SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 18, 1996
CRAIN INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
DELAWARE 33-96808 43-1714086
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
101 SOUTH HANLEY ROAD, SUITE 400
ST. LOUIS, MISSOURI 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 719-0100
-----------------------
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 18, 1996, Crain Industries, Inc., a Delaware corporation
("Crain"), acquired (the "Acquisition") all of the assets of the Comfort Clinic
division ("Comfort Clinic") of Bio Clinic Corporation, a Delaware corporation
("Bio Clinic"), pursuant to an Asset Purchase Agreement dated August 29, 1996,
by and among Crain, Bio Clinic and Sunrise Medical Inc., a Delaware corporation
and the parent corporation of Bio Clinic (the "Agreement"). The consideration
paid to Bio Clinic pursuant to the Agreement consisted of cash in the amount of
$14,000,000 (of which $500,000 was placed in escrow to secure the performance by
Bio Clinic of certain of its obligations under the Agreement). The consideration
paid pursuant to the Agreement was determined through arm's length negotiation
between the parties thereto.
The consideration paid pursuant to the Agreement was funded with (i)
borrowings under a Credit Agreement dated as of August 29, 1995, as amended,
among Crain, certain lenders identified therein, and Texas Commerce Bank
National Association, a national bank association, as agent for the lenders,
(ii) proceeds from the issuance of 3,376,435 shares of common stock, par value
$.01 per share, of Crain Holdings Corp., the parent corporation of Crain
("Holdings"), and (iii) proceeds from the issuance of 375,159 shares of Class A
Series II Common Stock, par value $.01 per share, of Holdings.
Pursuant to the Agreement, Crain acquired certain machinery,
equipment, tools, inventories, contract rights, intellectual property, accounts
receivable and other assets utilized by Comfort Clinic in the design,
manufacture and distribution of therapeutic comfort products, primarily foam
mattresses and pillows, to mass merchants, department stores, bed and bath
specialty stores, discount stores and catalogues (the "Business"). Crain intends
to continue to use the assets acquired pursuant to the Acquisition in the
Business.
Prior to the Acquisition Crain manufactured approximately 50% of
Comfort Clinic's supply of foam buns, mattress pads and pillows. Mattress pads
and pillows manufactured by Crain for Comfort Clinic were shipped by Crain
directly to Comfort Clinic's customers.
In connection with the Acquisition Crain entered into a Transition
Services Agreement dated October 18, 1996, pursuant to which an affiliate of Bio
Clinic, Sunrise Medical B.V., will provide certain services to Crain previously
provided by it to Comfort Clinic.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
An audited balance sheet and statement of revenues and
expenses of Comfort Clinic for the Fiscal Year Ended June 28, 1996, and the
accompanying Independent Auditors' Report are filed herewith as part of this
Current Report on Form 8-K.
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It is impracticable to file the remaining financial statements
of Comfort Clinic required by this Item 7(a) at this time because such
statements are not available. Such statements will be filed pursuant to Item
7(a)(4) of Form 8-K as soon as practicable, but not later than January 1, 1997,
60 days after the due date of this Current Report on Form 8-K.
(b) Pro Forma Financial Information.
It is impracticable to file the pro forma financial
information required by this Item 7(b) at this time because such information is
not available. Such information will be filed pursuant to Item 7(b)(2) of Form
8-K as soon as practicable, but not later than January 1, 1997, 60 days after
the due date of this Current Report on Form 8-K.
(c) Exhibits.
2.1 - Asset Purchase Agreement dated as of August 29, 1996, by and
among Bio Clinic Corporation, Sunrise Medical Inc., and Crain
Industries, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRAIN INDUSTRIES, INC.
Date: October 31, 1996 By: /s/ James G. Powers
-------------------
James G. Powers
Vice President and
Chief Financial Officer
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COMFORT CLINIC DIVISION
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report.................................................1
Statement of Assets to be Acquired and
Liabilities to be Assumed as of June 28, 1996..........................2
Statement of Revenues and Expenses for the
fiscal year ended June 28, 1996........................................3
Notes to Consolidated Financial Statements for
the fiscal year ended June 28, 1996....................................4
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Sunrise Medical Inc.
We have audited the accompanying statement of assets to be acquired and
liabilities to be assumed of Comfort Clinic, a division of Sunrise Medical Inc.
as of June 28, 1996, and the related statement of revenues and expenses for the
year then ended. These financial statements are the responsibility of the
management of Sunrise Medical Inc. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements were prepared
solely to present the assets to be acquired and liabilities to be assumed
pursuant to the Asset Purchase Agreement, and are not intended to be a complete
presentation of the Comfort Clinic, a division of Sunrise Medical Inc.,
financial position or cash flows.
In our opinion, the statements referred to above present fairly the assets to be
acquired and liabilities to be assumed of Comfort Clinic, a division of Sunrise
Medical Inc. at June 28, 1996, and its revenues and expenses for the year then
ended, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
October 16, 1996
1
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THE COMFORT CLINIC DIVISION OF SUNRISE MEDICAL INC.
STATEMENT OF ASSETS TO BE ACQUIRED AND
LIABILITIES TO BE ASSUMED
(in thousands)
June 28, 1996
Assets
- ------
Trade receivables, net of allowance for
doubtful accounts of $3,572 $7,554
Inventories 1,480
Property and equipment, net 3,636
Goodwill 4,979
Covenant not to compete, net of accumulated
amortization of $656 644
Other assets 400
-------
Total assets to be acquired 18,693
Liabilities
- -----------
Trade accounts payable 2,668
Accrued compensation 237
Other accrued liabilities 1,013
Non-compete liability 775
-------
Total liabilities assumed 4,693
-------
Net assets to be acquired $14,000
=======
(See accompanying notes to financial statements)
2
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THE COMFORT CLINIC DIVISION OF SUNRISE MEDICAL INC.
STATEMENT OF REVENUES AND EXPENSES
(in thousands)
Year ended June 28, 1996
Net sales $ 45,715
Cost of sales 42,672
--------
Gross profit 3,043
--------
Operating expenses:
Marketing 2,049
Selling 2,884
Distribution and customer service 355
Research and development 102
General and administrative 6,259
Impairment of goodwill 5,020
--------
Total operating expenses 16,669
--------
Loss before income taxes $(13,626)
========
(See accompanying notes to financial statements)
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THE COMFORT CLINIC DIVISION OF SUNRISE MEDICAL INC.
NOTES TO FINANCIAL STATEMENTS
Year ended June 28, 1996
(Dollar amounts in thousands)
1. Basis of Presentation
---------------------
Comfort Clinic was established as a separate division of Sunrise Medical Inc. in
July 1995. Previously, it operated as a division of Bio Clinic Corporation ("Bio
Clinic"), a wholly owned subsidiary of Sunrise Medical Inc. Comfort Clinic
designs, manufactures and markets therapeutic sleep products, principally foam
mattress pads and pillows, to consumers. These products are sold through various
retail distribution channels, including mass merchants, department stores and
specialty stores throughout the United States, Canada and Europe.
Pursuant to an Asset Purchase Agreement (the "Agreement") dated August 29, 1996,
between Sunrise Medical Inc. ("Sunrise") and Crain Industries, Inc. ("Crain"),
Sunrise agreed to sell to Crain specified assets and related liabilities of
Comfort Clinic (the "Business") in exchange for $14,000, subject to certain
adjustments at closing.
The accompanying Statement of Assets to be Acquired and Liabilities to be
Assumed and Statement of Revenues and Expenses reflect historical cost of the
identified assets, liabilities and results of operations identified in the sales
agreement.
The Business' financial statements include allocation of certain direct expenses
from Bio Clinic Corporation based on specific identification or formulas.
Sunrise's management believes that these allocations are based on assumptions
that are reasonable in the circumstances. However, these allocations are not
necessarily indicative of the costs and expenses that would have resulted if the
Business had been operated as a separate entity.
2. Summary of Significant Accounting Policies
------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported
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in the financial statements and accompanying notes. Actual results could differ
from those estimates.
Fiscal Year End
The Business' fiscal year ends on the Friday closest to June 30, resulting in
years of either 52 or 53 weeks. The year ended June 28, 1996 contained 52 weeks.
Inventories
Inventories are stated at the lower of average cost or market value. Cost is
determined using the first-in, first-out method.
Property and Equipment
Property and equipment are recorded at cost and depreciated over estimated
useful lives by use of the straight-line method. Leasehold improvements are
amortized over the shorter of their useful lives or the term of the lease. The
estimated useful lives of property and equipment range from three to seven
years. Depreciation expense was $1,048 for the year ended June 28, 1996.
Goodwill
The excess of Sunrise's purchase price over the fair value of net assets at the
date of acquisition (goodwill) is being amortized on a straight-line basis over
thirty years. Management of the Business assesses the recoverability of this
intangible asset by determining whether the amortization over its remaining life
can be recovered through undiscounted future operating cash flows. A provision
for impairment of goodwill has been recorded in the year ended June 28, 1996
based on the anticipated sales price of the Business.
Covenant not to Compete
The amount of two non-compete agreements is being amortized over the six- and
eight-year periods covered by the agreements. Total annual payments of $175 are
scheduled through October 1998 and at $125 annually thereafter through October
2000.
Contract Rebates
The Business enters into contractual agreements with its customers for rebates
on certain products based on the attainment of specified purchase volumes or in
connection with cooperative
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advertising. The cost of these rebates is accrued as earned by the customers.
Foreign Currency Transactions
Revenues and expenses denominated in foreign currencies are translated at
exchange rates prevailing during the year. Assets and liabilities are translated
at exchange rates in effect at the end of the period.
Research and Development
Research and development costs are charged to expense when incurred.
Income Taxes
The Business is not a separate taxable entity for federal, state, or local
income tax purposes. The Business' operations are included in the consolidated
tax returns of Sunrise. No allocation of income tax expense or benefit has been
made to the Business.
Fair Value of Financial Instruments
The carrying amounts of accounts receivable, accounts payable and accrued
liabilities approximate their fair values, based on the current aging of the
receivables and the short maturity of the liabilities. The fair value of the
non-compete liability based on current interest rates is $665.
3. Balance Sheet Items
-------------------
Inventories consist of the following at June 29, 1996:
Raw material $1,038
Finished goods 1,180
-----
2,218
Less: reserves ( 738)
-----
Total inventories $1,480
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The components of property and equipment are as follows at June 28, 1996:
Machinery and equipment $4,874
Furniture and fixtures 1,561
Leasehold improvements 326
-----
6,761
Less accumulated depreciation
and amortization (3,125)
-----
Property and equipment, net $3,636
=====
4. Leases and Commitments
----------------------
The Business leases office and operating facilities under operating leases which
expire over the next eight years. The leases generally provide for the lessee to
pay taxes, maintenance, insurance and certain other operating costs of the
leased property. The leases on most of the properties contain renewal
provisions. Rent expense was $718 in 1996.
Minimum lease payments under operating leases expiring subsequent to June 28,
1996 are as follows:
Year Ended Amount
---------- ------
1997 $828
1998 821
1999 791
2000 759
2001 564
Thereafter 3,232
-----
Total minimum lease payments $6,995
-----
The Business is involved in certain litigation and other matters in the ordinary
course of business. Management does not expect that any of these matters will
have a material adverse effect on the financial position or results of
operations of the Business.
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5. Concentration of Business and Credit Risk
-----------------------------------------
The Business' customers are located throughout the United States and Europe. Two
customers each accounted for 22% of sales in fiscal 1996. Sales to customers
outside the United States were 8% of total sales in 1996.
A portion of the accounts receivable of the Business are sold to a third party
on a recourse basis. The amount of outstanding receivables sold with recourse
was $885 at June 28, 1996. An allowance has been provided for estimated credit
losses.
6. Indirect Operating Expenses (unaudited)
---------------------------------------
Cash generated by and cash requirements of the Business flow through the
centralized treasury system of Sunrise. The accompanying Statement of Revenues
and Expenses does not include interest expense of $1,413 allocated by Sunrise,
nor does it include allocated management fees of $1,008.
7. Profit Sharing/Savings Plan
---------------------------
The employees of the Business are included in a 401(k) profit sharing/savings
plan of Sunrise. Employees may make contributions to the plan, which are matched
by the Business in an amount determined by Sunrise's Board of Directors. Sunrise
may also make discretionary contributions to each employee's account equal to a
percentage of salary for the fiscal year, based upon attainment of certain
earnings targets for the Business.
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EXHIBIT INDEX
Exhibit Page
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2.1 - Asset Purchase Agreement dated as of August 29, 1996,
by and among Bio Clinic Corporation, Sunrise Medical
Inc., and Crain Industries, Inc.
DAFS01...:\07\39407\0015\1670\8-K0256T.480
AGREEMENT
FOR
THE PURCHASE OF THE
COMFORT CLINIC DIVISION OF
BIO CLINIC CORPORATION
BY CRAIN INDUSTRIES, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS.............................................. 1
1.1 Defined Terms............................................ 1
1.2 Other Defined Terms...................................... 7
ARTICLE II - PURCHASE AND SALE OF ASSETS............................. 8
2.1 Transfer of Purchased Assets............................. 8
2.2 Assumption of Liabilities................................ 8
2.3 Purchase Price........................................... 8
ARTICLE III - CLOSING: RELATED MATTERS............................... 9
3.1 Closing.................................................. 9
3.2 Conveyances at Closing................................... 9
3.3 Post-Closing Adjustment.................................. 10
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND
SELLER............................................................... 12
4.1 Organization of Parent................................... 12
4.2 Organization of Seller................................... 12
4.3 Authorization............................................ 12
4.4 Absence of Certain Changes or Events..................... 12
4.5 Title to Assets. Etc..................................... 13
4.6 Condition of Assets...................................... 14
4.7 Contracts and Leases..................................... 14
4.8 No Conflict or Violation................................. 14
4.9 Consents and Approvals................................... 14
4.10 Financial Statements..................................... 15
4.11 Litigation............................................... 15
4.12 Labor Matters............................................ 15
4.13 Liabilities.............................................. 16
4.14 Compliance with Law: Permits............................. 16
4.15 No Brokers............................................... 17
4.16 No Other Agreements to Sell the Assets................... 17
4.17 Proprietary Rights....................................... 17
4.18 Taxes.................................................... 17
4.19 Accounts Receivable...................................... 17
(i)
DAFS01...:\07\39407\0015\1670\AGR0296U.470
<PAGE>
4.20 Inventories.............................................. 18
4.21 Customers and Suppliers.................................. 18
4.22 Compliance With Legislation Relating to Environmental
Quality ................................................. 19
4.23 Real Property Matters.................................... 20
4.24 Warranties and Product Related Claims.................... 20
4.25 Interest in Competitors. Suppliers. Customers. etc....... 20
4.26 Disclosure............................................... 20
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER.................. 20
5.1 Organization of Buyer.................................... 21
5.2 Authorization............................................ 21
5.3 Consents and Approvals................................... 21
5.4 No Brokers............................................... 21
5.5 No Conflict or Violation................................. 21
5.6 Litigation............................................... 21
5.7 Disclosure............................................... 21
ARTICLE VI - ACTIONS BY PARENT. SELLER AND BUYER PRIOR TO THE
CLOSING.............................................................. 22
6.1 Maintenance of Business.................................. 22
6.2 Certain Prohibited Transactions.......................... 22
6.3 Certain Affirmative Actions.............................. 23
6.4 Investigation by Buyer................................... 24
6.5 Consents and Best Efforts................................ 24
6.6 Notification of Certain Matters.......................... 24
6.7 Certain Financial Statements............................. 25
6.8 Information Regarding Permits............................ 25
6.9 Escrow Agreement......................................... 25
ARTICLE VII - CONDITIONS TO PARENT'S AND SELLER'S OBLIGATIONS........ 25
7.1 Representations, Warranties and Covenants................ 25
7.2 Consents................................................. 26
7.3 No Governmental Proceeding or Litigation................. 26
7.4 Certificates............................................. 26
7.5 Corporate Documents...................................... 26
7.6 HSR Act.................................................. 26
7.7 Resale Certificate....................................... 26
7.8 Other Documents.......................................... 26
(ii)
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ARTICLE VIII - CONDITIONS TO BUYER'S OBLIGATIONS..................... 27
8.1 Representations, Warranties and Covenants................ 27
8.2 Consents................................................. 27
8.3 No Governmental Proceeding or Litigation................. 27
8.4 Certificates............................................. 27
8.5 Corporate Documents...................................... 27
8.6 HSR Act.................................................. 27
8.7 License Agreement........................................ 28
8.8 Books and Records........................................ 28
8.9 Balance Sheet............................................ 28
8.10 Escrow Agreement......................................... 28
8.11 Certain Financial Information............................ 28
8.12 Other Documents.......................................... 28
ARTICLE IX - ACTIONS BY THE PARTIES AFTER THE CLOSING................ 28
9.1 Books and Records; Cooperation........................... 28
9.2 Further Assurances....................................... 29
9.3 Payments Received........................................ 29
9.4 Employees................................................ 30
9.5 Consents to Assignment................................... 32
9.6 Post-Closing Financial Statements........................ 32
9.7 Summed Sublease.......................................... 32
ARTICLE X - INDEMNIFICATION.......................................... 32
10.1 Survival of Representations, Etc......................... 32
10.2 Indemnification.......................................... 33
10.3 Indemnification Procedures............................... 33
10.4 Limitations.............................................. 34
ARTICLE XI - COVENANT NOT TO COMPETE................................. 35
ARTICLE XII - MISCELLANEOUS.......................................... 36
12.1 Termination.............................................. 36
12.2 Assignment............................................... 36
12.3 Notices; Transfer of Funds............................... 36
12.4 Choice of Law............................................ 38
12.5 Entire Agreement; Amendments and Waivers................. 38
12.6 Counterparts............................................. 38
12.7 Invalidity............................................... 38
(iii)
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12.8 Headings................................................. 39
12.9 Expenses................................................. 39
12.10 Publicity................................................ 39
12.11 Confidential Information................................. 39
12.12 Acquisition Proposals.................................... 40
12.13 Ribs of the Parties...................................... 40
12.14 No Recourse.............................................. 40
(iv)
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EXHIBITS
EXHIBIT A: BILL OF SALE
EXHIBIT B: ASSIGNMENT OF LEASE
EXHIBIT C: ASSIGNMENT OF CONTRACT
EXHIBIT D: ASSIGNMENT OF PROPRIETARY RIGHTS
EXHIBIT E: ASSUMPTION DOCUMENT
EXHIBIT F: CERTAIN CONSENTS
EXHIBIT G: LICENSE AGREEMENT
EXHIBIT H: CERTAIN EMPLOYEES
EXHIBIT I: SEVERANCE DOCUMENTS
(v)
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of August 29,
1996, is by and among Bio Clinic Corporation, a Delaware corporation ("Seller"),
Sunrise Medical Inc., a Delaware corporation ("Parent"), and Crain Industries,
Inc., a Delaware corporation ("Buyer").
RECITALS
A. WHEREAS, Seller owns certain assets which it uses in the conduct of the
Business (as defined below), which Business is conducted through Seller's
Comfort Clinic division (the "Division").
B. WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, such assets upon the terms and subject to the conditions of this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings:
"Accounts Receivable" shall mean all accounts receivable and any notes
receivable of Seller, whether current or non-current, arising out of the
operation of the Business.
"Balance Sheet" shall mean an audited statement of net assets of the
Division, with footnotes, as of June 28, 1996, a draft of which was previously
delivered by Seller to Buyer and the final form of which will be audited by KPMG
and delivered by Seller to Buyer in accordance with Section 6.7 hereof.
<PAGE>
"Balance Sheet Assets" shall mean Cash, Accounts Receivable, net of
applicable reserves, Prepaid Expenses, Inventory, net of applicable reserves,
Fixtures and Equipment, capitalized software and patents, capitalized MIS
equipment licenses and capitalized MIS conversion costs.
"Balance Sheet Date" shall mean June 28, 1996.
"Bio Clinic Business" shall mean that portion of Seller's business
relating to the design, manufacture and distribution of patient support surfaces
and therapeutic pillows using materials such as foam, fiber, gel, fluid or air
therapy, through healthcare channels such as hospitals, nursing homes, medsurg
distributors, home care dealers and drug stores.
"Books and Records" shall mean (a) all records and lists of Seller
pertaining to the Purchased Assets, Division Employees, the Business, (b) all
product, business and marketing plans of Seller relating to the Business and (c)
all books, ledgers, files, reports, plans, drawings and operating records of
every kind maintained by Seller and relating to the Business, but excluding the
originals of Seller's minute books, stock books and tax returns.
"Business" shall mean that portion of Seller's business relating to the
design, manufacture and distribution of therapeutic comfort products, primarily
foam mattresses and pillows, to mass merchants, department stores, bed and bath
specialty stores, discount stores and catalogues.
"Carpenter Obligation" shall mean the yearly purchase obligation of Seller
under that certain Purchase Agreement dated March 29, 1994 between Seller and
Carpenter Co., a Virginia corporation, as amended by that certain First
Amendment to Purchase Agreement dated May 13, 1996 between Seller and Carpenter
Co.
"Cash" shall mean all cash and cash equivalents in transit, on hand,
and/or in banks of the Business.
"Closing Date" shall mean the close of business on September 27, 1996, or
such other date as may be mutually agreed upon in writing by the parties hereto,
after each of the conditions specified in Articles VII and VIII have been
fulfilled (or waived by the party entitled to waive that condition).
"Closing Balance Sheet" shall mean a statement of net assets setting forth
the Balance Sheet Assets, Trade Liabilities and Closing Net Worth of the
Division as of the Closing Date, prepared in accordance with GAAP and in a
manner consistent with the preparation of
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the Balance Sheet (subject to the GAAP exceptions set forth in the definition of
Closing Net Worth).
"Closing Net Worth" shall mean the Balance Sheet Assets less the Trade
Liabilities, as determined pursuant to Section 3.3(a) hereof and listed on the
Closing Balance Sheet; provided, however, that in determining the Closing Net
Worth (A) the valuation reserves related to Accounts Receivable (including,
without limitation, the allowance for doubtful accounts, and for past, present
and future chargeback reserves and add-loading) shall in the aggregate be
stipulated to be $3,572,000 (regardless of whether the appropriate reserves
under GAAP would in fact he more or less than this amount), subject only to an
appropriate additional reserve on the Closing Balance Sheet for approved
mark-downs, as referenced in Section 4.20 of the Disclosure Schedule, and (B) no
Prepaid Expense shall be included in the Closing Balance Sheet unless Buyer will
actually realize the benefit thereof subsequent to the Closing Date. To the
extent Seller determines that Accounts Receivable are doubtful or uncollectible,
Seller will inform Buyer of such determination, provided that Seller shall not
be obligated to write down or write off any uncollectible or doubtful Accounts
Receivable, bad debts or the like through the Closing Date or on the Closing
Balance Sheet (regardless of whether GAAP would require such write downs or
write offs).
"Closing Schedule" shall mean a schedule prepared by Seller in conjunction
with the preparation of the Closing Balance Sheet and setting forth an itemized
description, in reasonable detail, of the Balance Sheet Assets and the Trade
Liabilities of the Division listed on the Closing Balance Sheet.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Contracts" shall mean all the agreements and contracts and legally
binding contractual rights relating primarily to the Business, including but not
limited to such of the foregoing as are described on Schedule 4.7 (including
those contracts described in Schedule 4.7 as contracts to be entered into
between Seller and third parties after the date hereof but prior to the Closing
Date, provided that such agreements are entered into in compliance with the
terms hereof), but excluding the Leases.
"Contract Rights" shall mean all of Seller's rights under the Contracts.
"Disclosure Schedule" shall mean a schedule executed and delivered by
Seller to Buyer as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by this
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Agreement. Unless otherwise specified, each reference in this Agreement to any
numbered schedule is a reference to that numbered schedule which is included in
the Disclosure Schedule.
"Employee Plan" shall mean any "employee benefit plan" as defined in
Section 3(3) of ERISA, and any other severance pay, vacation pay, company
awards, salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, stock purchase agreements or policies,
life insurance, scholarship or other employee benefit plan, program or
arrangement maintained by Parent or Seller or to which Parent or Seller has any
liability (contingent or otherwise) with respect to Division Employees.
"Encumbrances" shall mean any mortgage, claim, lien, pledge, option,
charge, easement, restriction, security interest, right-of-way, encumbrance or
other rights of third parties.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" shall mean all of Seller's rights, title and interests
in and to all properties, assets and rights not included in Purchased Assets,
including those Purchased Assets listed in the Disclosure Schedule.
"Facilities" shall mean the offices, plants and warehouses leased by
Seller pursuant to the Leases.
"Facility Leases" shall mean all of the Leases of Facilities.
"Financial Statements" shall mean (i) the Balance Sheet, (ii) an unaudited
statement of operations of the Division for the month of July 1996, previously
delivered by Seller to Buyer, and (iii) an audited statement of operations of
the Division for the fiscal year ending on the Balance Sheet Date.
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
furnishings, machinery, vehicles, spare and maintenance parts, supplies,
equipment, tooling, molds, patterns, dies, computers, hardware systems and all
other tangible personal property owned by Seller, wherever located, and used in
connection with the Business.
"GAAP" shall mean United States generally accepted accounting principles.
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"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Inventory" shall mean all of Seller's inventory held for resale in
connection with the Business, and all of Seller's raw materials, components,
work in process, finished products, wrapping, supply and packaging items,
samples and similar items with respect to the Business.
"Key Employees" shall mean Barbara Skoog, Jimmy White, Jerry Williams, Ed
Carr, Maria Humphrey, James Lewis, Molly Parker, Eileen Roller, Bruce Evans,
James Graham, Marc Wiley and Chuck Horn.
"Leasehold Estates" shall mean all of Seller's rights and obligations as
lessee under the Leases.
"Leasehold Improvements" shall mean all leasehold improvements situated in
or on the Facilities and owned by Seller.
"Leases" shall mean all of the existing leases with respect to the
personal or real property of Seller described on Schedule 4.7 hereto.
"Letters of Understanding" shall mean those letters of understanding
described in Schedule 1.1 hereto.
"Master Leases" shall mean (i) that certain Lease Agreement dated November
19, 1991 between S. Steven Selig III and Cathy Selig, f/k/a Cathy Selig Fine
d/b/a S&C Properties (as lessor), Comfort Sleeper, Inc. (as lessee) and Cushman
& Wakefield of Georgia, Inc. (as third party agent) and (ii) that certain Lease
Agreement dated August 6, 1993 between Transcontinental Realty Investors, Inc.
(as lessor) and Comfort Sleeper, Inc. (as lessee), as amended by amendments
dated October 19, 1993, February 17, 1994, July 27, 1994 and December 15, 1995.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders issued by, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
including but not limited to those listed or described on Schedule 4.14.
"Post-Closing Financial Statements" shall mean an audited statement of net
assets of the Division, with footnotes, as of June 30, 1995, and audited
statements of operations of the Division for the fiscal years ending June 30,
1995 and June 29, 1994.
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"Prepaid Expenses" shall mean all prepaid expenses, costs, fees and
deposits of Seller related to the Business.
"Proprietary Rights" shall mean all registrations of trademarks and of
other marks, trade names or other trade rights, and all pending applications for
any such registrations and all of Seller's patents and copyrights and all
pending applications therefor, and all other trademarks and other marks, trade
names and other trade rights and all other trade secrets, designs, plans,
specifications and other proprietary rights, owned or used by Seller primarily
in the operation of the Business, whether or not registered, including but not
limited to those listed or described on Schedule 4.17, but excluding any of the
foregoing that may be subject to the License Agreement.
"Purchased Assets" shall mean all of Seller's rights, title and interests
in and to all of the properties, assets and rights used primarily in connection
with the Business, including but not limited to the following:
(a) all Cash, Accounts Receivable, Fixtures and Equipment, Prepaid
Expenses and Inventory, in each case as described on the Closing Schedule;
(b) all Contract Rights and rights under the Letters of
Understanding;
(c) all Leases, Leasehold Estates and Leasehold Improvements;
(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits necessary for the conduct of the Business or for the
ownership and use of the Purchased Assets;
(g) all computer software used in connection with the Business;
(h) all available sales literature, promotional literature,
customer, supplier and distributor lists, art work, display units,
telephone and fax numbers and purchasing records related to the Business;
(i) all rights under or pursuant to all warranties, representations
and guarantees made by manufacturers and suppliers relating to the
Purchased Assets or services furnished to Seller pertaining to the
Business or affecting the Purchased
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Assets, to the extent such warranties, representations and guarantees are
assignable; and
(j) all of Seller's rights to the name "Comfort Clinic."
provided, however, that in no event shall Purchased Assets be deemed to include
the Excluded Assets.
"Subleases" shall mean (i) that certain Commercial Lease Contract dated
February 23, 1996 between Comfort Sleeper Inc. (as sublessor), Applied
Components, Inc. (as sublessee) and John Hunsinger & Company (as third-party
agent) and (ii) that certain Sublease Agreement between Bio Clinic Corporation
(as sublessor) and K.O.K. Trading Co., Inc. (as sublessee).
"To the knowledge of Seller" (or similar references to Seller's knowledge)
shall mean the knowledge, after due inquiry, of senior management of Parent and
Seller, Greg Szabo and the Key Employees.
"Trade Liabilities" shall mean all trade payables (including intercompany
payables) accrued in the ordinary course of business consistent with past
practice and accrued expenses incurred by the Division in the ordinary course of
its operation of the Business consistent with past practice to the extent such
trade payables and accrued expenses are reflected on the Balance Sheet, the
Closing Balance Sheet or the Closing Schedule.
1.2 Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
Term Section
---- -------
Acquisition Proposal 12.12(a)
Adjusted Purchase Price 2.3
Allocation 2.3
Allocation Determination Date 2.3
Assumed Liabilities 2.2
Term Section
---- -------
Assumption Document 3.2(g)
Buyer's Lenders 5.3
Closing 3.1
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Damages 10.2
Determination Date 3.3(b)
Division Recital
Division Assessment 9.7
Division Employees 9.4(a)
Environmental Law 4.22(b)
Escrow Account 6.9
Exclusivity Termination Date 12.12(b)
Hazardous Material 4.22(b)
Intended Net Worth 3.3(c)
KPMG 6.7
License Agreement 8.7
Purchase Price 2.3
Severance Documents 9.4(b)
Sunmed 9.8
Tax 4.18
Threshold Amount 10.4
Transferred Employees 9.4(a)
WARN 4.12(c)
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Purchased Assets. Upon the terms and subject to the
conditions contained herein, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will acquire from Seller, the Purchased Assets.
2.2 Assumption of Liabilities. Upon the terms and subject to the
conditions contained herein, at the Closing Buyer will assume the Trade
Liabilities, together with all liabilities arising out of or relating to events
or occurrences happening after the Closing Date under the Contracts, Leases and
Letters of Understanding which are assigned to Buyer on the Closing Date
(collectively, the "Assumed Liabilities") and no other liabilities whatsoever,
including, without limitation, the Carpenter Obligation.
2.3 Purchase Price. At the Closing, upon the terms and subject to the
conditions set forth herein and in addition to assuming the Assumed Liabilities,
Buyer shall pay to Seller for the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets,
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the aggregate amount of Fourteen Million Dollars ($14,000,000) (the "Purchase
Price"), subject to adjustment as provided in Section 3.3 (as adjusted, the
"Adjusted Purchase Price"). Seller, Parent and buyer shall agree upon the
allocation (the "Allocation") of the total purchase price for the Purchased
Assets by the 90th day following the Closing (the "Allocation Determination
Date"). In the event that Seller, Parent and Buyer shall be unable to agree upon
the Allocation by the Allocation Determination Date, the Allocation shall be
referred, within five days after the Allocation Determination Date, to a
nationally recognized fnm of certified public accountants chosen by the
certified public accountants of Seller and Buyer, who shall make a determination
as to the Allocation within 30 days which shall be conclusive and binding upon
the parties. Seller, Parent and Buyer agree to prepare and file all income tax
returns (including, if applicable, Form 8594) in a manner consistent with the
Allocation and will not in connection with the filing of such returns make any
allocation which is contrary to the Allocation. Seller, Parent and Buyer agree
to consult with each other with respect to all issues relating to such
Allocation in connection with any tax audits, controversy or litigation. No
party hereto shall take or agree to any position inconsistent with the
Allocation in connection with any tax audit, controversy or litigation which
would adversely affect the taxes of any other party hereto to any material
extent without the prior written consent of such other party. Such consent shall
not be unreasonably withheld, and shall not be necessary to the extent the party
which takes or agrees to such inconsistent position has indemnified the other
party against the effects of such action.
ARTICLE III
CLOSING: RELATED MATTERS
3.1 Closing. The closing of the transactions contemplated herein (the
"Closing") shall be held at 10:00 a.m. local time on the Closing Date at the
offices of Latham & Watkins, 650 Town Center Drive, Costa Mesa, California
92626-1925, unless the parties hereto otherwise agree.
3.2 Conveyances at Closing. To effect the transfer and assumption
described in Sections 2.1 and 2.2 hereof and the delivery of the consideration
described in Section 2.3 hereof, Seller and Buyer shall, on the Closing Date,
deliver the following:
(a) Buyer shall deliver to Seller $13,500,000 of the Purchase Price
by wire transfer of immediately available funds to an account designated by
Seller, or, if Buyer waives the condition set forth in Section 8.11 hereof,
Buyer shall deliver to Seller the entire Purchase Price;
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(b) Buyer shall deposit $500,000 into the Escrow Account, unless
Buyer waives the condition set forth in Section 8.11 hereof;
(c) Seller shall deliver to Buyer one or more bills of sale, in the
form attached hereto as Exhibit A, conveying the Purchased Assets;
(d) Seller shall deliver to Buyer Assignments of Lease in the form
attached hereto as Exhibit B with respect to the Leases described on Exhibit F
hereto;
(e) Seller shall deliver to Buyer Assignments of Contract, each in
the form of Exhibit C attached hereto, with respect to the Contract Rights;
(f) with respect to the Proprietary Rights, Seller shall deliver to
Buyer an Assignment in the form attached hereto as Exhibit D-1 and Seller shall
cause Michael Rothbard to execute and deliver to Buyer an Assignment in the form
of Exhibit D-2, each in recordable form to the extent necessary to assign such
rights;
(g) Buyer shall deliver to Seller an instrument of assumption
substantially in the form attached hereto as Exhibit E, evidencing Buyer's
assumption, pursuant to Section 2.2, of the Assumed Liabilities (the "Assumption
Document");
(h) Seller shall deliver to Buyer such other instruments as shall be
reasonably requested by Buyer to vest in Buyer title in and to the Purchased
Assets in accordance with the provisions hereof;
(i) Seller and Buyer shall each deliver all documents required to be
delivered pursuant to Articles VII and VIII hereof and Section 6.9 hereof; and
(j) All instruments and documents executed and delivered to Buyer
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All instruments and documents executed
and delivered to Seller pursuant hereto shall be in form and substance, and
shall be executed in a manner, reasonably satisfactory to Seller.
3.3 Post-Closing Adjustment.
(a) On the Closing Date, Seller shall undertake the preparation of
the Closing Balance Sheet and the Closing Schedule, and Buyer shall provide
Seller with access to such accounting and other personnel, computer systems,
software, work papers,
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documents and information as is necessary in connection therewith. Seller shall
prepare and deliver to Buyer the Closing Balance Sheet and the Closing Schedule
within 45 days after the Closing Date. The Closing Schedule, the Closing Balance
Sheet and Seller's determination of Closing Net Worth shall be subject to
verification by Buyer within 45 days after the date of delivery of the Closing
Balance Sheet and the Closing Schedule to Buyer. Within such 45- day period,
Buyer shall notify Seller of any' dispute with respect to the Closing Balance
Sheet, the determination of Closing Net Worth set forth therein or the Closing
Schedule. Any such dispute which cannot be resolved after good faith
negotiations within 30 days after the date of expiration of the foregoing 45-day
period shall be referred to a nationally recognized firm of certified public
accountants chosen by the certified public accountants of Seller and Buyer,
whose determination on such matters, which shall be made as promptly as
practicable, shall be final and binding on the parties and whose fees and
expenses shall be shared equally by the parties. (b) For purposes of this
Agreement, (i) the Closing Net Worth shall be reflected on the Closing Balance
Sheet, as modified by resolution of Seller and Buyer or by the aforesaid
independent accounting firm, or, if Buyer fails to notify Seller of any disputed
items within the prescribed 45-day period, the Closing Balance Sheet delivered
to Buyer, and (ii) the Cash, Accounts Receivable, Fixtures and Equipment,
Prepaid Expenses and Inventory acquired by Buyer pursuant to this Agreement
shall be the items described in the Closing Schedule, as modified by resolution
of Seller and Buyer or by the aforesaid independent accounting firm, or, if
Buyer fails to notify Seller of any disputed items within the prescribed 45-day
period, the Closing Schedule delivered to Buyer. The date that the Closing
Balance Sheet and the Closing Schedule are finally established pursuant to the
foregoing procedures shall hereinafter be referred to as the "Determination
Date."
(b) If the Closing Net Worth is determined to be more than $25,000
less than Nine Million Twenty-One Thousand Dollars ($9,021,000) (the "Intended
Net Worth"), Seller shall pay to Buyer the entire amount of the difference
between the Closing Net Worth and the Intended Net Worth within ten business
days after the Determination Date. If the Closing Net Worth is determined 1.0 be
more than $25,000 greater than the Intended Net Worth, Buyer shall pay to Seller
the entire amount of the difference between the Closing Net Worth and the
Intended Net Worth within ten business days after the Determination Date. Any
payments made under this Section 3.3(c) shall be accompanied by interest thereon
at the prime rate of interest announced in the Wall Street Journal on the
Determination Date.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Each of Seller and Parent, jointly and severally, represent and warrant to
Buyer as follows:
4.1 Organization of Parent. Parent is duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full corporate
power and authority to enter into and perform its obligations under this
Agreement.
4.2 Organization of Seller. Seller is duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full corporate
power and authority to conduct its business as it is presently being conducted
and to own and lease its properties and assets. Seller is in good standing and
duly qualified to conduct business as a foreign corporation in each jurisdiction
in which such qualification is necessary under applicable law as a result of the
conduct of the Business or of the ownership of the Purchased Assets. Seller is
in good standing and duly qualified to conduct business as a foreign corporation
in California, Georgia and New York.
4.3 Authorization. This Agreement has been duly authorized, executed and
delivered by each of Parent and Seller and is a legally valid and binding
obligation of each of them, enforceable against them in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights generally or by equitable
principles (whether considered in an action at law or inequity).
4.4 Absence of Certain Changes or Events. Since the Balance Sheet Date,
there has not been any:
(a) change in the Division's condition (financial or otherwise),
assets, liabilities, working capital, reserves, earnings, business or prospects,
except for changes contemplated hereby;
(b) except for normal periodic increases in the ordinary course of
business consistent with past practice (not to exceed 2.5% per annum), increase
in the compensation payable or to become payable to any of the Division
Employees whose total compensation for services rendered to the Division is
currently at an annual rate of more than $25,000;
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(c) sale, assignment or transfer of any assets or properties which
would have been included in the Purchased Assets, material singly or in the
aggregate, other than sales of Inventory in the ordinary course of business
consistent with past practice and other than the sale, assignment, transfer,
mortgage, pledge or other Encumbrance of accounts receivable of the Division in
connection with the Division's factoring of accounts receivable in the ordinary
course of business consistent with past practice;
(d) cancellation of any indebtedness or waiver of any rights of
substantial value to the Division, whether or not in the ordinary course of
business consistent with past practice;
(e) amendment, cancellation or termination of any Contract, license
or Lease;
(f) capital expenditure by the Division involving payments in excess
of $50,000 in the aggregate;
(g) failure to repay any material liability of the Division;
(h) change in accounting methods or practices employed by the
Division;
(i) damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Purchased Assets, the Business or the
prospects of the Division;
(j) mortgage, pledge or other encumbrance of any of the Purchased
Assets, other than the sale, assignment, transfer, mortgage, pledge or other
Encumbrances of accounts receivable of the Division in connection with the
Division's factoring of accounts receivable in the ordinary course of business
consistent with past practice;
(k) any liabilities not otherwise disclosed pursuant hereto incurred
by the Division involving $25,000 or more other than in the ordinary course of
business consistent with past practice; or
(l) agreement by Seller to do any of the foregoing.
4.5 Title to Assets. Etc. Seller has, and following the Closing, Buyer
will have, good, valid and marketable fee simple title to the Purchased Assets
free and clear of all title defects or objections or other Encumbrances, except
for minor liens which in the aggregate are not substantial in amount, do not
materially detract from the value of the properties or
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assets subject thereto or interfere with the present use and have not arisen
other than in the ordinary course of business consistent with past practice. To
the knowledge of Seller, there are no pending or threatened condemnation
proceedings relating to any of the Facilities.
4.6 Condition of Assets. All of the Purchased Assets are in good operating
condition and repair, subject to normal wear and maintenance, are usable in the
regular and ordinary course of business and conform to all applicable laws,
ordinances, codes, rules, regulations and Permits. The Purchased Assets
constitute all assets and rights necessary to operate the Business as currently
conducted. No person other than Seller owns any equipment or other tangible
assets or properties situated on the Facilities or necessary to the operation of
the Business, except for items leased pursuant to the Leases.
4.7 Contracts and Leases. The Contracts and Leases listed on Schedule 4.7
hereto constitute all of the contracts, leases, agreements, commitments or
arrangements, whether written or oral, necessary for the operation of the
Business as currently conducted. Each Contract and Lease is valid and
enforceable in accordance with its terms. Seller is, and to Seller's knowledge
all other parties thereto are, in compliance with the provisions thereof. Seller
is not, and to Seller's knowledge no other party thereto is, in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained therein, and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. Except
as listed on Schedule 4.7, no Contract or Lease requires the consent of any
party to its assignment in connection with the transactions contemplated hereby.
Seller has delivered to Buyer true and complete copies of all Contracts, Leases
and Letters of Understanding.
4.8 No Conflict or Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of either Seller or Parent, (b) a breach of, or a
default under, any term or provision of any contract, agreement, indebtedness,
lease, Encumbrance, commitment, license, franchise, permit, authorization or
concession to which Seller or Parent is a party or by which the Purchased Assets
are bound (c) a violation by Seller or Parent of any law, statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree or award,
or (d) an imposition of any material Encumbrance on the Business or on any of
the Purchased Assets.
4.9 Consents and Approvals. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
Parent or Seller in connection
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with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby other than the filings
required under the HSR Act.
4.10 Financial Statements. The Financial Statements, when delivered to
Buyer, will be complete, in accordance with the books and records of the
Division, and will accurately reflect in all material respects the assets,
liabilities, financial condition and results of operations indicated thereby in
accordance with GAAP consistently applied, and will contain and reflect all
necessary adjustments for a fair representation of the Financial Statements as
of the date and for the period covered thereby (subject to the GAAP exceptions
set forth in the definition of Closing Net Worth).
4.11 Litigation. There is no action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, labor dispute (other
than routine grievance procedures or routine, uncontested claims for benefits
under any benefit plans covering employees of Seller), arbitral action or
investigation pending or, to the knowledge of Seller, threatened or anticipated
against Seller that could reasonably be expected to adversely affect the
Division or the transactions contemplated by this Agreement.
4.12 Labor Matters.
(a) Neither Parent nor any affiliate of Parent has, since December
31, 1995, solicited for employment any of the Division Employees. None of
Richard Chandler, Ted Tarbet, John Radak, Steven Jaye or Roberta Baade has been
notified that any Division Employee material to the Business will terminate his
or her employment with the Division as a result of the consummation of the
transactions contemplated by this Agreement.
(b) With respect to the Division Employees, Seller is not a party to
any labor or collective bargaining agreement with any labor organization, group
or association and there are no collective bargaining agreements which pertain
to Division Employees, and, to the knowledge of Seller, there is no
organizational effort currently being made or threatened by or on behalf of any
labor union with respect to any of the Division Employees.
(c) Seller is in material compliance with all applicable laws,
regulations and orders relating to employment of the Division Employees,
including all such laws, regulations and orders relating to wages, hours, Worker
Adjustment and Retraining Notification Act, as amended, and any state or local
plant closing laws ("WARN"), civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax.
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(d) There is no unfair labor practice charge or complaint against
Seller pending before the National Labor Relations Board or any other
governmental agency, nor any other complaints, charges or claims against Seller
pending, or to the knowledge of Seller, threatened before any public or
governmental agency, arbitrator or court arising out of or based on or relating
to the employment or termination of employment by Seller of any Division
Employee.
(e) There has been no "mass layoff" or "plant closing" as defined by
WARN with respect to the Division within the six (6) months prior to the date of
this Agreement and Seller does not intend to take any action which would trigger
notification under WARN as of the Closing.
4.13 Liabilities. With respect to the conduct of the Business, Seller has
no liabilities or obligations (absolute, accrued, contingent or otherwise)
except (a) liabilities which are reflected and reserved against on the Balance
Sheet, (b) liabilities incurred in the ordinary course of business consistent
with past practice since the Balance Sheet Date, and (c) liabilities arising
under Contracts described in Schedule 4.7.
4.14 Compliance with Law: Permits. The conduct of the Business is in
compliance with all applicable laws, statutes, ordinances and regulations,
whether federal, state or local. Seller has not received any written notice to
the effect that, or otherwise been advised that, the Business is not in
compliance with any of such statutes, regulations, orders, ordinances or other
laws. Seller owns, holds, possesses, or lawfully uses in the operation of its
business all Permits which are in any manner necessary for it to conduct the
Business as now or previously conducted or for the ownership and use of the
Purchased Assets, free and clear of all Encumbrances and in compliance with all
laws, statutes, ordinances and regulations. All such Permits are described on
Schedule 4.14. Seller is not in default, nor has it received any notice of any
claim of default, with respect to such Permits. All such Permits are renewable
by their terms or in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees. None of such Permits will be adversely affected by
consummation of the transactions contemplated hereby and none of such Permits
requires the consent of any governmental authority in connection with the
transactions contemplated hereby. No stockholder, director, officer, employee,
or former employee of Seller of any affiliate of Seller, or any other person,
firm, or corporation owns or has any proprietary, financial, or other interest
(direct or indirect) in any Permits which the Seller owns, possesses, or uses in
the operation of the Business as now or previously conducted.
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4.15 No Brokers. Except for NewCap Partners, Inc., (whose fee will be
borne solely by Seller), neither Parent, Seller nor any affiliate of either of
them has entered into any contract, agreement, arrangement or understanding with
any person or firm which will result in the obligation of Seller or Buyer to pay
any finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
4.16 No Other Agreements to Sell the Assets. Neither Parent nor Seller has
any legal obligation, absolute or contingent, to any other person or firm to
sell any of the Purchased Assets or any interest therein, except for those
contracts entered into in the normal course of business consistent with past
practice for the sale of Inventory and other than obligations arising out of the
Division's factoring of accounts receivable in the ordinary course of business
consistent with past practice.
4.17 Proprietary Rights. The Proprietary Rights listed in Schedule 4.17 or
covered by the License Agreement are all those used in the Business. Seller owns
the entire right, title and interest in and to the Proprietary Rights and to the
patents and trademarks covered by the License Agreement. The License Agreement
and all letters patent, registrations and certificates issued by any
governmental authority relating to any of the Proprietary Rights are valid and
subsisting and have been properly maintained, and neither Seller, nor to the
knowledge of Seller, any other person or entity is in default or violation
thereunder. Seller's use of the Proprietary Rights is not infringing upon or
otherwise violating the rights of any third party in or to such Proprietary
Rights, and no proceedings have been instituted against or notices received by
Seller that are presently outstanding alleging that the Seller's use of the
Proprietary Rights infringes upon or otherwise violates any rights of a third
party in or to the Proprietary Rights.
4.18 Taxes. No security interests have been imposed upon or asserted
against any of the Purchased Assets or other assets of Seller as a result of or
in connection with any failure, or alleged failure, to pay any Tax. For purposes
of this Agreement, the term "Tax" shall mean all federal, state, local, or
foreign income, payroll, Medicare, withholding, unemployment insurance, social
security, sales, use, service, service use, leasing, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, transfer, workers'
compensation, severance, windfall profits, environmental (including taxes under
Section 59A of the Code), or other tax of the same or of a similar nature,
including any interest, penalty or addition thereto, whether disputed or not.
4.19 Accounts Receivable. The Accounts Receivable reflected in the Balance
Sheet, and all Accounts Receivable arising since the Balance Sheet Date,
represent bona fide claims
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against debtors for sales, services performed or other charges arising on or
before the date hereof, and all the goods delivered and services performed which
gave nse to said accounts were delivered or performed in accordance with the
applicable orders, contracts or customer requirements. Said Accounts Receivable
are subject to no defenses, counterclaims or rights of setoff and are
collectible in the ordinary course of business without cost, other than
factoring costs, to Buyer in collection efforts therefor except, in the case of
Accounts Receivable shown on the Balance Sheet, to the extent of the appropriate
reserves set forth on the Balance Sheet, and, in the case of Accounts Receivable
arising since the Balance Sheet Date, to a reasonable allowance for bad debts
consistent with the normal historical collection experience of the Division.
4.20 Inventories. The value at which the Inventory is shown on the Balance
Sheet has been determined in accordance with the normal valuation policy of the
Division, consistently applied and in accordance with GAAP. The Inventory (and
items of Inventory acquired or manufactured subsequent to the Balance Sheet
Date) consist only of items of quality and quantity commercially usable and
salable in the ordinary course of business, except for any items of obsolete
material or material below standard quality, all of which have been written down
to realizable market value, or for which adequate reserves have been provided,
and the present quantities of Inventory are reasonable in the present
circumstances of the Business. Except as provided in the preceding sentence, all
of the Inventory is valued at the lower of cost or market and is not subject to
any write-down or write-off. Seller is not under any liability or obligation
with respect to the return of inventory in the possession of wholesalers,
retailers or other customers.
4.21 Customers and Suppliers. The Disclosure Schedule contains a complete
and accurate list of (i) the 20 largest customers of the Division in terms of
sales during each of the Division's last two fiscal years, in each case showing
the approximate total sales by the Division to each such customer during such
fiscal year, and (ii) the 10 largest suppliers of the Division in terms of
purchases during the Division's last fiscal year, showing the approximate total
purchases by the Division from each such supplier during such fiscal year. Since
December 31, 1995, there has been no adverse change in the business relationship
of the Division with any customer or supplier named in the Disclosure Schedule
which is material to the business or financial condition of the Division and
Seller has not received notice from any of its customers that such customers
intend to terminate their relationship with Seller as a result of the
transactions contemplated by this Agreement.
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4.22 Compliance With Legislation Relating to Environmental Quality.
(a) There are no Hazardous Materials (as defined in Section 4.22(b)
hereof) being stored or otherwise used at any of the Facilities except in
compliance with applicable laws, and, to knowledge of Seller, there are no
Hazardous Materials under any of the Facilities. The Facilities and the
operations thereon are and have been maintained in compliance with all
Environmental Laws (as defined in Section 4.22(b) hereof). With respect to the
Facilities, there are no judicial or administrative proceedings or
investigations pending or, to the knowledge of Seller, threatened against Seller
or any of the Facilities alleging the violation of or seeking to impose
liability pursuant to any Environmental Law and Seller has not received any
written notice from any governmental body or other person claiming any violation
of or alleging liability pursuant to any Environmental Laws in connection with
the Facilities or the operation of the Division. There are no facts,
circumstances or conditions relating to, arising from associated with or
attributable to any Facilities that are reasonably likely to give rise to or
result in Seller incurring liability under Environmental Laws. Seller has
provided Buyer with copies of all environmentally related audits, assessments,
studies, reports, analyses, and results of investigations of any Facilities that
are in the possession, custody or control of Parent or Seller.
(b) For purposes of this Agreement, "Environmental Law" shall mean
any applicable federal, state, local, or foreign law (including common law),
statute, code, ordinance, rule, regulation, restriction, license, permit or
other legal requirement relating to the environment, natural resources, or
public or employee health and safety, and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the
Clean Air Act, 33 U.S.C. 2601 et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Section 136 et seq., the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 et seq., and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state or local
statutes. The term "Hazardous Materials" means any substance, material or waste
which is regulated by any governmental authority or the United States or other
national government, including, without limitation, any material, substance or
waste which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste," or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
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4.23 Real Property Matters. All of the Leasehold Improvements are in a
condition and repair sufficient for the operation and conduct of the Division's
business in the normal and ordinary course of business consistent with past
practice. The Facilities are properly zoned for their present use under
applicable zoning ordinances, and there are no pending or, to the knowledge of
Seller, threatened actions or proceedings which could result in a modification
or termination of such zoning.
4.24 Warranties and Product Related Claims. Except as set forth in
Disclosure Schedule, there are no express warranties or guarantees made by
Seller to third parties with respect to any products manufactured or sold by the
Division in connection with the operation of the Business.
4.25 Interest in Competitors. Suppliers. Customers. etc. Except for
ownership of up to one percent of any publicly traded equity securities, none of
Parent or Seller, any affiliate of Parent or Seller, or any officer or director
of Parent, Seller or such affiliate (i) owns, directly or indirectly, any
ownership interest in, (ii) serves as a director, officer, agent, employee,
advisor, consultant, or m any other capacity for, or (iii) has loaned money to
or borrowed money from, any competitor, supplier or customer of the Division.
4.26 Disclosure. No representation or warranty by Parent or Seller
contained in this Agreement, and no statement contained in any document
(including without limitation the Financial Statements, the closing documents
delivered pursuant to Article III and the Disclosure Schedule), list,
certificate or other instrument furnished or to be furnished by or on behalf of
Parent, Seller or any of their affiliates to Buyer or any of Buyer's
representatives in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading. Neither Parent nor Seller has failed to disclose to
Buyer any fact which would reasonably be determined to have a material adverse
effect on the business, financial condition, results of operations or prospects
of the Division, or which is otherwise material to the Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to each of Parent and Seller as
follows:
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5.1 Organization of Buyer. Buyer is duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full corporate
power and authority to enter into and perform its obligations under this
Agreement.
5.2 Authorization. This Agreement has been duly authorized, executed and
delivered by Buyer and is a legally valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally or by equitable principles (whether
considered in an action at law or in equity).
5.3 Consents and Approvals. Except for the consent of Texas Commerce Bank
National Association and the several financial institutions ("Buyer's Lenders")
party to that certain Credit Agreement dated as of August 29, 1995, by and among
Buyer and Buyer's Lenders and the filings required under the HSR Act, no
consent, approval or authorization of, or declaration, filing or registration
with, any United States federal or state governmental or regulatory authority,
or any other person or entity, is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
5.4 No Brokers. Neither Buyer nor any affiliate of Buyer has entered into
any agreement, arrangement or understanding with any person or firm which will
result in the obligation of Parent or Seller to pay any Finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
5.5 No Conflict or Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of Buyer, (b) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease, commitment,
license, franchise, permit, authorization or concession to which Buyer is a
party or (c) a violation by Buyer of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award.
5.6 Litigation. There is no action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, labor dispute,
arbitral action or investigation pending or, to the knowledge of Buyer,
threatened or anticipated against, relating to or affecting the transactions
contemplated by this Agreement.
5.7 Disclosure. No representation or warranty by Buyer contained in this
Agreement, and no statement contained in any document (including without
limitation the
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documents delivered pursuant to Article III), list, certificate or other
instrument furnished or to be furnished by or on behalf of Buyer to Seller or
any of its representatives in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE VI
ACTIONS BY PARENT. SELLER AND BUYER PRIOR TO THE CLOSING
Parent, Seller and Buyer covenant as follows for the period from the
date hereof through the Closing Date:
6.1 Maintenance of Business. Seller will cause the Division to carry on
its business in the ordinary course consistent with past practice.
6.2 Certain Prohibited Transactions. Except as Buyer shall otherwise agree
in writing, Seller will not:
(a) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other individual,
partnership, firm or corporation, or make any loans or advances to any
individual, partnership, firm or corporation, except to the extent that such
actions do not adversely affect the business or financial condition of the
Division;
(b) mortgage, pledge or otherwise encumber any of the Purchased
Assets or sell, transfer or otherwise dispose of any of the Purchased Assets, or
cancel, release or assign any indebtedness owed to it or any claims held by it
except in the ordinary course of business consistent with past practice;
(c) terminate any Contract or Lease or make any material change in
the terms thereof, other than in the ordinary course of business consistent with
past practice;
(d) make any change in financial accounting principles or practices
employed by the Division unless required by GAAP or applicable law (subject to
the GAAP exceptions set forth in the definition of Closing Net Worth);
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(e) increase the compensation payable or to become payable by Seller
to any Division Employee, create any new or increase the coverage or benefits
available under any, severance pay, termination pay, vacation pay, company
awards, salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation arrangement made to, for, or with any
Division Employee, or enter into or amend any employment, deferred compensation,
severance, consulting or similar agreement with any Division Employee, except as
may be required under termination agreements in effect on the date of this
Agreement;
(f) permit the Division to make capital expenditures involving
payments in excess of $50,000 in the aggregate, except with respect to MIS
software or equipment which shall not exceed $25,000 in the aggregate;
(g) permit the Division to make pricing allowances or discounts with
respect to the sale of Inventory except in the ordinary course of business
consistent with past practice; or
(h) do any other act or omit to do any act which would cause any
representation or warranty of Parent or Seller in this Agreement to be or become
untrue rn any material respect.
6.3 Certain Affirmative Actions. Except as Buyer shall otherwise agree in
writing, Seller will:
(a) carry on the business of the Division in the usual, regular and
ordinary course as presently conducted and consistent with past practice, and
keep the business of the Division intact;
(b) use its best efforts to keep available the services of the
Division Employees;
(c) use its best efforts to maintain the goodwill associated with
the Business, including but not limited to preserving the relationships of
customers, suppliers and others having business dealings with the Division;
(d) maintain the Purchased Assets in good condition, maintain
supplies and inventories related to the Business in quantities consistent with
the customary practice of the Division and maintain all of the Proprietary
Rights;
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(e) cause the working capital of the Division to be maintained at a
level consistent with past practice; and
(f) maintain insurance policies with respect to the Business that
are sufficient for material compliance with all requirements of law and of all
agreements relating to the Business to which Seller is a party or by which
Seller is bound.
6.4 Investigation by Buyer. Seller shall continue to allow Buyer during
regular business hours through Buyer's employees, agents and representatives, to
make such investigation of the business, properties, books and records of the
Division, and to conduct such examination of the condition of the Division,
including, but not limited to the Facilities, as Buyer deems necessary or
advisable to familiarize itself with such business, properties, books, records,
condition and other matters, and to verify the representations and warranties of
Parent and Seller hereunder; provided, however, that any information obtained
from Seller is subject to the confidentiality provisions contained in Section
12.11 hereof.
6.5 Consents and Best Efforts. No later than August 30, 1996, Buyer and
Seller shall make or cause to be made all filings required under the HSR Act.
Buyer and Seller agree that any filing fee required to be paid in connection
with any filing under the HSR Act shall be paid one-half by Buyer and one-half
by Seller. Seller will, as soon as possible, commence taking all action required
to obtain all consents, approvals and agreements of, and to give all notices and
make all other filings with, any third parties, including governmental
authorities, necessary to authorize, approve or permit the transactions
contemplated hereby, and Buyer shall cooperate with Seller with respect thereto.
In addition, subject to the terms and conditions herein provided, each of the
parties hereto covenants and agrees to use its best efforts to take, or cause to
be taken, all action or do, or cause to be done, all things necessary, proper or
advisable under applicable laws to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder; provided, however, that no party shall be required to
take any action which would have a material adverse effect upon it or any of its
affiliates.
6.6 Notification of Certain Matters. Parent or Seller, as the case may be,
shall give prompt notice to Buyer, and Buyer shall give prompt notice to Parent
and Seller, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate m any material respect at
any time from the date hereof to the Closing Date and (ii) any material failure
of Parent, Seller or Buyer, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy the same;
provided, however, that
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such notice shall not operate to cure any breach of any representations,
warranties, covenants, conditions or agreements made in this Agreement or any
Exhibits or Schedules referred to herein or attached hereto.
6.7 Certain Financial Statements. Seller will in good faith use its
diligent best efforts to (i) cause the Balance Sheet to be prepared and
delivered to Buyer within seven days after the date hereof, (ii) prepare and
deliver to KPMG Peat Marwick LLP ("KPMG") as soon as practicable after the date
hereof the Post-Closing Financial Statements in audited form, together with
supporting documentation sufficient to permit KPMG to audit such financial
statements within 60 days after the Closing Date, and (iii) cause an unaudited
statement of operations of the Division for the fiscal year ending on the
Balance Sheet Date to be prepared and delivered to Buyer on or prior to the
Closing Date.
6.8 Information Regarding Permits. Within 10 days after the date hereof,
Seller will deliver to Buyer sufficient information to enable Buyer to apply for
the licenses and permits described in Schedule 4.14.
6.9 Escrow Agreement. On the Closing Date, Buyer and Seller shall enter
into an escrow agreement with mutually agreeable terms pursuant to which
$500,000 of the Purchase Price shall be deposited by Buyer into an escrow
account (the "Escrow Account") to secure Seller's obligation to deliver the
Post-Closing Financial Statements and an audited statement of operations of the
Division for the fiscal year ending on the Balance Sheet Date pursuant to
Section 9.6 hereof.
ARTICLE VII
CONDITIONS TO PARENT'S AND SELLER'S OBLIGATIONS
The obligations of Parent and Seller to consummate the transactions
contemplated hereby is subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Buyer shall have
performed in all material respects all agreements and covenants required hereby
to be performed by it prior to or at the Closing
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Date. There shall be delivered to Seller a certificate (signed by the President
or a Vice President of Buyer) to the foregoing effect.
7.2 Consents. All consents, approvals and waivers from governmental
authorities and from the third parties described on Exhibit F hereto necessary
to permit Seller to transfer the Purchased Assets and to permit Buyer to assume
the Assumed Liabilities shall have been obtained.
7.3 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which Parent or
Seller determines in good faith is reasonably likely to materially and adversely
affect Parent, Seller or the Division if the transactions contemplated hereby
are consummated.
7.4 Certificates. Buyer will furnish Seller with such certificates of its
officers, directors and others to evidence compliance with the conditions set
forth in this Article VII as may be reasonably requested by Seller.
7.5 Corporate Documents. Seller shall have received from Buyer resolutions
adopted by the board of directors of Buyer approving this Agreement and the
transactions contemplated hereby, certified by Buyer's corporate secretary.
7.6 HSR Act. The applicable waiting period, including any extension
thereof, under the HSR Act shall have expired.
7.7 Resale Certificate. Seller shall have received from Buyer resale
certificates regarding Buyer's intended resale of the Inventory in a form
mutually agreeable to Buyer and Seller.
7.8 Other Documents. Seller shall have received from Buyer each of the
items to be delivered by Buyer pursuant to Section 3.2 hereof and such
additional information and materials as Seller shall reasonably request.
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ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the transactions contemplated hereby
is subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date as if such representations
and warranties were made at and as of the Closing Date, and Seller shall have
performed in all material respects all agreements and covenants required hereby
to be performed by it prior to or at the Closing Date. There shall be delivered
to Buyer a certificate (signed by the President or a Vice President of Seller)
to the foregoing effect.
8.2 Consents. All consents, approvals and waivers from governmental
authorities and from the third parties described on Exhibit F hereto necessary
to permit Seller to transfer the Purchased Assets and to permit Buyer to assume
the Assumed Liabilities shall have been obtained, and Buyer shall have obtained
the consent of Buyer's Lenders.
8.3 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which the Buyer
determines in good faith may materially and adversely affect the Buyer if the
transactions contemplated hereby are consummated.
8.4 Certificates. Seller shall furnish Buyer with such certificates of the
officers of Seller to evidence compliance with the conditions set forth in this
Article VIII as may be reasonably requested by Buyer.
8.5 Corporate Documents. Buyer shall have received from Parent and Seller
resolutions adopted by the board of directors of Parent and Seller approving
this Agreement and the transactions contemplated hereby, certified by the
respective corporate secretaries of Parent and Seller.
8.6 HSR Act. The applicable waiting period, including any extension
thereof, under the HSR Act shall have expired.
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8.7 License Agreement. Seller and Buyer shall have entered into a license
agreement (the "License Agreement") substantially in the form attached hereto as
Exhibit G.
8.8 Books and Records. On the Closing Date, Seller will deliver to Buyer
all Books and Records.
8.9 Balance Sheet. Buyer shall have received from Seller the Balance
Sheet.
8.10 Escrow Agreement. Subject to Section 8.11 below, Buyer and Seller
shall have entered into an escrow agreement with mutually agreeable terms
pursuant to which $500,000 of the Purchase Price shall be deposited by Buyer
into the Escrow Account on the Closing Date to secure Seller's obligation to
deliver the Post-Closing Financial Statements pursuant to Section 9.6 hereof.
8.11 Certain Financial Information. The Post-Closing Financial Statements
in unaudited form shall have been prepared by Seller and delivered to KPMG with
supporting documentation sufficient to permit KPMG to audit such financial
statements within 60 days after the Closing Date, and Seller shall have
delivered to Buyer the Financial Statements; provided, however, that in the
event that Buyer waives this condition to Closing, the Escrow Account shall not
be funded and Buyer shall hold Seller and Parent harmless for any loss suffered
by Buyer as a result of the Post-Closing Financial Statements not being
delivered.
8.12 Other Documents. Buyer shall have received from Seller each of the
items to be delivered by Seller pursuant to Section 3.2 hereof and such
additional information and materials as Buyer shall reasonably request.
ARTICLE IX
ACTIONS BY THE PARTIES AFTER THE CLOSING
9.1 Books and Records; Cooperation.
(a) Parent, Seller and Buyer agree that so long as any Books and
Records, to the extent that they pertain to the operations of the Division prior
to the Closing Date, remain in existence and available, each party (at its
expense) shall have the right to inspect and to make copies of the same at any
time during business hours for any proper purpose. Each of Seller and Buyer
agree to preserve all Books and Records possessed by such party relating to the
operations of the Division prior to the Closing Date until the fifth anniversary
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of the Closing Date; provided, however, that after the fifth anniversary of the
Closing Date, neither party shall destroy or otherwise dispose of such Books and
Records without first notifying the other party and giving such party the
opportunity to receive or copy (at the other party's own expense) such Books and
Records. All information received or copied pursuant to this Section 9.1(a)
shall be subject to the terms of the confidentiality provisions contained in
Section 12.11 hereof.
(b) Parent, Seller and Buyer shall (i) each provide the other with
such assistance as may reasonably be requested by any of them in connection with
the preparation of any tax return, audit, or other examination by any taxing
authority or judicial or administrative proceedings relating to liability for
taxes, (ii) each retain and provide the other with any records or other
information that may be relevant to such tax return, audit or examination,
proceeding, or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any tax return of the other for any
period. Without limiting the generality of the foregoing, Parent, Seller and
Buyer shall each retain copies of all tax returns, supporting work schedules,
and other records or information that may be relevant to such tax returns for
all tax periods or portions thereof ending before or including the Closing Date
and shall not destroy or otherwise dispose of any such records except as set
forth in Section 9.1(a) hereof.
(c) If Buyer requests, Seller and Parent will fully cooperate with
Buyer and its counsel with respect to any filings with the Securities and
Exchange Commission relating to, or resulting from, the transactions relating
hereto. Such cooperation shall include the furnishing of all financial
statements and other information as Buyer shall reasonably determine as
necessary or appropriate for inclusion in any such filing. Except with respect
to costs, fees and expenses incurred in connection with the audit of the Post
Closing Financial Statements, which shall be paid in accordance with Section 9.6
hereof, Buyer shall promptly pay all costs, fees and expenses reasonably
incurred by Parent or Seller in connection with any action taken by Parent or
Seller pursuant to or as contemplated by this Section 9.1(c).
9.2 Further Assurances. On and after the Closing Date, Parent, Seller and
Buyer will take all appropriate action and execute all documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof, including without limitation, putting Buyer in
possession and operating control of the Business.
9.3 Payments Received. Seller and Buyer each agree that after the Closing
they will hold and will promptly transfer and deliver to the other, from time to
time as and when
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received by them, any cash, checks with appropriate endorsements (using their
best efforts not to convert such checks into cash), or other property that they
may receive on or after the Closing which properly belongs to the other party,
and will account to the other for all such receipts. From and after the Closing,
Buyer shall have the right and authority to endorse the name of Seller on any
check or any other evidences of indebtedness received by Buyer on account of the
Business and the Purchased Assets transferred to Buyer hereunder. In the event
that Buyer receives a check on account of the Excluded Assets, Buyer shall
promptly deliver the check to Seller.
9.4 Employees.
(a) The Disclosure Schedule identifies all employees of the Division
who are actively employed by the Division as of the date of this Agreement by
name, location, title or function, current base salary or hourly wage, date of
hire and social security number (the "Division Employees"). Effective as of the
Closing Date, Buyer shall extend offers of employment to all Division Employees
except those set forth on Exhibit H hereto, and such offers of employment shall
be at the salary or hourly wage specified on the updated Disclosure Schedule and
shall provide for substantially similar employee benefits in the aggregate as
those provided to similarly situated employees of the Buyer. All employees who
accept such offers of employment are hereinafter referred to as the "Transferred
Employees." Seller shall cooperate with and use its commercially reasonable
efforts to assist Buyer in its efforts to secure satisfactory employment
arrangements with those individuals offered employment under this Section
9.4(a). Until the second anniversary of the Closing Date, neither Parent, Seller
nor any affiliate of either of them shall solicit for employment any Transferred
Employee; provided, however, that Parent and Seller may solicit any such
Transferred Employee (i) who has been terminated by Buyer or (ii) who has
voluntarily terminated his or her employment with Buyer, but only after six
months have passed since the date of such termination.
(b) Seller shall be solely responsible for any liability, claim or
expense with respect to employment, termination of employment, compensation or
employee benefits of any nature (including, but not limited to, the benefits
provided under any Employee Plans covering Division Employees) owed to any
employee or former employee of the Division (or the beneficiary of any employee
or former employee) whether or not such employee or former employee becomes a
Transferred Employee, that arises out of or relates to the employment
relationship between the Division and any such employee or former employee, or
the termination thereof, prior to or on the Closing Date. Buyer shall not
continue or assume any employee benefit plan or program of Parent or Seller
(including, but not limited to the Employee Plans), and Buyer shall not be
responsible for and Seller shall fully
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indemnify Buyer against any obligation or liability thereunder; provided,
however, that except with respect to Key Employees set forth on Exhibit H
hereto, Buyer shall assume the severance obligations of Parent to the those Key
Employees accepting Buyer's offers of employment made pursuant to Section
9.4(a), as described in the memoranda and letters attached hereto as Exhibit I
(the "Severance Documents"); provided further that Buyer shall pay severance to
Transferred Employees (other than Key Employees) in accordance with Section
9.4(d) hereof.
(c) For purposes of eligibility in any employee benefit plan of
Buyer for which a Transferred Employee otherwise becomes eligible, such
Transferred Employee shall be given credit under such plan for all service
rendered prior to the Closing Date with Seller for all purposes other than
benefit accrual. In addition, all pre-existing condition provisions contained in
any health or dental benefit plan of the Buyer for which a Transferred Employee
otherwise becomes eligible shall be waived to the extent possible.
(d) Nothing contained in this Agreement shall confer upon any
Division Employee any right with respect to employment by Buyer, nor shall
anything herein interfere with the right of Buyer, following any employment of
any Transferred Employee, to terminate the employment of any such Transferred
Employee at any time, with or without cause, or restrict Buyer in the exercise
of its independent business judgment in modifying any of the terms and
conditions of the employment of any such Transferred Employee; provided,
however, that in the event that Buyer terminates a Transferred Employee (other
than a Key Employee) without cause within the first 12 months after the Closing
Date, Buyer shall be obligated to provide such Transferred Employee with 30 days
notice of termination and a severance payment equal to one week's pay for each
year such Transferred Employee had been employed by Seller; provided further in
the event that Buyer terminates a Key Employee without cause within the first 12
months after the Closing Date, Buyer shall be obligated to make severance
payments to such Key Employee pursuant to the terms and conditions of the
Severance Documents.
(e) Except with respect to the rights of Transferred Employees in
certain circumstances to severance payments as set forth in Sections 9.4(b) and
9.4(d) above, no provision of this Agreement shall create any third party
beneficiary rights in any Division Employee, any beneficiary or dependents
thereof, or any collective bargaining representative thereof, with respect to
the compensation, terms and conditions of employment and benefits that may be
provided to any Division Employee by Buyer or under any benefit plan which Buyer
may maintain.
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9.5 Consents to Assignment. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall not constitute an agreement to assign any
Contract, Lease or Permit, or any claim, right, benefit or obligation arising
thereunder or resulting therefrom if an attempted assignment thereof, without
consent of a third party thereto, would constitute a default thereof or in any
way adversely affect the rights or obligations of Buyer or Seller thereunder. If
such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights or obligations thereunder so that Buyer
would not receive all such rights or Seller would be subjected to additional
obligations, Seller and Buyer will cooperate, in all reasonable respects, so
that Buyer will receive the benefits and assume the obligations under any such
Contract, Lease or Permit. Such cooperation shall include, without limitation,
Seller's enforcement for the benefit of Buyer of any and all rights of Seller
against a third party thereto arising out of the default or cancellation by such
third party or otherwise.
9.6 Post-Closing Financial Statements. Seller will use its good faith and
diligent best efforts to cause KPMG to deliver to Buyer within 60 days after the
Closing Date the Post-Closing Financial Statements. Seller and Buyer shall each
pay one-half of all fees and expenses relating to the audit of the Post-Closing
Financial Statements.
9.7 Summed Sublease. Upon written notice from Buyer, Seller agrees to
cause Summed Service, Inc., a Delaware corporation ("Summed") to agree to
terminate that certain Sublease dated April 15, 1996 between Seller and Summed,
as amended, and to vacate the leased premises within 90 days.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations, Etc. Except as to (i) the
representations and warranties contained in Section 4.22 relating to
environmental issues, which shall survive the Closing until the expiration of
three (3) years from the Closing Date, (ii) the representations and warranties
contained in Section 4.5 relating to title to assets, which shall survive the
Closing and remain in effect indefinitely, and (iii) the representations and
warranties contained in Section 4.18 relating to tax matters, which shall
survive the Closing until 60 days after the expiration of the last day on which
any Tax may be validly assessed by the Internal Revenue Service or any other
governmental authority against the Purchased Assets or the Business with respect
to circumstances or transactions on or prior to the Closing Date, the
representations and warranties of Seller and Buyer contained herein or in any
list,
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certificate, or other instrument furnished by or on behalf of Seller or Buyer
pursuant hereto, shall survive until March 31, 1998, without regard to any
investigation made by any of the parties hereto.
10.2 Indemnification. Parent and Seller shall jointly and severally
indemnify Buyer against, and hold Buyer harmless from, any damage, claim,
liability or expense, including without limitation, interest, penalties and
reasonable attorneys' fees (collectively, "Damages"), arising out of (i) the
breach of any warranty, representation, covenant or agreement of Parent and/or
Seller contained in this Agreement, or in any list, certificate, or other
instrument furnished by or on behalf of Parent or Seller pursuant hereto (ii)
any Taxes with respect to the Business or Seller for all periods, or portions
thereof, on or prior to the Closing Date, and the transfer from Seller to Buyer
of the Purchased Assets, (iii) any Employee Plan, except with respect to the
severance obligations described in Section 9.4 hereof, (iv) any failure to
comply with any "bulk sales" laws applicable to the transactions contemplated
hereby, (v) the conduct of the Business or any portion thereof or the use or
ownership of any of the Purchased Assets prior to or on the Closing Date (other
than the Assumed Liabilities), (vi) any liabilities with respect to Seller or
the Business not expressly assumed herein, including, without limitation, any
liabilities or obligations arising from or under any Environmental Law with
respect to Seller, its affiliates and the Business prior to or on the Closing
Date, (vii) any Damages arising out of any claim, suit, litigation, proceeding,
criminal prosecution, or any governmental audit, inquiry or investigation
related to the accounting irregularities of Seller, including the Division,
previously investigated by Parent and currently under investigation by the
Securities Exchange Commission, (viii) the amount, if any, by which the total
rent paid by Buyer under any Master Lease for the period from the Closing Date
through the date of termination of such Master Lease exceeds the total rent paid
to Buyer under the respective Sublease relating to such Master Lease for the
period from the Closing Date through the date of termination of such Master
Lease, and (ix) any claim made in connection with the Division's use of software
purchased from Universal Information Systems. Buyer shall indemnify and hold
each of Parent and Seller harmless from any Damages arising out of the breach of
any warranty, representation, covenant or agreement of Buyer contained in this
Agreement, or in any list, certificate, or other instrument furnished by or on
behalf of Parent or Seller pursuant hereto. Any payment pursuant to this Article
X shall be treated as an adjustment of the Purchase Price.
10.3 Indemnification Procedures. Upon Buyer becoming aware of a fact,
condition or event which constitutes a breach of any of the representations,
warranties, covenants or agreements of Parent or Seller contained herein, or in
any list, certificate, or other instrument furnished by or on behalf of Parent
or Seller pursuant hereto, if a claim for Damages in respect thereof is to be
made against Parent or Seller under this Article X, Buyer
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will with reasonable promptness notify Parent and Seller in writing of such
fact, condition or event. If such fact, condition or event is the assertion of a
claim by a third party, Parent and Seller will be entitled to participate in or
take charge of the defense against such claim, provided that Parent, Seller and
Parent's counsel shall proceed with diligence and in good faith with respect
thereto.
Upon Parent or Seller becoming aware of a fact, condition or event
which constitutes a breach of any of the representations, warranties, covenants
or agreements of Buyer contained herein, or in any list, certificate, or other
instrument furnished by or on behalf of Buyer pursuant hereto, if a claim for
Damages in respect thereof is to be made against Buyer under this Article X,
Parent or Seller will with reasonable promptness notify Buyer in writing of such
fact, condition or event. If such fact, condition or event is the assertion of a
claim by a third party, Buyer will be entitled to participate in or take charge
of the defense against such claim, provided that Buyer and its counsel shall
proceed with diligence and in good faith with respect thereto.
10.4 Limitations. Notwithstanding anything to the contrary contained in
this Agreement, (i) a party from whom indemnification is sought under this
Article X with respect to a breach of representations or warranties contained
herein, or in any list, certificate, or other instrument furnished by or on
behalf of Parent or Seller pursuant hereto, shall not be liable to the party
seeking indemnification for any Damages relating to such a breach unless and
until the aggregate amount of such Damages exceeds $350,000 (the "Threshold
Amount") and thereafter the total amount of all such Damages actually incurred
above $175,000 shall be indemnifiable, (ii) the aggregate Damages for which
indemnification may be sought against any party with respect to a breach of
representations or warranties contained herein, or in any list, certificate, or
other instrument furnished by or on behalf of Parent or Seller pursuant hereto,
shall in no event exceed the Purchase Price, and (iii) Buyer's exclusive remedy
for the alleged inadequacy of reserves, accruals, allowances or any other item
set forth on the Closing Balance Sheet shall be the Post-Closing Adjustment set
forth in Section 3.3 hereof; provided, however, that the limitations imposed by
(x) clauses (i) and (ii) of this Section 10.4 shall not apply to (A) Damages
resulting from or relating to any misrepresentation or breach of warranty
contained in Section 4.5 or Section 4.15 hereof, or (B) any willful
misrepresentation made by Parent or Seller, and (y) clause (iii) of this Section
10.4 shall not limit Buyer's rights under Section 10.2(vi).
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ARTICLE XI
COVENANT NOT TO COMPETE
Parent and Seller each acknowledge and agree that the Division's
reputation and goodwill are an integral part of its business success throughout
the areas where it conducts its business. If Parent or Seller deprives Buyer of
any of the Division's goodwill or in any manner utilizes its reputation and
goodwill in competition with the Division, Buyer will be deprived of the
benefits it has bargained for pursuant to this Agreement. Accordingly, as an
inducement for Buyer to enter into this Agreement, Parent and Seller agree that
for a period of ten (10) years after the Closing Date, Parent and Seller shall
not and shall cause their affiliates not to, without Buyer's prior written
consent, directly or indirectly, own, manage, operate, control or participate in
the ownership, management, operation or control of any profit or non-profit
business or organization which, directly or indirectly, at any location
throughout the world, engages in the Business; provided, however, that nothing
herein shall prohibit Parent or Seller or their affiliates from acquiring a
stock interest in a corporation, provided such stock is publicly traded and the
stock so acquired is not more than five percent (5%) of the outstanding shares
of such company; provided further that nothing herein shall prohibit Parent or
Seller or their affiliates from, directly or indirectly, owning, managing,
operating, controlling or participating in the ownership, management, operation
or control of any profit or non-profit business or organization which, directly
or indirectly, at any location throughout the world, engages in the Bio Clinic
Business so long as such business or organization does not engage in the
Business. Parent and Seller agree to maintain in confidence, and not to disclose
to any third party, any ideas, methods, developments, inventions, improvements
and business plans and information which are the confidential information of the
Division. In the event the agreement in this Article XI shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or over too great a geographical area
or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
Parent and Seller each acknowledge that a breach of the covenants
contained in this Article XI will cause irreparable damage to Buyer, the exact
amount of which will be difficult to ascertain, and that the remedies at law for
any such breach will be inadequate. Accordingly, Parent and Seller agree that if
Parent or Seller breaches the covenant contained in this Article XI, in addition
to any other remedy which may be available at law or in
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equity, Buyer shall be entitled to specific performance and injunctive relief,
without posting bond or other security.
ARTICLE XII
MISCELLANEOUS
12.1 Termination. This Agreement shall terminate automatically if the
Closing Date has not occurred on or prior to November 30, 1996. No party shall
be released from liability hereunder if this Agreement is terminated and the
transactions abandoned by reason of (i) the failure of such party to have
performed its obligations hereunder, or (ii) any willful misrepresentation made
by such party of any matter set forth herein.
12.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Parent or Seller without the prior
written consent of Buyer, or by Buyer without the prior written consent of
Parent and Seller; provided, however, that (a) upon notice to Parent and Seller,
Buyer may assign or delegate any or all of its rights or obligations under this
Agreement to any affiliate of Buyer or to any person or entity that acquires all
or substantially all of the assets or voting stock of Buyer, and (b) Buyer may
make a collateral assignment of its rights under this Agreement to any
institutional lender who provides funds to Buyer to consummate the transactions
contemplated hereby. Parent and Seller agree to execute acknowledgements of such
assignments and collateral assignments in such forms as Buyer or Buyer's
institutional lender(s) may from time to time reasonably request. In the event
of such a proposed assignment by Buyer, the provisions of this Agreement shall
inure to the benefit of and be binding upon Buyer's assigns. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, and no other person
shall have any right, benefit or obligation hereunder.
12.3 Notices; Transfer of Funds. Unless otherwise provided herein, all
notices, requests, demands and other communications which are required or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method; the day
after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and three (3)
business days after sent, if sent by certified or registered mail, return
receipt requested. In each case notices shall be sent to:
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If to Seller:
Sunrise Medical Inc.
2382 Faraday Avenue, Suite 200
Carlsbad, California 92008
Telephone: (619) 930-1540
Telecopy: (619) 930-1587
Attention: Steven A. Jaye, Esq.
with a copy to:
Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Telephone: (714) 755-8220
Telecopy: (714) 755-8290
Attn: Jeffrey T. Pero, Esq.
If to Buyer:
Crain Industries, Inc.
101 S. Hanley Road, Suite 400
St. Louis, Missouri 63105
Telephone: (314) 746-2245
Telecopy: (314) 746-2299
Attention: Mr. David M. Sindelar
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Telephone: (214) 740-7300
Telecopy: (214) 740-7313
Attention: Lawrence D. Stuart Jr.
Al Diekmann
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Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telephone: (214) 746-7859
Telecopy: (214) 746-7777
Attention: Mr. David J. Webster
or to such other place and with such other copies as a party may designate as to
itself by written notice to the others.
Payments to be made to Seller hereunder shall be made by wire transferred
funds to be delivered to an account designated by Seller not later than five
business days prior to the Closing Date.
12.4 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the internal laws of the
State of California without regard to principles of conflict of laws.
12.5 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.7 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
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12.8 Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
12.9 Expenses. Seller and Buyer will each be liable for its own costs and
expenses incurred in connection with the negotiation, preparation, execution or
performance of this Agreement. Notwithstanding the foregoing, all sales, use,
transfer, stamp, conveyance, value added or other similar taxes, duties, excises
or governmental charges imposed by any taxing jurisdiction, domestic or foreign,
and all recording or filing fees, notarial fees and other similar costs of
Closing with respect to the transfer of the Purchased Assets and the assumption
of the Assumed Liabilities or on account of this Agreement or the transactions
contemplated hereby will be borne by Seller.
12.10 Publicity. Except as required by law (including without limitation
the federal or foreign securities laws or exchange rules applicable to the
parties and their affiliates), neither Parent, Seller nor Buyer shall issue any
press release, other than a press release substantially in a form previously
reviewed and approved by all parties hereto, or make any public statement
regarding the transactions contemplated hereby without the prior written consent
of the other, which shall not be unreasonably withheld or delayed.
12.11 Confidential Information.
(a) The parties acknowledge that the transaction described herein is
of a confidential nature and shall not be disclosed except to consultants,
advisors and affiliates, or as required by law, until such time as the parties
make a public announcement regarding the transaction as provided in Section
12.10. Neither Parent, Seller nor Buyer 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 the consummation of
the transactions contemplated hereby, each party acknowledges that it will have
access to confidential information relating to the other parties. Each party
shall treat such information as confidential, preserve the confidentiality
thereof and not duplicate, use or disclose such information, except (i) to
advisors, consultants and affiliates in connection with the transactions
contemplated hereby, and (ii) disclosures made in response to a binding order
from a court or governmental body or agency compelling its production; provided,
however, that in the event that a party is compelled by such a binding order to
disclose confidential information pertaining to another party, the party so
compelled shall promptly notify the party about whom the information pertains so
that an appropriate protective order may be sought.
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(b) Seller, at a time and in a manner which it reasonably determines
and after prior notice to and consultation with Buyer, may notify employees of
the fact of the subject transaction. In the event of the termination of this
Agreement for any reason whatsoever, each party shall return to the other all
documents, work papers and other material (including all copies thereof)
obtained in connection with the transactions contemplated hereby and will use
all reasonable efforts, including instructing its employees and others who have
had access to such information, to keep confidential and not to duplicate, use
or disclose such information unless such information is now or hereafter
disclosed, through no act or omission of such party, in any manner making it
available to the general public.
12.12 Acquisition Proposals.
(a) From and after the date of this Agreement and until the
Exclusivity Termination Date (as defined in Section 12.12(b) below), neither
Parent nor Seller shall, nor shall either of them authorize or permit any
officer, director or employee of, or any investment banker, attorney, accountant
or other representative retained by Parent or Seller to, solicit, initiate or
encourage submission of any proposal or offer (including by way of furnishing
information) from any person which constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal. As used in this Agreement, "Acquisition
Proposal" shall mean any proposal for a merger or other business combination
involving the Division or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of the
Division.
(b) For purposes of this Agreement, "Exclusivity Termination Date"
shall mean the earliest to occur of (i) the Closing, (ii) September 30, 1996,
unless Buyer shall have delivered to Seller on or prior to such date evidence of
the approval of Buyer's Lenders to the transactions contemplated hereby and an
irrevocable waiver by Buyer of the condition relating thereto and contained
herein, or (iii) the termination of this Agreement.
12.13 Rights of the Parties. Except as provided in Section 12.2, nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the parties hereto and their
respective affiliates any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
12.14 No Recourse. Notwithstanding any of the terms or provisions of this
Agreement, Parent and Seller agree that neither of them nor any person acting on
their behalf may assert any claims or causes of action against any officer,
director or stockholder of Buyer in connection with or arising out of this
Agreement or the transactions contemplated
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hereby, and Buyer agrees that it nor any person acting on its behalf may assert
any claims or causes of action against any officer, director or stockholder of
Parent or Seller in connection with or arising out of this Agreement or the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf by their respective officers thereunto
duly authorized, as of the day and year first above written.
SUNRISE MEDICAL, INC., CRAIN INDUSTRIES, INC.,
a Delaware corporation a Delaware corporation
By /s/ Richard H. Chandler By /s/ James G. Powers
------------------------- ------------------------
Name Richard H. Chandler Name James G. Powers
----------------------- ----------------------
Its Chairman and President Its Vice President - CFO
------------------------ ----------------------
BIO CLINIC CORPORATION,
a Delaware corporation
By /s/ Richard H. Chandler
---------------------------
Name Richard H. Chandler
---------------------------
Its Chairman and President
---------------------------
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