided, however, that such PFEL Stockholder shall not be liable for a
breach of the warranty set forth in Section 5(a) herein except where there
has been fraud or deliberate concealment on his part.
(f) The PFEL Stockholder has full power and authority (including, if the PFEL
Stockholder is a corporation, full corporate power and authority) to
execute and deliver this Agreement and all related documents and to perform
his or her obligations hereunder and thereunder. Without limiting the
generality of the foregoing, for each PFEL Stockholder that is a
corporation, the board of directors and the stockholders of such
corporation have duly authorized the execution, delivery, and performance
of this Agreement and such PFEL Stockholder has obtained all waivers,
consents and approvals in respect of its corporate capacity which are
required or necessary for the consummation of this transaction. This
Agreement constitutes the valid and legally binding obligation of the PFEL
Stockholder, enforceable in accordance with its terms and conditions.
(g) The execution and the delivery of this Agreement and any related documents
by the PFEL Stockholder, the performance by the PFEL Stockholder of his or
her obligations hereunder and thereunder, the consummation of the
transactions contemplated hereby and thereby, and all
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consents and permits obtained in connection herewith and therewith, will
not materially (i) violate any organizational, governmental or contractual
obligation or (ii) conflict with, result in a breach of, constitute a
default under, result in Material Adverse Consequences under any agreement
or other arrangement to which any of such Persons is a party or by which it
is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets); Each PFEL
Stockholder has obtained any and all waivers, consents or approvals
required by any third parties or governmental authorities with respect to
PFEL Stockholder's obligations under this Agreement and any related
agreement executed by PFEL Stockholder.
6. POST-CLOSING COVENANTS.
------------------------
The Company and each PFEL Stockholder agrees as follows with respect to the
period following the Closing.
(a) General.
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In case at any time after the Closing any further action is reasonably necessary
or desirable to carry out the purposes of this Agreement and the transactions
contemplated herein, as determined in Buyer's reasonable discretion, the Seller
will take such further action (including the execution and delivery of such
further instruments and documents), all at the sole cost and expense of the
Buyer (unless the Buyer is entitled to indemnification as set forth below),
including contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or similar circumstance.
(b) Transition.
------------
The Seller and each PFEL Stockholder will not solicit or take any action that is
designed or intended to have the effect of discouraging any employee lessor,
licensor, customer, supplier, or other business associate of any of the Company
from maintaining the same business relationships with the Company after the
Closing as it maintained with the Company prior to the Closing.
(c) Confidentiality.
----------------
The Seller and each PFEL Stockholder will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly at Closing to the
Buyer all tangible embodiments and all digital media copies of the Confidential
Information which are in its, his or her possession.
(d) Covenant Not to Compete.
-----------------------
Except as provided in an Employment Agreement with Buyer, for a period of three
years from and after the Closing Date, each PFEL Stockholder and the Seller
will not engage directly or indirectly including managing, financing,
consulting, owning or being in the employment of any business of automated or
semi automated cytological testing (other than as a client of any company which
is an Affiliate of the Buyer), provided, however, that (i) ownership of less
than 5% of the outstanding stock of any publicly traded corporation and/or (ii)
ownership of any amount of stock of Neuromedical Systems, Inc., or any or its
Subsidiaries, shall in either case be deemed not to be engaged by reason thereof
in any of the business above described. If the final
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judgment of a court of competent jurisdiction declares that any term or
provision of this paragraph is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this provision shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
7. INDEMNIFICATION.
---------------
(a) Survival.
---------
All of the representations and warranties of the Buyer, the Company, the Seller
and the PFEL Stockholders contained in this Agreement shall survive the Closing
and continue in full force and effect for a period of three (3) years
thereafter.
(b) Indemnification of Buyer.
------------------------
In the event the Seller breaches any of its representations, warranties, and
covenants contained in this Agreement provided that the Buyer makes a written
claim for indemnification against the Seller, then the Seller agrees to
indemnify hold harmless and defend the Buyer from and against the entirety of
any Material Adverse Consequences the Buyer may suffer so long as such Material
Adverse Consequences arise during the survival period of this Agreement,
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach); provided, however, that the Indemnification
provided for herein shall be limited to the Purchase Price hereof, except the
indemnity shall not be so limited in the case of any (x) fraud, (y) Material
Adverse Consequences resulting from, arising out of, relating to, in the nature
of, or caused by any disclosure set forth on a Disclosure Schedule which
qualifies any of the representations and warranties of the Seller.
(c) Indemnification of PFEL Stockholders.
------------------------------------
In the event the Buyer breaches any of its representations, warranties, and
covenants contained in this Agreement, provided that the Seller makes a written
claim for indemnification against the Buyer, then the Buyer agrees to indemnify
the Seller from and against the entirety of any Material Adverse Consequences
the Seller may suffer through and after the date of the claim for
indemnification (including any Material Adverse Consequences the Seller may
suffer so long as such Material Adverse Consequences arise during the survival
period of this Agreement) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach), provided, however,
that the indemnification provided for herein shall be limited to the Purchase
Price hereof.
(d) Representation.
---------------
(i) If any third party shall notify any of Buyer, the Seller or any PFEL
Stockholder (each, an "Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party"), then the
11
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after notice of
the Third Party Claim; and (B) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief.
(iii) So long as the Indemnifying Party is conducting the defence of the Third
Party Claim (A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defence of the Third Party Claim, (B)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld unreasonably), and
(C) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld
unreasonably).
8. MISCELLANEOUS.
-------------
(a) No Third Party Beneficiaries.
----------------------------
This Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns.
(b) Entire Agreement.
----------------
This Agreement (including the Exhibits, Schedules and other documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(c) Succession and Assignment.
-------------------------
This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party; provided,
however, that without such written approval the Buyer may (i) assign any or all
of its rights and interest hereunder to one or more Persons and (ii) designate
one or more Persons to perform its obligations hereunder.
(d) Execution and Counterparts.
--------------------------
This Agreement may be executed via facsimile in one or more counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument, provided that actual execution exemplars of each
such facsimile signature must be forwarded and delivered to the other Parties no
later than ten (10) days following the Closing.
12
(e) Headings.
--------
The Section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices.
-------
All notices, requests, demands, claims, and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business days after) it is
sent by registered or certified mail, return receipt requested, postage prepaid,
and addressed to the intended recipient as set forth below:
If to the Buyer:
NSI Asia Pacific Ltd.
C/O Neuromedical Systems, Inc.
Two Executive Blvd.,
Suffern, NY 10901
U.S.A.
With a copy to:
NEUROMEDICAL SYSTEMS, INC.
Xxx Xxxxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000;
Attention: Xxxx X. Xxxxxxxx, III
Facsimile: (000) 000-0000
If to the PFEL:
Papnet (Far East) Ltd.
0xx Xxxxx, Xxxxxx Xxxxx,
Xxxx Xxxxxx, PO Box 709.
Xxxxxx Town, Cayman Islands
If to Rose Beauty:
Rose Beauty Ltd.
XX Xxx 000,
Xxxx Xxxx
Xxxxxxx,
Xxxxxxx Xxxxxx Xxxxxxx
13
If to the PFEL Stockholders:
Dr. Xxxxxxx Xx, M.D. Madam Xxxxx Foo
18 La Costa, 18 La Costa,
Apt.3B Apt. 3B
Discovery Xxx Xxxxxxxxx Xxx
Xxxx Xxxx Xxxx Xxxx
Xx. Xxxxxxx Xxxxx, M.D. Rose Beauty Ltd.
Xxxx 000, Xxxx Xxxxxx. XX Xxx 000, Xxxx Xxxx,
582 Xxxxxx Road Tortola, British Virgin Islands
Kowloon
Hong Kong
SCM Limited Five Peaks Limited
0X Xxxxxx Xxxxx 000 Xxxxx Xxxxx
128 Gloucester Road Chater Road
Wanchai Central
Hong Kong Hong Kong
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including facsimile, personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
(g) Governing Law and Jurisdiction.
------------------------------
This Agreement shall be governed by and construed in accordance with the
domestic laws of England without giving effect to any choice or conflict of law
provision or rule (whether of England or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than England. Each
of the Parties submits to the jurisdiction of the English courts in any action
or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each of the Parties waives any defence of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on the other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 9(f) above.
(h) Amendments and Waivers.
----------------------
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Buyer and the Company. No waiver by any
Party of any default,
14
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) Severability.
------------
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.
(j) Construction.
-------------
The Parties have participated jointly in the negotiation 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 of the provisions of this Agreement. The word
"including" shall mean including without limitation.
(k) Specific Performance.
--------------------
Each of the Buyer, the Seller and the PFEL Stockholders acknowledges and agrees
that each such Party may be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties, individually, shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of equity or law having jurisdiction over the
Parties and the matter, at law or in equity.
(l) Expenses.
--------
The Parties shall each bear their own costs and expenses incurred in connection
with the transactions contemplated in this Agreement including, without
limitation, the fees and expenses of their counsel and accountants, provided,
however, that Hong Kong stock transfer stamp duties shall be shared equally be
each of PFEL (as agent for the Seller) and the Buyer.
(m) Risk of Loss.
--------------
The risk of loss of the Acquired Assets shall remain with the Company until the
Closing.
(n) Remedies Cumulative.
-------------------
No remedy set forth in this Agreement or otherwise conferred upon or reserved to
any party shall be considered exclusive of any other remedy available hereunder,
at law or in equity to any party, but the same shall be distinct, separate and
cumulative and may be exercised from time to time as often as occasion may arise
or as may be deemed expedient.
(o) Confidential Information and Publicity.
--------------------------------------
No party hereto shall make any public disclosure of the specific terms of this
Agreement, except as required by law. In connection with the negotiation of
this Agreement and the preparation for
15
the consummation of the transactions contemplated hereby, each of the Parties
acknowledges that certain confidential information relating to such Parties may
be disclosed to another Party. Each Party shall treat such information as
confidential, preserve the confidentiality thereof and not duplicate or use such
information, except as reasonably necessary to discuss the transactions
contemplated herein with attorneys, advisors, consultants, and Affiliates, and
except as required to comply with any law or any provision of this Agreement or
related documents necessary to consummate the transactions contemplated herein.
9. DEFINITIONS.
-----------
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934.
"Assets" means: (i) all of the assets of the Company, including, but not limited
to the Company's (a) representative offices in the Peoples Republic of China;
(b) CompuScreen, (c) real property and fixtures (d) personal property, (e)
Intellectual Property, (f) equipment and real property leases, (g) agreements
-
and contracts, (h) accounts receivable for services rendered (i) claims,
deposits, prepayments, and refunds, (j) approvals, permits, licenses,
registrations, certificates and similar rights obtained from governments and
governmental agencies, and (k) software, data, books, records, ledgers, files,
documents, correspondence, lists (including customer lists), advertising and
promotional materials, studies, reports, and any other printed, written or
digital materials.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the Recitals of this Agreement above except
with respect to Section 8 in which case it shall mean Buyer, its officers,
directors, employees, agents, representatives, stockholders and their respective
successors and assigns.
"Closing Date" has the meaning set forth in Section 1(d).
"Closing Financial Statement" has the meaning set forth in Section 5.
"Closing" has the meaning set forth in Section 1(d).
"Company Share" means any equity ownership share of the Company.
"Company" has the meaning set forth in the Recitals of this Agreement.
"CompuScreen" means the Company's Hong Kong medical diagnostic laboratory doing
business under the name of CompuScreen.
16
"Confidential Information" means any information concerning the businesses and
affairs of the Company that is not already generally available to the public.
"Disclosure Schedule" has the meaning set forth in Section 2.
"Effective Time" has the meaning set forth in Section 1(b).
"Employment Agreements" shall mean the employment agreements entered into by
each of the persons listed on the attached Schedule D.
"Environmental, Health, and Safety Laws" means any one or more laws, statutes,
rules, common law holdings, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety.
"Financial Statements" has the meaning set forth in Section 2(f).
"GAAP" means generally accepted accounting principles as in effect from time to
time.
"Indemnified Party" has the meaning set forth in Section 7(d).
"Indemnifying Party" has the meaning set forth in Section 7(d).
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Joint Venture" means any contract, agreement or understanding between one or
more of the Company and any other Persons to undertake, contribute to or engage
in any activity, in either a direct, intermediary or indirect capacity, and
share or allocate as between such parties or Persons any portion of the capital,
financing, labor, material, Intellectual Property, real or personal
17
property, costs, expenses, profits, Liabilities or losses related either
directly or indirectly to such activity.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes, royalties or commissions.
"Material Adverse Consequences" means any of one or more of the following which
is subject in amount, singly or in the aggregate, to US$5,000 or more: any
actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
"Most Recent Financial Statements" has the meaning set forth in Section 2(f).
"Most Recent Fiscal Year End" has the meaning set forth in Section 2(f).
"Ordinary Course of Business" means the ordinary course of business consistent
with past day-to-day custom and practice (including with respect to quantity and
frequency) as such business has been conducted during the calendar years of
1995, 1996 and 1997.
"Partnership" means any contract, agreement or understanding between one or more
of the Company and any other Persons to undertake, contribute to or engage in
any plan or activity, in either a direct, intermediary or indirect capacity, and
share or allocate as between such parties or Persons any portion of the capital,
financing, labor, material, Intellectual Property, real or personal property,
costs, expenses, profits, Liabilities or losses related either directly or
indirectly to such plan or activity.
"Party" means, individually, each of the Buyer, the Company and each of the PFEL
Stockholders, and collectively, "Parties" means all of the foregoing.
"Payroll Expenses" means the aggregate of the Company's unpaid payroll expenses
accrued from December 1, 1996 until the Closing Date (such expenses in
accordance with the Financial Statements and the Closing Financial Statement).
"Person" means an individual, partnership, corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"PFEL" has the meaning set forth in the Recitals of this Agreement.
18
"PFEL Stockholder " means any Person who holds any PFEL equity shares.
"Pro-Forma Financial Statement" means a pro-forma balance sheet, statement of
income, changes in stockholder's equity and cash flow of the Company as of March
28, 1997.
"Purchase Price" has the meaning set forth in Section 1(c).
"Retention Fund" has the meaning set forth in Section 1(c).
"Rose Beauty" has the meaning set forth in the Recitals of this Agreement.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Security Interest" means any material mortgage, pledge, claim, lien,
encumbrance, charge, or other security interest.
"Sellers" shall have the meaning set forth in the Recitals of this Agreement.
"Shares" means all issued and outstanding stock of the Company as of the
Closing.
"Subsidiary" means any entity with respect to which a specified Person (or
a Subsidiary thereof) owns 1% or more of the equity ownership thereof or has the
power to vote, by ownership, agreement, understanding or otherwise, or direct
the voting of sufficient securities to elect one or more directors.
"Tax Liability" has the combined meanings of the definitions of "Tax" and
"Liability."
"Tax Return" means any return, declaration, report, claim for refund, or
information return, examination reports, statements of deficiencies assessed
against or agreed to, or any other statement relating to Taxes, any schedule or
attachment to any such item and any amendment thereof.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs, duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, bulk sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Third Party Claim" has the meaning set forth in Section 7(d)
10. This Agreement may be executed by the parties on different copies and where
all parties have executed this Agreement such executed copies shall together
constitute a duly executed copy of this Agreement.
[Signature Page Follows]
19
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.
NSI ASIA PACIFIC LTD.
By: /s/ Xxxxxxx Or
Title: General Manager
PAPNET (FAR EAST) LTD.
By: /s/ Xxxxxxx Xx, M.D.
Title: President
[Signatures Continue on the Following Page]
20
PFEL STOCKHOLDERS with respect to Sections 5, 6 and 7 and such of the
definitions in this Agreement applicable to such Sections:
/s/ Xxxxxxx Xx, M.D.
Xxxxxxx Xx, M.D.
/s/ Xxxxx Foo
Xxxxx Foo
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
XXXX BEAUTY
By: /s/ Xxxxxxx Xx
Title: Director
SCM LTD.
By: /s/ Xxx Xxxxx
Title: President
FIVE PEAKS LTD.
By: /s/ Xxxxxxxx X. Xxxx
Title: Director
21
