ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated this 2nd day of July,
2001, by and between ENCORE MEDICAL CORPORATION, a Delaware corporation
("Buyer"), and TECNOL, INC.; ▇▇▇▇▇▇▇▇-▇▇▇▇▇ CORPORATION; and ▇▇▇▇▇▇▇▇-▇▇▇▇▇
WORLDWIDE, INC. each a Delaware corporation (collectively referred to as
"Seller").
WHEREAS, Seller owns and operates an orthopedic soft goods/patient
safety/pressure care manufacturing, marketing and distribution activity related
to the products set forth on Exhibit A, with its primary place of business
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located at Del Rio, Texas (hereinafter sometimes referred to as the "Activity");
and
WHEREAS, the parties desire to provide for the sale and transfer of the
Activity and its assets including the personal property used primarily in
connection with such Activity, in exchange for cash and a promissory note, upon
the terms and subject to the conditions herein set forth; and
WHEREAS, this Agreement sets forth the terms and conditions to which the
parties have agreed;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties herein contained, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1 Transfer of Assets. Subject to the terms and conditions of
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this Agreement, Seller does hereby agree to sell, transfer, convey and deliver
to Buyer and Buyer does hereby agree to purchase and accept from Seller the
following property and rights:
(a) All furniture, fixtures, equipment and other personal
tangible property used primarily in the operation of the Activity as set forth
on Schedule 1.1(a) to this Agreement (the "Fixed Assets");
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(b) All raw materials, work in process, finished product and
supplies used, acquired or received by Seller primarily in the operation of the
Activity as set forth on Schedule 1.1(b) hereto, (the "Inventory");
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(c) All formulae, patents, inventions, licenses, know-how,
trademarks, trade names, service marks, copyrights, and trade secrets used
solely with respect to the Activity as set forth in Schedule 1.1 (c) (the
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"Intellectual Property Assets");
(d) All of the interest of the Seller in the Activity, together
with any lists of present, contemplated and former customers, mailing lists,
business books, drawings, files and database records of all types relating
primarily to the Activity, the telephone numbers and listings for the Activity,
all customer and sales brochures, sales support and marketing collateral,
pamphlets, advertising literature, catalogs and related buying or sales
material; and
(e) Seller's interest in and benefits under all transferable
licenses, permits, contracts, raw material and finished goods purchase orders or
agreements relating primarily to the Activity, or governmental issued licenses
or permits, as set forth on Schedule 1.1(e) hereto, (collectively, the
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"Assumed Contracts"), provided, however, that such Assumed Contracts shall be
transferred and conveyed only to the extent that the Assumed Contracts relate to
the Activity.
All property to be sold by Seller to Buyer described above shall be
hereinafter collectively referred to as the "Assets."
Section 1.2 Purchase Price. In reliance on the representations and
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warranties of Seller herein contained, and on the terms and subject to the
conditions of this Agreement, Buyer, in consideration for the transfer and
delivery to it of the Assets as herein provided, will pay to Seller the sum of
Eight Million Eight Hundred Thirty-Five Thousand Two Hundred Six Dollars
($8,835,206) (the "Purchase Price"), provided however, such Purchase Price shall
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be adjusted pursuant to the terms of Section 1.6 hereof.
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Section 1.3 Liabilities of Seller Assumed by Buyer. Buyer agrees to
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assume, upon the terms and subject to the conditions set forth herein, at the
Closing, and agrees to perform or satisfy, to the extent related to the
Activity, only the following: (a) all liabilities and obligations of Seller
under the Assumed Contracts except as specifically set forth in Schedule 1.3;
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(b) all liabilities, obligations, claims, demands and causes of action arising
from the operations of the Activity or the functioning, use and condition of the
Assets on and after the Closing Date, including, but not limited to, regulatory
obligations; (c) any liability or obligation with respect to Taxes (as
hereinafter defined) applicable to the Activity or the Assets for any period (or
partial period) beginning after the Closing Date; and (d) all obligations and
liabilities of Seller for returns and warranties arising from the operations of
the Activity prior to and after the Closing Date. All of the foregoing
liabilities and obligations of Seller to be assumed by Buyer hereunder are
hereinafter referred to as the "Assumed Liabilities."
Section 1.4 Allocation of Purchase Price. The Purchase Price shall be
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allocated among the Assets (including the Assumed Liabilities) in the manner
required by Treasury Regulations (S)1.1060-1T and shall be reasonably agreed to
in writing by Seller and Buyer on or before the Closing Date, provided that such
allocation shall be updated as of the end of the Transition Period, as
hereinafter defined. Buyer and Seller agree that, except as otherwise required
by law, (i) the allocations to be agreed to as herein described shall be binding
on Seller and Buyer for all foreign, federal, state and local tax purposes, and
(ii) Buyer and Seller shall file with their respective federal income tax
returns consistent IRS Forms 8594-Asset Acquisition Statements under Section
1060, including any required amendments thereto, which shall reflect the
allocations set forth in their written agreement. Buyer and Seller shall file
all applicable transfer tax forms and declarations. All Taxes applicable to the
Assets for periods beginning before and ending after the Closing Date, and any
other charges which are appropriate subjects for proration, shall be prorated on
a daily basis as of 12:01 a.m. on the Closing Date between Seller and Buyer;
provided, however, that, all property, ad valorem or similar taxes shall be
allocated to Seller for the period ending on the Closing Date based on a daily
proration of the most recent (as of the Closing Date) ascertainable property, ad
valorem or similar taxes to be prorated. Any refund of property, ad valorem or
similar taxes (net of any reasonable costs incurred to recover same) shall be
prorated between Seller and Buyer in the same proportion. Notwithstanding the
foregoing, Buyer shall be responsible for the payment of all sales and use, deed
and transfer taxes as a result of the sale and transfer of the Assets
contemplated hereby. Buyer and Seller shall file all applicable transfer tax
forms and declarations in connection therewith. For purposes of this Agreement,
"Tax" (and, with correlative meaning, "Taxes") shall mean any federal, state,
local or foreign income, gross receipts, personal property, severance, sales,
use, transfer, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem or excise tax, or any other tax,
charge, levy, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest, fine, penalty, assessment or
addition thereto, imposed by any governmental authority.
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Section 1.5 Effective Date. The Effective Date of the transfer of the
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Assets shall be 12:01 a.m. on the Closing Date.
Section 1.6 Purchase Price Adjustment.
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(a) As used herein, the term "Inventory Value" means the value
of the net inventory as determined pursuant to Schedule 1.6 (a) as of the
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Effective Date.
(b) Within thirty (30) days after the Closing Date, Buyer may,
but is not obligated to, prepare and deliver to Seller a statement of the
Closing Inventory of Seller (the "Closing Inventory Statement"). Buyer shall
prepare the Closing Inventory Statement in accordance with the formula and
accounting principles described in Schedule 1.6(a). Buyer shall promptly deliver
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to Seller the results of the inventory count and shall grant Seller's
Accountants such access to Buyer's facilities and the results of the physical
count as Seller reasonably requests.
(c) Seller shall allow Buyer and Buyer's independent accountants
("Buyer's Accountants") access to the work papers, if any, of Seller's
independent accountants ("Seller's Accountants"), which are relevant to the
Closing Inventory Statement, and shall cooperate and direct its personnel and
Seller's Accountants to cooperate with Buyer and Buyer's Accountants to
facilitate preparation and delivery of the Closing Inventory Statement. From and
after the Closing Date, Buyer shall cooperate and direct its personnel and
Buyer's Accountants to cooperate with Seller and Seller's Accountants to
facilitate the Seller's review of the Closing Inventory Statement and in
connection with the resolution of any disputes with respect thereto and the
determination of the Final Inventory Statement.
(d) The Closing Inventory Statement delivered by Buyer to Seller
will be the Final Inventory Statement and will be conclusive and binding on the
parties unless Seller, within the thirty (30) day period after the delivery to
Seller of the Closing Inventory Statement, notifies Buyer in writing that Seller
disputes any of the amounts set forth therein, specifying the nature of each
dispute and the basis therefor (the "Dispute Notice") provided that Seller may
deliver a Dispute Notice only if Seller reasonably believes that the Closing
Inventory Statement contains mathematical errors or has not been prepared in
accordance with the formula and accounting principles described in Schedule
1.6(a). Failure by Seller to dispute the amounts reflected in the Closing
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Inventory Statement within such thirty (30) day period will be deemed an
acquiescence thereto by Seller. The parties shall attempt in good faith to reach
agreement resolving all the disputes set forth in the Dispute Notice within
thirty (30) days after the Dispute Notice is delivered by Seller to Buyer, in
which event the Closing Inventory Statement, as amended to the extent necessary
to reflect the resolution of all such disputes, will be the Final Inventory
Statement and will be conclusive and binding on the parties. If the parties are
unable to resolve any or all of such disputes within the aforesaid thirty (30
day period, the parties will, promptly after the expiration of such time period,
submit for resolution all unresolved disputes to a mutually acceptable Big Five
Accounting Firm as an arbiter (the "Designated Accounting Arbitrator") for
resolution. Promptly, but no later than thirty (30) days after its acceptance of
its appointment as Designated Accounting Arbitrator, the Designated Accounting
Arbitrator shall determine, based solely on presentation by Buyer and Seller,
and not by independent review, those items in dispute on the Closing Net Working
Assets Statement and shall render a written report as to the resolution of each
dispute and the resulting calculation of the Final Inventory Statement and the
Closing Net Working Assets. In resolving any disputed item, the Designated
Accounting Arbitrator may not assign a value to such item greater than the
greatest value for such item claimed by either party or less than the smallest
value for such item claimed by either party. The Designated Accounting
Arbitrator will have exclusive jurisdiction over, and resort to the Designated
Accounting Arbitrator as provided in this paragraph (d) will be the sole
recourse and remedy of, the parties against one another or any other person
(including
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Seller's Accountants or Buyer's Accountants) with respect to, any disputes
arising out of or relating to the Closing Inventory Statement and/or the Final
Inventory Statement; and the Designated Accounting Arbitrator's determination
will be conclusive and binding on the parties and will be enforceable in a court
of law.
(e) Seller shall pay the fees and expenses of Seller's
Accountants. Buyer shall pay the fees and expenses of Buyer's Accountants. Buyer
and Seller shall share equally the fees and expenses of the Designated
Accounting Arbitrator.
(f) As used herein, the term "Final Inventory Statement" means (A)
the Closing Inventory Statement if no Dispute Notice is given by Seller within
the time period set forth in Section 1.6(d) or (B) if a Dispute Notice is timely
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given and all of the disputed items are resolved by mutual agreement of the
parties, the Closing Inventory Statement, as amended if necessary, to reflect
such resolution of all disputes or (C) if a Dispute Notice is timely given and
any or all of the disputed items are submitted to the Designated Accounting
Arbitrator for resolution, the Closing Inventory Statement, as amended if
necessary, to reflect the resolution of any disputes by mutual agreement of the
parties and the resolution of all other disputes by the Designated Accounting
Arbitrator.
(g) If the Inventory Value on the Final Inventory Statement is
less than $5,721,706, Seller shall pay Buyer the amount of such difference. If
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the Inventory Value on the Final Inventory Statement is greater than $5,771,706,
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Buyer shall pay Seller the amount of such difference. Any payments made by
Seller or Buyer pursuant to this Section 1.6(g), together with interest thereon
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from the Closing Date to the date of payment at a rate of eight percent (8%) per
annum, shall be made by adjustment to the then outstanding balance of the
Promissory Note.
Section 1.7 Retained Assets. Anything in Section 1.1 to the contrary
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notwithstanding, there shall be excluded from the Assets to be sold, assigned,
transferred and conveyed to Buyer hereunder and not included within the meaning
of the term "Assets" (such excluded assets being referred to as the "Retained
Assets") (a) all rights of Seller under this Agreement; (b) all rights to
refunds, rebates or credits of any Taxes for all periods (or partial periods)
ending at or prior to the Closing Date; (c) any insurance policies; (d) all of
the assets and rights of Seller under any benefit plans or benefit arrangements,
including but not limited to Seller Benefit Plans (as hereinafter defined, but
without limitation by reference to Employees) or to Seller Benefit Arrangements
(as hereinafter defined, but without limitation by reference to Employees); (e)
any cash, negotiable securities, certificates of deposit and other cash
equivalents; (f) any deposits received by Seller at or prior to Closing and any
payments or prepayments relating to periods prior to the Closing Date; (g) any
medical, payroll and employee personnel and benefit records; (h) all registered
and unregistered trademarks, service marks, service names, trade styles and
trade names (and supplies bearing any of the foregoing), and all associated
goodwill, all statutory, common law and registered copyrights, all patents, all
applications for any of the foregoing and all trade secrets that do not relate
primarily to the Activity, including without limitation, except as otherwise
provided herein or in the Transition Services and Supply Agreement any rights in
the use of the names set forth in Schedule 1.7 (except as provided below); (i)
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all confidential and proprietary information of Seller that does not relate
primarily to the Activity; (j) any other intangible assets, other than those
expressly transferred pursuant to Section 1.1 hereof; (k) any expenses which are
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prepaid at or prior to the Closing, and (l) all other assets and properties of
Seller not specifically referenced as being sold to Buyer pursuant to Section
1.1.
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Buyer shall have the royalty-free right to use the names set forth in Schedule
1.7 for purposes of selling or distributing marketing/brochure material,
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packaging, and items of Inventory that contain such names and that are delivered
to Buyer at Closing or are purchased by Buyer from Seller during the Transition
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Period pursuant to the Transition Services Agreement, provided, however, Buyer
shall in no event have the right to use the names set forth in Schedule 1.7 in
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connection with packaging and marketing/brochure material after the second
anniversary of the Closing Date nor shall Buyer have the right to use the names
set forth in Schedule 1.7 in connection with the items of Inventory after the
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third anniversary of the Closing Date. Notwithstanding the above, Seller grants
to Buyer a license to use the Secure-All trademark for a renewable term of ten
(10) years from the Closing Date for the limited purpose of marketing,
distributing and selling patient safety devices generally of the type or related
to those patient safety devices described in Exhibit A. The term of use shall
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renew automatically for an additional three (3) terms of ten (10) years each.
Buyer shall not sell any product in connection with the Secure-All trademark
that does not conform to the product standards that Seller may reasonably
establish and communicate to Buyer from time to time in order to maintain the
consistency and quality of products associated with the Secure-All trademark.
Section 1.8 Nonassignable Contracts or Licenses.
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(a) (i) To the extent that assignment hereunder by Seller to
Buyer of any Assumed Contract is not permitted or is not permitted without the
consent (including, without limitation, waiver of a right of first refusal or
option right) of a third party, this Agreement shall not be deemed to constitute
an undertaking to assign the same if such consent is not given or if such an
undertaking otherwise would constitute a breach of or cause a loss of benefits
thereunder.
(ii) Seller shall use all reasonable efforts (other than
the payment of money or the deposit of funds by Seller on behalf of Buyer) to
obtain any and all such third-party consents.
(iii) If and to the extent that Seller is unable to obtain
any required third party consent contemplated by this Agreement, Seller shall
continue to be bound by any such Assumed Contract (the "Non-Assigned Contract").
In such event, to the maximum extent permitted by law or the terms of the Non-
Assigned Contract, the assignment provisions of this Agreement shall operate to
create a subcontract, sublease or sublicense with Buyer to perform each relevant
Non-Assigned Contract at a price equal to the monies, rights, and other
consideration receivable or payable by the Seller with respect to the
performance by or enjoyment of Buyer under such subcontract, sublease or
sublicense. To the extent such benefit is made available, and/or such
subcontract, sublease or sublicense is created, (1) Buyer shall pay, perform and
discharge fully all obligations of the Seller, under any such Non-Assigned
Contract from and after the Closing Date and shall indemnify Seller or any of
Seller Indemnified Parties (as defined herein) against any Losses (as
hereinafter defined) incurred by any of the Seller Indemnified Parties arising
from any of the Seller's inability to obtain said consent in connection with
such Non-Assigned Contract after the Closing Date, (2) Seller shall, without
further consideration therefor, pay and remit to Buyer promptly any monies,
rights and other consideration received by Seller in respect of such Non-
Assigned Contract performance, and (3) Seller shall exercise or exploit its
respective rights and options under all such Non-Assigned Contracts only as
directed at Buyer and at Buyer's expense. If and when any third party consent
contemplated in this section is obtained or any such Non-Assigned Contract shall
otherwise become assignable, Seller shall promptly assign all of its rights and
obligations thereunder or in connection therewith to Buyer without payment of
any further consideration therefore, and Buyer shall assume such rights and
obligations.
(b) To the extent any Permit is not assignable, either by its
terms or as a matter of law, Seller shall provide reasonable cooperation to
Buyer and assist Buyer in preparing and submitting any information or filings
required in connection with the re-issuance to Buyer of any such Permit.
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ARTICLE II
CLOSING
Section 2.1 Closing. The closing of the transaction provided for in this
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Agreement (hereinafter referred to as the "Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation located in Roswell, Georgia, at 2:00 p.m.
on the later to occur of July 2, 2001 or ten (10) business days after the
satisfaction of the conditions set out in Articles VI and VII of this Agreement
(hereinafter referred to as the "Closing Date"), or at such other place, time
and date as the parties shall, in writing, mutually agree. In the event of any
postponement thereof, all references in this Agreement to the Closing Date shall
be deemed to refer to the time and to the date to which the Closing Date shall
have been so postponed as herein provided.
Section 2.2 Instruments Of Conveyance and Transfer. At the Closing,
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Seller shall deliver to Buyer such bills of sale, endorsements, assignments and
other good and sufficient instruments of transfer, conveyance and assignment,
substantially in the form attached hereto as Exhibit B, as shall be effective to
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vest in Buyer good and marketable title to all of the Assets free and clear of
all liens. Seller shall take all such steps as may be required to put Buyer in
actual physical possession and control of the Assets and the Activity.
Section 2.3 Instruments of Assumption. In order to effectuate the
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assumption of the Assumed Liabilities, Buyer shall execute and deliver to
Seller, at the Closing (a) one or more instruments of assumption, in the form
attached hereto as Exhibit C, and (b) such other documents, in a form reasonably
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acceptable to Seller and Buyer, as Seller shall reasonably deem necessary or
appropriate to confirm Buyer's assumption of the Assumed Liabilities
(collectively, the "Instruments of Assumption").
Section 2.4 Additional Closing Obligations. At the Closing, in addition
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to those items set forth in Sections 2.2 and 2.3:
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(a) Seller will deliver to Buyer:
(i) A certificate executed by Seller representing and
warranting to Buyer that each of Seller's representations and warranties in this
Agreement is accurate in all respects as of the Closing Date;
(ii) The Transition Services and Supply Agreement, in the
form set forth in Exhibit D; and
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(iii) The Noncompetition Agreement, in the form set forth in
Exhibit E.
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(b) Buyer will deliver to Seller:
(i) a bank cashier's or certified check payable to the
order of, or by wire transfer to an account specified by Seller in the amount of
Five Million Seven Hundred Thousand Dollars ($5,700,000);
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(ii) a Promissory Note in favor of Seller in the original
principal amount of Three Million One Hundred Thirty-Five Thousand Two Hundred
Six Dollars ($3,135,206) and in the form set forth in Exhibit F (the "Promissory
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Note").
(iii) a certificate executed by Buyer to the effect that,
except as otherwise
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stated in such certificate, each of Buyer's representations and warranties in
this Agreement is accurate in all respects as of the Closing Date; and
(iv) The Transition Services and Supply Agreement, in the
form set forth in Exhibit D.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller does hereby represent and warrant to Buyer as follows:
Section 3.1 Organization; Standing; Authorization. Each Seller is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with requisite corporate power and authority to own
and to conduct the Activity as it is now being conducted. The execution,
delivery and performance of this Agreement by Seller has been duly and
effectively authorized and consented to by the board of directors of Seller and
no further action or other authorization or consent is required. The Closing of
the transaction contemplated by this Agreement will not result in a breach,
violation or default by Seller of or under any judgment, decree, mortgage,
agreement, indenture or other instrument or agreement applicable to Seller or to
which Seller is a party. Upon execution and delivery, this Agreement shall
constitute the valid and binding obligation of Seller enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights and remedies
generally or general principles of equity.
Section 3.2 Financial Statements. Pro-forma balance sheets of the
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Activity dated December 31, 1999, December 31, 2000, and May 31, 2001 (the
"Balance Sheet Date"), and pro-forma statement of earnings for each of the
twelve (12) month periods then ended (hereinafter collectively referred to as
"Financial Statements") are set forth in Schedule 3.2 and made a part hereof. To
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the Knowledge of Seller, the Financial Statements (a) are, in all material
respects, in accordance with the books of account and records of Seller; (b)
fairly present, in all material respects, as of their respective dates, the
financial condition of the Activity and the results of its operations as of the
date and for the period therein specified, provided however, that it is
acknowledged by the Buyer that the Activity was not affiliated with ▇▇▇▇▇▇▇▇-
▇▇▇▇▇ Corporation until December 1997 and it is further acknowledged by Buyer
that Seller has never maintained separate financial statements for the Activity
and instead such were prepared for informational purposes only.
Section 3.3 Absence of Certain Changes. Since the Balance Sheet Date,
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except as disclosed in Schedule 3.3, there has not been with respect to the
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Activity:
(a) Any damage, destruction or loss, whether or not covered by
insurance, which materially and adversely affects the Assets or the Activity;
(b) Any significant labor trouble or any negotiations with any
labor union or employee association that would impact Seller's ability to
perform under the Transition Services and Supply Agreement;
(c) Any material adverse change in the Activity;
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(d) Other than in the Ordinary Course of Business of the
Activity, the encumbrance of any of the Assets by Seller or the assertion of any
lien or claim against any of the Assets by any person or entity in an amount
greater than $15,000;
(e) Other than the Assumed Contracts and except as set forth in
Schedule 3.3(e), any material contract, commitment or understanding entered into
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by Seller;
(f) Other than in the ordinary course of business of the
Activity and specifically excluding the sale of inventory and products in the
ordinary course of business, any material sale, disposal, divestiture, transfer,
purchase or acquisition of the Assets; or
(g) Entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Seller with respect to the
Activity of at least $60,000.
Section 3.4 Tax Matters. Since January 1, 1998, Seller has filed all Tax
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returns which were required to be filed with respect to the Activity and such
returns, were, when filed true, correct and complete in all material respects.
Section 3.5 Rights of Third Parties. Other than the Assumed Contracts
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or as set forth on Schedule 3.5 and other than in the ordinary course of
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business of the Activity, Seller has not entered into any leases, licenses,
easements or other agreements, recorded or unrecorded, granting rights to third
parties in any of the Assets, and to Seller's Knowledge no person or entity has
any right to possession of any of the Assets.
Section 3.6 Inventories. The inventories of the Activity as shown on the
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Financial Statements are true, complete and accurate and have been prepared in
accordance with generally accepted accounting principles applied in a consistent
manner. All inventory of the Activity, whether or not reflected in the Financial
Statements, consists of a quality usable and either salable or adequate for
repair, replacement or manufacturing purposes in the Ordinary Course of
Business, except for obsolete items and items of below standard quality, all of
which have been written off or written down to net realizable value in the
Financial Statements or on the Inventory Value determined pursuant to Schedule
1.6(a) as of the Closing Date.
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Section 3.7 Title and Condition of Assets. At Closing, Seller will have
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and will deliver or cause to be delivered to Buyer, good title to the Assets
(except those such assets which are leased, and in which case, Seller has a
valid leasehold interest) free and clear of any Encumbrance, except for any
Encumbrances securing taxes, assessments, governmental charges or levies, or the
claims of materialmen, carriers, landlords or like persons, which are (A) not
yet due and payable or (B) are being contested in good faith, and which
Encumbrances, either individually or in the aggregate, would not materially
interfere with Buyer's ownership or use of such Assets (collectively, "Permitted
Personal Property Encumbrances"). Such Permitted Personal Property Encumbrances
are set forth in Schedule 3.7. The Fixed Assets identified in Schedule 1.1(a)
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as "In Service" as of the Closing Date are to the best of Seller's Knowledge, in
good operating condition and repair ordinary wear and tear excepted and
available for use on the Closing Date in a manner consistent with Seller's past
practices related to the Activity. Except as set forth in Schedule 3.7(a), to
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Seller's Knowledge all Fixed Assets located in ▇▇▇▇▇, Mexico on the Closing Date
were manufactured or assembled in the United States. In addition, the molds and
dies listed in Schedule 1.1(a) were in good operating condition to the extent
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that they produced quality products as of the last time that such molds and dies
were used to produce products related to the Activity prior to the Closing Date.
Except for the specific representations, warranties and
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covenants set forth in this Agreement, the Assets will be transferred at the
Closing "as is and where is," and all other representations and warranties,
including any warranty of merchantability or fitness for a particular purpose,
are hereby expressly disclaimed.
Section 3.8 Default. Seller is not in default under, nor has any event
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occurred which, with notice or the lapse of time or both, could result in a
material default under any outstanding note, indenture, mortgage, contract or
agreement related to the Activity or the Assets. Other than with respect to the
Assumed Contracts, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not violate any
provision of, or result in the breach of, modification of, acceleration of, or
constitute a default under, any law, order, injunction or decree of any court,
governmental agency or arbitration tribunal or any contract, note, mortgage,
security agreement, other agreement or instrument to which Seller is a party or
by which Seller is bound.
Section 3.9 Litigation. Schedule 3.9 sets forth a description of all
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pending or, to Seller's Knowledge, Threatened litigation, administrative,
arbitration or other proceedings involving the Assets or the Activity. Except
as set forth on Schedule 3.9, to the knowledge of Seller (a) none of the Assets
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are subject in any material respect to, any litigation, suit, action,
investigation, proceeding or controversy before any court, administrative agency
or other governmental authority that could reasonably be expected to have a
material adverse affect on the Assets or the Activity; and (b) Seller has not
been permanently or temporarily enjoined by an order, judgment or decree of any
court or any governmental agency, authority or body from engaging in or
continuing any conduct or practice in connection with the Assets or the
Activity.
Section 3.10 Court Orders and Decrees. There is not outstanding or, to
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the Knowledge of Seller, Threatened any order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal that materially affects the
Assets or the Activity.
Section 3.11 Warranties. Except as set forth in Schedule 3.11 and except
---------- ----
in the Ordinary Course of Business, Seller has not given or made any express
warranties to third parties with respect to any merchandise sold or services
performed by Seller related to the Activity. Schedule 3.11(a) sets forth a
-------
description of Seller's warranty and return history for the Activity from April
1, 2000 through March 31, 2001and fairly represents in all material respects the
rebate, warranty and return history during that time period.
Section 3.12 Contracts. None of the parties to the Assumed Contracts is
---------
in material breach or default and all such contracts are valid, legally binding
and enforceable in accordance with their terms.
Section 3.13 Intellectual Property.
---------------------
(a) Intellectual Property Assets--The term "Intellectual
----------------------------
Property Assets" includes:
(i) the name, all fictional business names, trading
names, registered and unregistered trademarks, service marks, and applications
used solely with respect to the Activity (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable used solely with respect to the Activity
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works used solely with respect to the Activity (collectively,
"Copyrights"); and
-9-
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints related to the Activity (collectively, "Trade
Secrets"); owned, used, or licensed by Seller as licensee or licensor.
(b) Agreements - Schedule 3.13(b) contains a complete and accurate
---------- -------
list and summary description, including any royalties currently paid or received
by Seller related to the Intellectual Property Assets to which Seller is a party
or by which Seller is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
with a value of less than $1,000 under which Seller is the licensee. There are
no outstanding and no Threatened disputes or disagreements with respect to any
such agreement.
(c) Liens and Encumbrances
----------------------
Seller is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has the right to
use without payment to a third party all of the Intellectual Property Assets.
(d) Patents
-------
(i) Schedule 1.1(c) contains a complete and accurate list and
------
summary description of all Patents. With the exception of those patents listed
in Schedule 3.13(b), Seller is the owner of all right, title, and interest in
and to each of the Patents, free and clear of all liens, security interests,
charges, encumbrances, entities, and other adverse claims.
(ii) To Seller's Knowledge, all of the issued Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or use), are
presumed valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing Date.
(iii) To Seller's Knowledge, no Patent has been or is now
involved in any interference, reissue, reexamination, or opposition proceeding.
To Seller's Knowledge, there is no potentially interfering patent or patent
application of any third party.
(iv) To Seller's Knowledge, no Patent is infringed or has been
challenged or Threatened in any way. To Seller's knowledge, none of the products
manufactured and sold, nor any process or know-how used described in Schedule
1.1(c), by Seller infringes or is alleged to infringe any patent or other
proprietary right of any other Person.
(e) Trademarks
----------
(i) Schedule 1.1(c) contains a complete and accurate list and
------
summary description of all Marks. With the exception of common law marks shown
on Schedule 1.1(c), Seller is the owner of all right, title, and interest in and
to each of the Marks, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
-10-
(iii) No ▇▇▇▇ has been or is now involved in any opposition,
invalidation, or cancellation and, to Seller's Knowledge, no such action is
Threatened with the respect to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No ▇▇▇▇ is infringed or, to Seller's Knowledge, has been
challenged or Threatened in any way. None of the Marks used by Seller infringes
or is alleged to infringe any trade name, trademark, or service ▇▇▇▇ of any
third party.
(f) Copyrights
----------
(i) Schedule 1.1(c) contains a complete and accurate list and
------
summary description of all Copyrights. Seller is the owner of all right, title,
and interest in and to each of the Copyrights, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims.
(ii) No Copyrights have been registered.
(iii) No Copyright is infringed or, to Seller's Knowledge, has
been challenged or Threatened in any way. None of the subject matter of any of
the Copyrights infringes or is alleged to infringe any copyright of any third
party or is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
Section 3.14 Brokers or Finders. Except as set forth in Schedule 3.14,
------------------ ----
Seller has incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
Section 3.15 Insurance.
---------
(a) Seller has delivered to Buyer:
(i) a brief description of all policies of insurance in force
insuring the Assets or the Activity; and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) Schedule 3.15(b) describes:
-------
(i) any self-insurance arrangement by or affecting Seller,
including any reserves established there under;
-11-
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by Seller; and
(iii) all obligations of Seller with respect to the Activity to
third parties with respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which such coverage is
provided.
(c) With respect to the Activity, Schedule 3.15(c) sets forth, by
-------
year, for the current policy year and each of the two (2) preceding policy
years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $25,000, which sets forth:
-------
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims
in excess of $25,000 that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Schedule 3.15(d):
--------
(i) All policies to which Seller with respect to the Activity
is a party or that provide coverage to Seller with respect to the Activity:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of the Activity for all risks normally insured
against by a Person carrying on the same business or businesses as the Activity;
and
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which Seller with respect to the Activity is a
party or by which any of them is bound.
(ii) Seller has not received (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or (B) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations there under.
(iii) Seller has paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which Seller
with respect to the Activity is a party or that provides coverage to Seller with
respect to the Activity.
(iv) Seller has given notice to the insurer of all claims that
may be insured
-12-
thereby.
Section 3.16 Contracts; No Defaults.
----------------------
(a) Schedule 3.16(a) contains a complete and accurate list, and
------
Seller has delivered to Buyer true and complete copies of:
(i) each agreement that involves the sale of goods related to
the Activity to which Seller is a party which, to the best of Seller's
Knowledge, involves the sale of goods in excess of $15,000 per year.
(ii) each agreement that involves an outstanding purchase
obligation for raw materials, finished products and supplies by Seller that
relate to the Activity.
(iii) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 3.16(b) to the best of Seller's
-------
Knowledge, each Contract identified or required to be identified in Schedule
3.16(a) is in full force and effect and is valid and enforceable in accordance
-------
with its terms and there are no known defaults or claimed or alleged defaults of
any party thereunder.
(c) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to Seller
under current or completed Contracts with any Person and no such Person has made
written demand for such renegotiation.
Section 3.17 Representation - Accuracy. No representation or warranty by
--------------------------
Seller made in this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to be
stated therein or necessary to make the statements contained therein not
materially misleading. No notice given pursuant to Agreement will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
Section 3.18 Compliance with Legal Requirements; Governmental
------------------------------------------------
Authorizations.
--------------
(a) Except as set forth in Schedule 3.18, to the best of Seller's
----
Knowledge:
(i) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
the Seller with respect to the Assumed Contracts of, or a failure on the part of
the Seller with respect to the Assumed Contracts to comply with, any Legal
Requirement, or (B) may give rise to any obligations on the part of the Seller
with respect to the Assumed Contracts to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(ii) the Seller with respect to the Activity has not received,
at any time since January 1, 1998, any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of the Seller to undertake, or to bear all or any portion
of the costs of, any remedial action of any
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nature, which have not been remedied.
(b) Each Governmental Authorization listed or required to be listed
in Schedule 1.1(e) is valid and in full force and effect.
------
ARTICLE IV
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Organization and Authority of Buyer. The Buyer is a
-----------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has all requisite corporate power and authority to own,
lease and operate its assets, properties and business and to carry on its
business as now being conducted.
Section 4.2 Authorization; No Breach.
--------------------------
(a) Buyer has all requisite corporate power and authority to enter
into, execute and deliver (as applicable) this Agreement, the Instruments of
Assumption, and any agreements and documents contemplated hereby (the "Buyer
Closing Documents"), and to perform fully its obligations hereunder and
thereunder, and no other corporate act or proceeding on the part of Buyer is
necessary to authorize same. This Agreement has been, and each of the
Instruments of Assumption, and the Buyer Closing Documents to be delivered by
Buyer at the Closing will be, duly authorized, executed and delivered by Buyer,
as the case may, and will be, a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
(b) The execution, delivery and performance of this Agreement, the
Instruments of Assumption and the Buyer Closing Documents by Buyer and the
consummation of the transactions contemplated hereby and thereby, will not (i)
violate, conflict with or result in the breach of any provision of the
Certificate of Incorporation or Bylaws of Buyer, (ii) violate, result in the
breach of, or default (or an event which, with notice or lapse of time or both,
would constitute a default) under, any material contract to which Buyer is a
party or to which Buyer or any of its respective assets or properties may be
bound, (iii) result in the creation or imposition of any Encumbrance upon the
assets or the properties of Buyer, (iv) violate any order, writ, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory authority against Buyer or affecting the assets or properties of
Buyer, or (v) violate any statute, law, rule or regulation of any jurisdiction,
which violation could affect Buyer's ability to consummate the transactions
contemplated herein.
Section 4.3 Consents and Approvals. The performance by Buyer of its
----------------------
obligations hereunder and thereunder, do not require Buyer to obtain any
consent, approval, authorization, license, permit or other action of, or make
any filing with or give any notice to, any governmental or regulatory body or
any other person.
Section 4.4 Actions and Proceedings. There are no outstanding orders,
-----------------------
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against Buyer, and there are no actions,
litigations or suits or legal, administrative or arbitration proceedings of any
type whatsoever pending, or to the Knowledge of Buyer, Threatened, against or
involving Buyer which, in either case, individually or in the aggregate, could
reasonably be expected to adversely affect Buyer's
-14-
ability to consummate the transactions contemplated herein or the performance of
its obligations hereunder.
Section 4.5 Representation Accuracy. No representation or warranty by
-----------------------
Buyer made in this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to be
stated therein or necessary to make the statements contained therein not
misleading.
Section 4.6 Buyer Broker. Buyer has not engaged any broker or finder in
------------
connection with the transactions contemplated by this Agreement.
Section 4.7 Cash on Hand. Buyer will have upon the Closing available cash
------------
on hand sufficient to pay the portion of the Purchase Price to be paid via wire
transfer on the Closing Date.
ARTICLE V
Covenants
Section 5.1 [Intentionally Deleted]
-----------------------
Section 5.2 Conduct of Activity Pending Closing. Pending the Closing and
-----------------------------------
except as otherwise permitted by this Agreement or as consented to by Buyer in
writing, Seller covenants that:
(a) Seller will conduct the Activity only in the Ordinary Course
of Business which, without limitation, shall include material compliance with
all applicable laws and regulations, and the maintenance in force of all
insurance policies referred to Section 3.17 of this Agreement;
----
(b) Seller shall preserve its business organization intact and use
its best efforts to maintain for Buyer the goodwill of suppliers, customers and
others having business relations with Seller.
Section 5.3 Additional Agreements; Reasonable Efforts. Subject to the
-----------------------------------------
terms and conditions of this Agreement, each of the parties hereto agrees to use
all reasonable efforts, to take or cause to be taken all action, and to do or
cause to be done all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement including cooperating with the other
parties to this Agreement.
Section 5.4 Further Assurances. From time to time after the Closing, at
------------------
the request of Buyer, and without further consideration, Seller will execute and
deliver such additional instruments and will take such other action as Buyer
reasonably may require to convey, assign, transfer and deliver the Assets and
the Activity and otherwise carry out the terms of this Agreement.
Section 5.5 Cooperation and Records Retention.
---------------------------------
(a) Seller shall have the right for a period of seven (7) years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other similar information as are transferred to
Buyer pursuant to the terms of this Agreement for the limited purposes of
concluding its involvement in the Activity prior to the Closing Date and for
complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. Buyer shall have the right for a
period of seven (7) years following the Closing Date to have reasonable access
to those books, records and accounts, including financial and tax information,
correspondence, production
-15-
records, employment records and other records which are retained by Seller
pursuant to the terms of this Agreement and its standard corporate record
retention policy to the extent that any of the foregoing relates to the Activity
or Assets transferred to Buyer hereunder or is otherwise needed by Buyer in
order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. Seller and Buyer each
agree that if at the end of such seven (7)-year period either party hereto is
involved in a dispute (of which the other party hereto has been notified) with
regard to records held by the party not engaged in the dispute, the party not
engaged in the dispute shall not destroy such records during the pendency of
such dispute.
(b) Each party hereto will cooperate in all reasonable respects with
the other in the defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Activity prior to or after the
Closing Date (other than litigation arising out of the transactions contemplated
by this Agreement). The party requesting such cooperation shall pay the out-of-
pocket expenses (including legal fees and disbursements) of the party providing
such cooperation and of its officers, directors, employees and agents reasonably
incurred in connection with providing such cooperation, but shall not be
responsible to reimburse the party providing such cooperation for such party's
time spent in such cooperation or the salaries or costs of fringe benefits or
similar expenses paid by the party providing such cooperation to its officers,
directors, employees and agents while assisting in the defense or prosecution of
any such litigation or proceeding.
Section 5.6 Reports, Taxes Non-Foreign Affidavit. At or prior to Closing,
------------------------------------
Seller shall furnish Buyer an affidavit, stating under penalties of perjury, the
transferor's United States taxpayer identification number and that the
transferor is not a foreign person pursuant to section 1445(b)(2) of the Code.
Section 5.7 Affiliation with Selling Parties. Except as permitted under
--------------------------------
the Transition Services and Supply Agreement, Buyer shall not represent to any
third party that Buyer or (after the Closing) the Activity is in any way
affiliated or associated with, or owned or operated by, Seller or any of their
Affiliates.
Section 5.8 Governmental Filings. As soon as practicable after the
--------------------
execution of this Agreement, the Seller and Buyer shall cooperate with each
other and shall make any and all filings and submissions to any governmental
agency that are required to be made in connection with the transactions
contemplated hereby for the transfer of or application for all necessary
permits. Notwithstanding the foregoing, Buyer shall be responsible for making
all filings necessary to transfer and obtain all permits necessary for the
operation of the Activity on and after the Closing Date. Seller shall furnish to
Buyer and Buyer shall furnish to Seller such information and assistance as the
other party may reasonably request in connection with the preparation of any
such notices, filings or submissions. Each party hereto agrees to give the
other party hereto written notice of any notification that it receives from any
governmental agency in connection with the transfer or obtaining of the permits.
Section 5.9 Mail or Other Communications Received After Closing. On or
---------------------------------------------------
after the Closing, Buyer may receive and open all mail or other communications
addressed to Seller or their affiliates and deal with the contents thereof in
its discretion to the extent that such mail or other communications and the
contents thereof relate to the Activity, the Assets or any of the Assumed
Liabilities. Buyer agrees to keep confidential the contents of, and to deliver
or to cause to be delivered promptly to Seller, all other mail or communications
received which are addressed to Seller or their affiliates and not related
primarily to the Activity, the Assets or the Assumed Liabilities. In the event
that Seller or their Affiliates receive mail or other communications on or after
the Closing Date addressed to Seller or the Activity which relate to the
Activity, the Assets or any Assumed Liabilities, Seller shall deliver or cause
to be
-16-
delivered promptly to Buyer such mail or other communications and Seller agrees
to keep confidential the contents of such mail or other communications.
ARTICLE VI
Conditions Precedent to Obligations of Seller
The obligations of Seller under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of the following conditions
precedent, each of which may be waived in writing at the sole discretion of
Seller:
Section 6.1 Purchase Price, Instruments of Assumption and the Buyer
-------------------------------------------------------
Closing Documents. Buyer shall have delivered to Seller the cash payment and
-----------------
promissory note described in Section 2.4(b), and Buyer shall have executed and
--------
delivered to Seller, as applicable, the Instruments of Assumption and the Buyer
Closing Documents.
Section 6.2 Continued Truth of Representations and Warranties of the
--------------------------------------------------------
Buyer; Compliance with Covenants and Obligations. The representations and
------------------------------------------------
warranties of the Buyer in this Agreement shall be true in all material respects
on and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes consented to in writing by
Seller. The Buyer shall have performed and complied in all material respects
with all conditions, covenants, obligations and agreements required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
Section 6.3 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or Threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which could be
reasonably expected to affect the ability of Seller to consummate the
transactions contemplated hereby.
Section 6.4 Other Closing Deliveries. Seller shall have received at or
------------------------
prior to the Closing each of the following documents:
(a) such certificates of the Buyer's officers evidencing satisfaction
of the conditions specified in Section 6.2 as Seller shall reasonably request;
---
(b) certificates and other evidence reasonably required by Seller
relating to the legal existence and good standing of the Buyer in the State of
Delaware;
(c) certificate of the Secretary of the Buyer attesting to the
incumbency of certain of their respective officers, the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement, and the
authenticity and validity of the charter documents of Buyer;
(d) Buyer shall execute and deliver to Seller the Transition Services
and Supply Agreement; and
(e) Buyer shall execute and deliver to Seller such other documents,
instruments or certificates as Seller may reasonably request.
-17-
ARTICLE VII
Conditions Precedent to Obligations of Buyer
The obligations of Buyer under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of the following conditions
precedent, each of which may be waived in writing at the sole discretion of
Buyer:
Section 7.1 Continued Truth of Representations and Warranties of Seller;
------------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties
-----------------------------------------
of Seller in this Agreement shall be true in all material respects on and as of
the Closing Date as though such representations and warranties were made on and
as of such date, except for any changes permitted by the terms hereof or
consented to in writing by the Buyer. Seller shall have performed and complied
in all material respects with all covenants, obligations, and agreements
required by this Agreement to be performed or complied with by it prior to or at
the Closing Date.
Section 7.2 Adverse Proceedings. No action or proceeding by or before
-------------------
any court or other governmental body shall have been instituted or Threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
could be reasonably expected to materially affect the ability of Buyer to
consummate the transactions contemplated hereby.
Section 7.3 Other Closing Deliveries. Buyer shall have received at or
------------------------
prior to the Closing each of the following documents:
(a) such certificates of Seller's officers evidencing satisfaction of
the conditions specified in Section 7.1 as Buyer shall reasonably request;
---
(b) certificates and other evidence reasonably required by Buyer
relating to the legal existence and good standing of Seller in Delaware;
(c) certificate of the Secretary of Seller attesting to the
incumbency of certain of their respective officers, the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement, and the
authenticity and validity of the charter documents of Buyer;
(d) Seller shall execute and deliver to Buyer the Transition Services
and Supply Agreement;
(e) Seller shall execute and deliver to Buyer such other documents,
instruments or certificates as Buyer may reasonably request; and
(f) Seller shall execute and deliver to Buyer the Noncompetition
Agreement.
ARTICLE VIII
Amendment
This Agreement may be amended or modified only by written instrument
executed by the parties hereto.
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ARTICLE IX
Survival of Representations, Warranties and Covenants; Indemnification
Section 9.1 Obligation of Seller to Indemnify. Seller agrees to
---------------------------------
indemnify, defend and hold harmless Buyer and its directors, officers,
employees, affiliates, shareholders from and against all losses, liabilities,
damages, costs or expenses (including, without limitation, interest and
reasonable attorneys' fees and disbursements) ("Losses") actually incurred by
Buyer or any of such other indemnified parties based upon, arising out of or
otherwise in respect of (a) subject to the limitations contained in Section 9.4
---
and Section 9.5, any breach of any representation or warranty of Seller
---
contained in this Agreement, (b) Seller breach of the covenants or agreements
contained in this Agreement, or (c) any product shipped or manufactured by, or
any services provided by, the Seller related to the Activity through the Closing
Date, except as for Losses resulting from returns or warranties for such
products.
Section 9.2 Obligation of Buyer to Indemnify. Buyer agrees to
--------------------------------
indemnify, defend and hold harmless Seller (and their respective directors,
officers, employees, affiliates, successors and assigns) from and against any
Losses actually incurred by Seller based upon, arising out of or otherwise in
respect of (a) subject to the limitations contained in Section 9.4(b) and
------
Section 9.5, any breach of any representation or warranty of Buyer contained in
----
this Agreement, (b) Buyer's breach of any of the covenants or agreements
contained in this Agreement or the Buyer Closing Documents, or (c) Buyer's
failure to perform or satisfy any Assumed Liability.
Section 9.3 Notice and Opportunity to Defend.
--------------------------------
(a) Notice of Asserted Liability. Promptly after receipt by any
----------------------------
party hereto (the "Indemnitee") of notice of any demand, claim or circumstances
which could give rise to a claim or the commencement (or Threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in a Loss, the Indemnitee shall give notice thereof
(the "Claims Notice") to the other party or parties obligated to provide
indemnification or payment pursuant to Section 9.1 or 9.2 (the "Indemnifying
--- ---
Party"). The Claims Notice shall describe the Asserted Liability in reasonable
detail, and shall indicate the amount of the Loss that has been or may be
suffered by the Indemnitee. In no event shall the Indemnitee's failure to give a
Claims Notice to the Indemnifying Party relieve the Indemnifying Party of any
liability under this Article IX except to the extent the Indemnifying Party can
establish that the Indemnitee's failure to give such Claims Notice materially
prejudiced the Indemnifying Party's ability to adequately defend such claim.
(b) Opportunity to Defend. The Indemnifying Party may elect to
---------------------
compromise or defend, at its own expense and with counsel reasonably
satisfactory to the Indemnitee, any Asserted Liability, and if the Indemnifying
Party so elects to compromise or defend, the Indemnifying Party shall have the
right to control the defense of such Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 15
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate in the
compromise of, or defense against, such Asserted Liability. If the Indemnifying
Party elects not to compromise or defend the Asserted Liability, fails to notify
the Indemnitee of its election as herein provided or contests its obligation to
indemnify under this Agreement, the Indemnitee may pay, compromise or defend
such Asserted Liability and the Indemnitee shall have the right to control the
defense of such Asserted Liability. Notwithstanding the foregoing, (i) the
Indemnifying Party may settle or compromise any Asserted Liability, provided,
--------
that such settlement or compromise does not result in any liability to,
restriction on, or admission of, the Indemnitee, and (ii) provided that the
Indemnifying Party is defending an Asserted Liability at its own expense, the
Indemnitee may not settle or compromise such claim over the objection of the
Indemnifying Party. In any event, the Indemnitee and the
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Indemnifying Party may participate, at their own expense, in the defense of such
Asserted Liability. If the Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to the Indemnifying Party any books, records or
other documents within its control that are necessary or appropriate for such
defense.
Section 9.4 Limitations on Indemnification.
------------------------------
(a) The indemnification provided for in Section 9.1 shall be subject
---
to the following limitations:
(i) Seller shall not be obligated to pay any amounts for
indemnification under Section 9.1(a) and (c) until the aggregate Losses actually
------ ---
incurred by Buyer (net of insurance recoveries thereunder) equals $25,000 (the
-------
"Basket"), whereupon Seller shall be obligated to pay only the additional
amounts of Losses in excess of the Basket actually incurred by Buyer under
Section 9.1(a) and (c) in full, subject to the limits set forth in clauses (ii)
------ ---
and (iv) below.
(ii) Seller shall not be obligated to pay an aggregate amount
for indemnification under Sections 9.1(a) in excess of $2,000,000.
------ -----------
(iii) Seller shall be obligated to pay any and all amounts for
indemnification under Sections 9.1(b) in full up to the Purchase Price without
------
regard to the Basket.
(iv) Seller shall be obligated to pay any and all amounts for
indemnification under Sections 9.1(c) in full without regard to the Basket.
------
(b) The indemnification provided for in Section 9.2 shall be subject
---
to the following limitations:
(i) Buyer shall not be obligated to pay any amounts for
indemnification under Section 9.2(a) until the aggregate Losses actually
------
incurred by Seller (either individually or collectively) meets the Basket,
whereupon Buyer shall be obligated to pay only the additional amounts of Losses
in excess of the Basket actually incurred by Seller under Section 9.2(a) in
------
full, subject to the limits set forth in clauses (ii) and (iv) below.
(ii) Buyer shall not be obligated to pay an aggregate amount
for indemnification under Section 9.2(a) in excess of $2,000,000.
------ ----------
(iii) Buyer shall be obligated to pay any and all amounts for
indemnification under Sections 9.2(b) and (c) in full up to the Purchase Price
------ ---
without regard to the Basket.
Section 9.5 Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Agreements. All representations, warranties, covenants and agreements
----------
contained herein shall survive the execution and delivery of this Agreement and
the Closing hereunder and except as otherwise specifically provided in this
Agreement, all representations and warranties contained herein shall thereafter
terminate and expire on the first anniversary of the Closing Date with respect
to any claim based upon, arising out of or otherwise in respect of any fact,
circumstance, action or proceeding of which the party asserting such claim shall
not have given written notice on or prior to such date to the party against
which such claim is asserted.
Section 9.6 Computation of Indemnified Losses. The amount of any
---------------------------------
indemnified loss otherwise payable pursuant to a claim brought pursuant to
Section 9.3(a) hereunder shall be reduced (a)
------
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by the amount of any insurance proceeds from insurance policies owned by Seller
on the Closing Date received by Buyer, or its affiliates, officers, directors,
and employees as compensation for the damage or loss caused by the act,
omission, fact or circumstances giving rise to the indemnified loss; and (b) by
the amount, if any, of the net tax benefits actually received by the Indemnitee
as a result of the indemnified losses, incurred thereby.
Section 9.7 Exclusive Remedy. The indemnification provisions of this
-----------------
Article IX are the exclusive remedy following the Closing for any Seller
breaches or alleged breaches of any representation, warranty or other provision
of this Agreement or the transactions contemplated hereby and, without
limitation on the foregoing, Buyer hereby waives any and all rights that are or
may otherwise be available to it at law or equity in respect to breaches of the
representation and warranties of Seller.
ARTICLE X
Miscellaneous
Section 10.1 Notices. All notices provided for hereunder shall be in
-------
writing and directed as follows:
(1) if to Buyer, to:
Encore Medical Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(2) if to Seller or ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation, to:
Tecnol, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Group President,
Healthcare and Nonwovens
with a copy to:
General Counsel
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation
World Headquarters
▇.▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or at such other place or places as shall be designated by notice by any party
hereto.
Section 10.2 Parties in Interest. This Agreement shall inure to the
-------------------
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned by any party hereto
without the prior written consent of the other parties.
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Section 10.3 Entire Agreement. This instrument embodies the whole
----------------
agreement of the parties. There are no promises, terms, conditions, or
obligations other than those contained herein. This contract shall supersede
all previous communications, representations, or agreements, either verbal or
written, between the parties hereto.
Section 10.4 Captions; Counterparts. The section and subsection headings
----------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. This Agreement may
be executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 10.5 Governing Law. This Agreement shall be construed and
-------------
enforced in accordance with the laws of the State of Delaware.
Section 10.6 Severability. The provisions of this Agreement shall be
------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or any
circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a
suitable and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid or enforceable, such provision and (b) the remainder
of this Agreement and the application of such provision to other persons or
circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
Section 10.7 No Third Party Beneficiaries. This Agreement shall not
----------------------------
confer any rights or remedies upon any person other than the parties hereto and
their respective successors and permitted assigns.
Section 10.8 Confidentiality. If this Agreement is terminated, Buyer and
---------------
its affiliates and agents shall continue to be bound by and subject to the terms
and conditions of Buyer's letter agreement dated February 6, 2001 (the
"Confidentiality Agreement").
Section 10.9 Public Announcements. Neither Seller nor Buyer shall make
--------------------
any publicity release or announcement concerning this Agreement or the
transactions contemplated hereby without the prior written approval thereof of
Buyer or Seller, as the case may be, as to the substance of such announcement
except as required by law, in which case the party issuing the release shall so
advise the other parties in writing, including a copy of such release, in
advance of such issuance. Seller and Buyer will consult with each other
concerning the means by which the Activity's employees, customers, and suppliers
and others having dealings with the Activity will be informed of the
Transactions, and Buyer will have the right to be present for any such
communication.
Section 10.10 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement, including all fees and expenses of agents, representatives, counsel,
and accountants. Seller will cause the Activity not to incur any out-of-pocket
expenses in connection with this Agreement. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
Section 10.11 Definitions. To the extent not previously defined, the
-----------
following terms shall have the definitions set forth below:
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"Contract" - any agreement, contract, obligation, promise, or undertaking
--------
(whether written or oral and whether express or implied) that is legally
binding.
"Encumbrance" - any charge, claim, community property interest, condition,
-----------
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Governmental Authorization" - any approval, consent, license, permit, waiver,
--------------------------
or other authorization issued, granted, given, or otherwise made available
by or under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body" - any:
-----------------
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any
court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"Knowledge" - an individual will be deemed to have "Knowledge" of a particular
---------
fact or other matter if such individual is actually aware of such
fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is an employee of
such Person has, or at any time had, Knowledge of such fact or other
matter.
"Legal Requirement" - any federal, state, local, municipal, foreign,
-----------------
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"Ordinary Course of Business" - an action taken by a Person will be deemed to
---------------------------
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority); and
-23-
(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any
Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the
same line of business as such Person.
"Person" - any individual, corporation (including any non-profit corporation),
------
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
----------
litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Threatened" - a claim, Proceeding, dispute, action, or other matter will be
----------
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that
would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced,
taken, or otherwise pursued in the future.
"Transition Period" - that period of time from the Closing until the termination
-----------------
of the period of the term of the Transition Services and Supply Agreement,
which shall be, unless terminated sooner pursuant to such agreement, a
period of six (6) months.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date
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first written above.
BUYER:
-----
ENCORE MEDICAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
SELLER:
------
TECNOL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
▇▇▇▇▇▇▇▇-▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Group President
Global Health Care/Nonwovens
▇▇▇▇▇▇▇▇-▇▇▇▇▇ WORLDWIDE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
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