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EXHIBIT 2.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
dated as of July 7, 2000
among
DEPUY ORTHOPAEDIC TECHNOLOGY, INC.,
as SELLER
and
DJ ORTHOPEDICS, LLC AND
DONJOY, L.L.C.
collectively, as BUYER
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TABLE OF CONTENTS
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PAGE
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ARTICLE I DEFINITIONS AND INTERPRETATIONS....................................................................1
1.1 DEFINITIONS........................................................................................1
1.2 INTERPRETATION.....................................................................................6
ARTICLE II PURCHASE AND SALE.................................................................................7
2.1 PURCHASE AND SALE..................................................................................7
2.2 EXCLUDED ASSETS....................................................................................8
2.3 ASSUMED LIABILITIES................................................................................9
2.4 EXCLUDED LIABILITIES...............................................................................9
2.5 ASSIGNMENT OF CONTRACTS AND RIGHTS................................................................10
2.6 PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE......................................................10
2.7 CLOSING; PAYMENT OF PURCHASE PRICE................................................................11
2.8 PREPARATION OF PRICE ADJUSTMENT STATEMENT.........................................................11
2.9 CLOSING STATEMENT.................................................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER........................................................13
3.1 CORPORATE EXISTENCE AND POWER.....................................................................14
3.2 CORPORATE AUTHORIZATION; SUBSIDIARIES.............................................................14
3.3 GOVERNMENTAL AUTHORIZATIONS.......................................................................14
3.4 NONCONTRAVENTION..................................................................................14
3.5 REQUIRED CONSENTS.................................................................................15
3.6 FINANCIAL STATEMENTS..............................................................................15
3.7 ABSENCE OF UNDISCLOSED LIABILITIES................................................................15
3.8 ABSENCE OF CERTAIN CHANGES........................................................................15
3.9 CONTRACTS; NO DEFAULTS............................................................................16
3.10 LITIGATION........................................................................................16
3.11 COMPLIANCE WITH LAWS AND COURT ORDERS.............................................................17
3.12 PROPERTIES........................................................................................17
3.13 INTELLECTUAL PROPERTY.............................................................................18
3.14 FINDERS' FEES.....................................................................................19
3.15 SUPPLIERS AND VENDORS.............................................................................19
3.16 CUSTOMERS.........................................................................................19
3.17 SUFFICIENCY OF PURCHASED ASSETS; CONDITION OF PURCHASED ASSETS....................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........................................................19
4.1 LEGAL EXISTENCE AND POWER.........................................................................19
4.2 AUTHORIZATION.....................................................................................20
4.3 GOVERNMENTAL AUTHORIZATIONS.......................................................................20
4.4 NONCONTRAVENTION..................................................................................20
4.5 LITIGATION........................................................................................20
4.6 FINDERS' FEES.....................................................................................21
ARTICLE V COVENANTS OF SELLER...............................................................................21
5.1 CONDUCT OF THE BUSINESS...........................................................................21
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY............................................................21
5.3 NOTICES OF CERTAIN EVENTS.........................................................................22
5.4 NON-COMPETITION...................................................................................22
ARTICLE VI COVENANTS OF BUYER...............................................................................23
6.1 CONFIDENTIALITY...................................................................................23
6.2 ACCESS; CONFIDENTIALITY...........................................................................24
6.3 TRADEMARKS; TRADENAMES............................................................................24
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6.4 RETURNED GOODS....................................................................................25
ARTICLE VII COVENANTS OF BUYER AND SELLER...................................................................25
7.1 GENERAL...........................................................................................25
7.2 FURTHER ASSURANCES................................................................................25
7.3 CERTAIN FILING....................................................................................26
7.4 PUBLIC ANNOUNCEMENTS..............................................................................26
7.5 CONSENTS..........................................................................................26
7.6 MISDIRECTED PROCEEDS..............................................................................27
7.7 CORPORATE NAME CHANGE.............................................................................27
7.8 PHYSICAL TRANSFER OF PURCHASED ASSETS.............................................................27
7.9 TERMINATION OF DISTRIBUTION AGREEMENTS............................................................27
ARTICLE VIII EMPLOYEE MATTERS...............................................................................28
8.1 EMPLOYEES.........................................................................................28
8.2 TERMS OF EMPLOYMENT...............................................................................28
8.3 BENEFITS..........................................................................................29
8.4 BENEFITS REQUIREMENTS.............................................................................29
8.5 SELLER'S BENEFIT PLANS............................................................................30
ARTICLE IX TAX MATTERS......................................................................................30
9.1 TAX DEFINITIONS...................................................................................30
9.2 TAX MATTERS.......................................................................................30
9.3 TAX COOPERATION; ALLOCATION OF TAXES..............................................................31
ARTICLE X CONDITIONS TO CLOSING.............................................................................32
10.1 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER.....................................................32
10.2 CONDITIONS TO OBLIGATIONS OF BUYER................................................................32
10.3 CONDITIONS TO THE OBLIGATIONS OF SELLER...........................................................33
ARTICLE XI SURVIVAL; INDEMNIFICATION........................................................................34
11.1 SURVIVAL..........................................................................................34
11.2 INDEMNIFICATION...................................................................................34
11.3 PROCEDURES........................................................................................36
11.4 CALCULATION OF DAMAGES............................................................................36
11.5 ASSIGNMENT OF CLAIMS..............................................................................37
11.6 EXCLUSIVITY.......................................................................................37
ARTICLE XII TERMINATION.....................................................................................37
12.1 GROUNDS FOR TERMINATION...........................................................................37
12.2 EFFECT OF TERMINATION.............................................................................38
ARTICLE XIII MISCELLANEOUS..................................................................................38
13.1 NOTICES...........................................................................................38
13.2 WAIVERS...........................................................................................39
13.3 EXPENSES..........................................................................................39
13.4 SUCCESSORS AND ASSIGNS............................................................................39
13.5 GOVERNING LAW.....................................................................................39
13.6 MEDIATION.........................................................................................39
13.7 DISPUTE RESOLUTION................................................................................40
13.8 COUNTERPARTS; THIRD PARTY BENEFICIARIES...........................................................43
13.9 ENTIRE AGREEMENT..................................................................................43
13.10 BULK SALES LAW....................................................................................43
13.11 HEADINGS..........................................................................................43
13.12 DISCLOSURE SCHEDULES..............................................................................43
13.13 CONFIDENTIALITY AGREEMENT.........................................................................44
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13.14 NO SHOP...........................................................................................44
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SCHEDULES
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Schedule 1 - Products
Schedule 2.1(b) - Assigned Contracts
Schedule 2.1(c) - Personal Property and Fixtures
Schedule 2.1(j) - Purchased Assets and Properties from Seller's Foreign Affiliates
Schedule 2.2(e) - Excluded Property and Assets
Schedule 3.3 - Seller Governmental Authorizations
Schedule 3.5 - Required Consents
Schedule 3.8 - Absence of Certain Changes
Schedule 3.9(a) - Contracts
Schedule 3.10 Litigation
Schedule 3.11 - Compliance with Laws; Permits
Schedule 3.12(a) - Real Property
Schedule 3.12(b) - Liens
Schedule 3.13(a) - Business Intellectual Property
Schedule 3.13(d) - Royalties, etc.
Schedule 3.15 - Insurance
Schedule 3.17 - Customers
Schedule 3.18(b) - Condition of Purchased Assets
Schedule 4.3 - Buyer Governmental Authorizations
Schedule 7.8 - Physical Transfer of Purchased Assets
Schedule 9.2(a) - Contested Taxes
Schedule 10.1 - Certain Governmental Entities
Schedule 10.2(c) - Closing Consents
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EXHIBITS
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Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Statement of Assets and Liabilities
Exhibit C - Form of Transition Services Agreement
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July
7, 2000, is by and among DePuy Orthopaedic Technology, Inc., a Delaware
corporation ("SELLER"), dj Orthopedics, LLC, a Delaware limited liability
company ("DJ"), and DonJoy, L.L.C., a Delaware limited liability company
("DONJOY") (DJ and DonJoy, collectively, the "BUYER").
WITNESSETH:
WHEREAS, Seller conducts a business which manufactures, sells and
distributes the Products (as defined below) (the "BUSINESS");
WHEREAS, Buyer desires to purchase certain of the assets and assume
certain of the Liabilities of the Business from Seller, and Seller desires to
sell or cause to be sold to Buyer certain of the assets and transfer certain of
the Liabilities of the Business to Buyer, upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of mutual representations, agreements
and covenants hereinafter set forth, Seller and Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1.1 DEFINITIONS.
(a) For purposes of this Agreement, the following terms, as used
herein, shall have the following meanings:
"ACCOUNTS RECEIVABLE" shall mean all trade receivables arising in
the normal course of business, offset by an allowance for doubtful accounts,
product returns and rebates and excluding all credit allowances related to
written express product warranties.
"AFFILIATE" shall mean any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled-by or is under
common control with such Person.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an Assignment
and Assumption Agreement in the form of Exhibit A to be executed by the parties
at the Closing.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement
between Buyer and Seller dated August 16, 1999.
"CONTROL" of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"EMPLOYEE BENEFIT PLAN" shall mean (i) any "EMPLOYEE BENEFIT
PLAN" (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended), whether a single employer, a multiple employer or a
multiemployer plan, including each related trust, custodial account or insurance
contract, or (ii) any other plan, policy, program, practice or
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arrangement providing compensation or benefits, including, without limitation,
retirement, pension, profit sharing, vacation, holiday, medical, severance,
disability, death, incentive compensation, stock option, or stock purchase or
other similar benefits, whether written or unwritten.
"FUNDED INDEBTEDNESS" means the aggregate amount T(including the
current portions thereof) of all (i) indebtedness of Seller for money borrowed
from others (whether or not an Affiliate), purchase money indebtedness of Seller
(other than accounts payable in the ordinary course), and reimbursement
obligations of Seller with respect to letters of credit, (ii) indebtedness of
the type described in clause (i) above guaranteed in any manner by Seller, or in
effect guaranteed, directly or indirectly, in any manner by Seller through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the debtor, or to purchase indebtedness, or to purchase and pay for
property if not delivered or pay for services if not performed, primarily for
the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss, but excluding endorsements
of checks and other instruments in the ordinary course of business, (iii) all
indebtedness of the type described in clause (i) above secured by any Lien upon
property owned by Seller, even though the Seller has not in any manner become
liable for the payment of such indebtedness, and (iv) all interest expense
accrued but unpaid, and all repayment premiums and penalties, on or relating to
any of such indebtedness.
"GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied.
"GOVERNMENTAL ENTITY" shall mean any federal, state, local or
foreign government and any court, tribunal, arbitrator, administrative agency,
including, without limitation, the FDA, commission or other governmental or
regulatory authority or agency, whether domestic, foreign or supranational and
whether legislative, executive, judicial or otherwise.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INTELLECTUAL PROPERTY" shall mean (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights, and all applications, registrations and renewals in connection
therewith, (d) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (e) all copies and
tangible embodiments thereof (in whatever form or medium) and (f) all interests
in proprietary computer programs, shrink-wrap programs and websites, domain
names, universal
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resource locators and internet addresses and software, hardware and licenses
connected therewith.
"J&J" shall mean Johnson & Johnson, a New Jersey corporation.
"LIABILITY" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"LIEN" shall mean, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or
other contract to give the foregoing in respect of such property or asset.
"LAW" shall mean any constitution, law, statute, code, treaty,
rule, directive, ordinance or regulation or Order enacted, adopted, issued or
promulgated by any Governmental Entity.
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" shall
mean any event or situation that has a material adverse change or effect,
respectively, on the business, operations, assets, Liabilities, results of
operations, cash flows or financial condition, relations with material customers
or material suppliers, of the Business, taken as a whole, except any such effect
resulting from or arising in connection with (i) this Agreement or the
transactions contemplated hereby, (ii) changes or conditions affecting the
orthopedic industry generally, (iii) changes in economic, regulatory or
political conditions generally or (iv) resignations or departures of employees
of the Business.
"NET INVENTORY" shall mean as of a particular date the value of
the inventory of saleable finished Products held for sale and work in process
plus Product specific raw materials and supplies in connection with the
manufacture and/or distribution of saleable products as valued under GAAP using
Seller's inventory accounting policies in effect on the date of the Audited
Financial Statements.
"NON-ORTHOPEDIC AFFILIATE" shall mean an Affiliate of Seller for
purposes of Section 5.4 hereof which does not derive a material portion of its
revenue from the sale, license, lease or distribution for promotion of device in
the orthopedic medical devices industry; provided, however, that J&J shall not
constitute a Non-Orthopedic Affiliate for purposes hereof.
"ORDER" shall mean judgments, writs, decrees, compliance
agreements, injunctions, enforcement actions, including, without limitation, any
fines, penalties, recalls or suspensions, or orders of any Governmental Entity.
"PERSON" shall mean an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PROCEEDINGS" shall mean actions, suits, claims, investigations
or legal, administrative or arbitration proceedings.
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"PRODUCTS" shall mean the products described on Schedule 1
hereto.
"RELATED DOCUMENTS" shall mean the Assignment and Assumption
Agreement and Transition Services Agreement.
"REPLACEMENT PRODUCTS" shall mean any advancements, improvements
or "product line extensions" relating to or with respect to the Products;
provided that the Replacement Products shall not include internally ingested
substances or implanted medical devices.
"SELLER'S KNOWLEDGE" shall mean the (i) actual knowledge, without
investigation, of Tom Oberhausen, Nanette Benson, Kevin Sidow and Greg Bidlack
and (ii) that knowledge which Tom Oberhausen, Nanette Benson, Kevin Sidow and
Greg Bidlack would normally have obtained in the management and oversight of the
Business.
"SELLER'S RESTRICTED BUSINESS" shall mean the business of
selling, licensing, leasing or otherwise deriving revenue from the (i) Products
or (ii) Replacement Products.
"STATEMENT OF ASSETS AND LIABILITIES" shall have the meaning
given to it in Section 3.6(a)(ii) and, with the Audited Financial Statements, is
attached hereto as Exhibit B.
"TRANSITION SERVICES AGREEMENT" shall mean a Transition Services
Agreement in the form of Exhibit C to be executed by the parties at the Closing.
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TERM SECTION
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Accounting Firm ................................................ 2.8(a)
Acquisition Expenses ........................................... 13.14(a)
Audited Financial Statements ................................... 3.6(a)
Agreed Rate .................................................... 2.8(c)
Allocation ..................................................... 2.6(b)
Another Transaction ............................................ 13.14(a)
Appeal Arbitrator .............................................. 13.7(g)
Apportioned Obligations ........................................ 9.3(b)
Assigned Contracts ............................................. 2.1(b)
Assumed Liabilities ............................................ 2.3
Business Intellectual Property ................................. 3.13(a)
Closing ........................................................ 2.7(a)
Closing Date ................................................... 2.7(a)
Closing Statement .............................................. 2.9
Code ........................................................... 9.l
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TERM SECTION
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Comparable Employment........................................... 8.1
Competing Business ............................................. 5.4
Contracts ...................................................... 3.9
CPR ............................................................ 13.6(a)
Damages ........................................................ 11.2(a)
Determination Date ............................................. 3.6(a)
Dispute ........................................................ 13.6(a)
Excluded Assets ................................................ 2.2
Excluded Liabilities ........................................... 2.4
FDA ............................................................ 3.11(b)
Indemnified Party .............................................. 11.3(a)
Indemnifying Party ............................................. 11.3(a)
Just Cause ..................................................... 8.2
Leases ......................................................... 2.2(i)
Negative Purchase Price Adjustment ............................. 2.8(b)
Non-Compete Period ............................................. 5.4
Notice of Disagreement ......................................... 2.8(a)
Permits ........................................................ 2.1(g)
Permitted Liens ................................................ 3.12(b)(v)
Pre-Closing Period ............................................. 5.1
Pre-Closing Tax Period ......................................... 9.1
Price Adjustment Statement ..................................... 2.8(a)
Positive Purchase Price Adjustment ............................. 2.8(b)
Post-Closing Tax Period ........................................ 9.3(b)
Potential Contributor .......................................... 11.5
Purchase Price ................................................. 2.6(a)
Purchase Price Adjustment Due Date ............................. 2.8(c)
Purchased Assets ............................................... 2.1
Real Property .................................................. 3.12
Representatives ................................................ 5.2
Required Consents .............................................. 3.5
Seller Intellectual Property ................................... 2.2(c)
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TERM SECTION
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Seller Mark..................................................... 6.3
Statement of Assets and Liabilities ............................ 3.6(a)
Target Inventory Amount ........................................ 2.8(a)
Tax ............................................................ 9.1
Taxing Authority ............................................... 9.1
Tax Return ..................................................... 9.1
Third Party Claim .............................................. 11.3(b)
Transfer Taxes ................................................. 9.3(c)
Transferred Employee ........................................... 8.1
Unaudited Financial Statements ................................. 3.6(a)
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1.2 INTERPRETATION.
(a) Unless otherwise provided herein all monetary values stated herein
are expressed in United States currency.
(b) Each accounting term set forth herein and not otherwise defined
shall have the meaning accorded it under GAAP as applied on a consistent basis
by Seller. For the avoidance of doubt, in the event of any discrepancy between
GAAP and the provisions of this Agreement, the provisions of this Agreement
shall control.
(c) Any statute, statutory instrument, regulation, bylaw or other
requirement of U.S. federal, state or local law and any U.S. legal term for any
action, remedy, method of judicial proceeding, legal documents, legal status,
procedure, court, official or any legal concept or doctrine or other expression
shall in respect of any non-U.S. jurisdiction be deemed include that which most
nearly approximates in such non-U.S. jurisdiction such U.S. statute, statutory
instrument, regulation, bylaw other requirement of law or legal term.
(d) Whenever conversion of payments from any foreign currency for a
particular date or period shall be required, such conversion shall be made at
the average of the bid and ask rate published by Reuters for the conversion of
such foreign currency into United States currency as of such date or period.
Whenever conversion of payments from any foreign currency for a particular
period shall be required, such conversion shall be made at the average of the
beginning and end of month exchange rates used by Seller for income statement
financial reporting purposes for the applicable months.
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ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE.
Except as otherwise provided below, upon the terms and subject to the
conditions of this Agreement, Buyer agrees to purchase and acquire from Seller,
and Seller agrees to sell, convey, transfer, assign and deliver, or cause to be
sold, conveyed, transferred, assigned and delivered, to Buyer at Closing, free
and clear of all Liens, other than the Permitted Liens, all of Seller's right,
title and interest in, to and under the assets, properties, interests in
properties and rights of Seller of every kind, nature and description, whether
real, personal or mixed, tangible or intangible (and other than the Excluded
Assets), owned or used in the conduct of the Business by Seller, wherever
located, as the same may exist on the Closing Date (the "PURCHASED ASSETS"),
including, without limitation, but except as otherwise provided below, all
right, title and interest of Seller in, to and under the following Purchased
Assets to the extent owned, held or used in the conduct of the Business:
(a) the assets and properties identified on the Closing Statement,
including (i) all personal property and interests therein, (ii) all Business
Intellectual Property, (iii) all raw materials, work-in-process, finished goods,
supplies and other inventories (except as described in Section 2.2(j)) and (iv)
all prepaid expenses other than those prepaid expenses relating to any Excluded
Asset;
(b) all rights under all contracts, agreements, licenses, commitments,
sales orders, purchase orders and other instruments listed on Schedule 2.1(b)
other than any rights under or to items described in Section 2.2(f)
(collectively, the "ASSIGNED CONTRACTS");
(c) all books, records, technical manuals, files and papers (Seller
having the right to retain copies), other than historical financial records,
related to the Business;
(d) all machinery and equipment, including, without limitation, all
manufacturing, production, maintenance, packaging, testing and other machinery,
tooling and equipment, molds, presses, motor vehicles and other vehicles, spare
or replacement parts, furniture, office equipment, supplies and other items of
tangible personal property used in the Business and listed on Schedule 2.1(d);
(e) all warranties and guarantees received from vendors, suppliers or
manufacturers with respect to the Purchased Assets or the Business;
(f) all stationery, sales and purchase order forms, forms, labels,
shipping material, catalogs, brochures, art work, photographs, marketing and
advertising material of the Business;
(g) all permits, licenses, authorizations, registrations, franchises,
approvals, certificates, variances and similar rights obtained from any
Governmental Entity ("PERMITS");
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(h) all rights, recoveries, refunds, counterclaims, rights of offset,
other rights, choses in action and claims (known or unknown, matured or
unmatured, accrued or contingent) of the Business against third parties that
result from or arise out of events, facts or circumstances occurring or
existing, on or after the Closing Date, other than any of the foregoing which
relate solely to the Excluded Assets or the Excluded Liabilities;
(i) all computer hardware and software programs and related databases
used exclusively in the conduct of the Business; and
(j) certain assets and properties of Seller's foreign Affiliates held
for use in the Business as set forth on Schedule 2.1(j).
2.2 EXCLUDED ASSETS.
Buyer expressly understands and agrees that the following assets,
properties or interest therein of Seller (the "EXCLUDED ASSETS") shall be
excluded from the Purchased Assets:
(a) all of Seller's cash and cash equivalents on hand and in banks;
(b) insurance policies relating to the Business and all claims,
credits, causes of action or rights thereunder that result from or arise out of
events, facts or circumstances occurring or existing on or prior to the Closing;
(c) all Intellectual Property of Seller and its Affiliates, other than
the Business Intellectual Property (the "SELLER INTELLECTUAL PROPERTY");
(d) all books, records, files and papers, whether in hard copy or
computer format, prepared in connection with this Agreement or the transactions
contemplated hereby and all minute books, tax records and corporate records
(including historical financial records) of Seller and its Affiliates;
(e) the property and assets described on Schedule 2.2(e);
(f) any Accounts Receivable, other receivables and any deferred Tax
asset of the Business;
(g) all of Seller's (and its Affiliates') right, title and interest in
its Employee Benefit Plans and the related assets;
(h) all Inventory sold or otherwise disposed of in the ordinary course
consistent with past practice from the date hereof until the Closing Date;
(i) the real property and leases of, and other interests in, real
property in each case together with all building and improvements erected
thereon, listed on Schedule 3.12(a) (collectively, the "LEASES");
(j) all assets and properties of Seller's foreign Affiliates used or
held for use in the Business, except for those assets and properties of Seller's
foreign Affiliates set forth on Schedule 2.1(j);
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(k) certain assets included in the line item entitled "Other Current
Assets" on the balance sheet of Seller as it exists on the Closing Date,
prepared in accordance with GAAP, consistently applied with the Audited
Financial Statements (assuming such balance sheet were to be prepared); and
(l) the product know as the "Global Shoulder Kit" and all related
work-in-process, supplies and other related inventory.
2.3 ASSUMED LIABILITIES.
Upon the terms and subject to the conditions of this Agreement, Buyer
agrees, effective at the time of the Closing, to pay or assume, perform and
discharge when due the following Liabilities relating to or arising out of the
conduct of the Business (the "ASSUMED LIABILITIES"):
(a) all Assumed Liabilities set forth on the Closing Statement;
(b) all Liabilities of Seller arising under the Assigned Contracts
from and after the Closing Date, but in each case only to the extent such
Assigned Contracts have been effectively assigned and transferred to Buyer
pursuant to the provisions hereof; and
(c) all Liabilities relating to any Products manufactured or sold by
Buyer from and after the Closing Date including, without limitation, warranty
obligations, product returns (in accordance with Section 6.4) and other product
Liabilities.
2.4 EXCLUDED LIABILITIES.
Notwithstanding any provision in this Agreement or any other writing to the
contrary, Buyer is assuming only the Assumed Liabilities and is not assuming any
other Liability of Seller of whatever nature, whether presently in existence or
arising hereafter. All such other Liabilities shall be retained by and remain
Liabilities of Seller (all such Liabilities not being assumed being hereinafter
referred to as the "EXCLUDED LIABILITIES"), and, notwithstanding anything to the
contrary in this Section 2.4, Buyer is not assuming and none of the following
shall be Assumed Liabilities for the purposes of this Agreement:
(a) any Liability for Taxes of Seller or relating to the Excluded
Assets for any period or any Liability for Taxes relating to the Business or the
Purchased Assets attributable to the Pre-Closing Tax Period; provided that
Transfer Taxes incurred in connection with the transactions contemplated by this
Agreement shall be paid in the manner set forth in Section 9.3(c) hereof;
(b) all accounts and trade payables, accrued Liabilities and booked
overdraft reserves of Seller, except to the extent such items relate to Assumed
Liabilities;
(c) any Liability relating to any Employee Benefit Plan;
(d) all Liabilities arising out of any action, suit, investigation or
Proceeding relating to or arising out of the Business or the Purchased Assets
before any court or arbitrator or any Governmental Entity;
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(e) any Liability relating to an Excluded Asset;
(f) any Liability of Seller under or pursuant to this Agreement and
the Assignment and Assumption Agreement;
(g) any Liability of Seller under any Contract (including, without
limitation, the Leases), and, with respect to the Assigned Contracts described
on in Section 2.1(b), those Liabilities arising out of a breach or alleged
breach thereof that occurred on or prior to the Closing;
(h) any Liability of Seller arising by reason of any violation or
alleged violation of any Law or Order or any requirement of any Governmental
Entity, to the extent such Liability results from or arises out of events, facts
or circumstances occurring or existing on or prior to the Closing,
notwithstanding that the date on which any Proceeding or claim is commenced or
made is after the Closing;
(i) any Liability for the product return (in accordance with Section
6.4) or product Liability, including that of any customer of Seller, of products
sold or distributed on or prior to the Closing, notwithstanding that the date on
which any Proceeding or claim is commenced or made is on or after the Closing
Date;
(j) any Liability of Seller with respect to any employee of Seller
that is not a Transferred Employee and, with respect to Transferred Employees,
those Liabilities that result from or arise out of events, facts or
circumstances occurring or existing on or prior to the date of hire by Buyer of
each Transferred Employee;
(k) any Liability related to Funded Indebtedness.
2.5 ASSIGNMENT OF CONTRACTS AND RIGHTS.
Anything in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement or attempted agreement to assign or transfer
any Purchased Asset or any right thereunder if an attempted assignment, without
the consent of a third party, would constitute a breach or in any way adversely
affect the rights of Buyer or Seller thereunder.
2.6 PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE.
(a) The purchase price for the Purchased Assets (the "PURCHASE PRICE")
is $47,111,000 in cash. The Purchase Price will be paid as provided in Section
2.7 and shall be subject to adjustment as provided in Section 2.8.
(b) Within ninety (90) days after the Closing Date, Buyer shall
prepare and deliver to Seller for its review and approval (which approval shall
not be unreasonably withheld) a statement setting forth the allocation of the
Purchase Price plus any Assumed Liabilities treated as Purchase Price for Tax
purposes. In the event of any adjustment in the Purchase Price pursuant to
Section 2.8 or otherwise, Buyer shall amend such allocation to reflect the
amount of any such adjustment due to an increase or decrease in value of one of
the categories as to which the Purchase Price has been allocated or deducted
from each such category of assets and the
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amount allocated to the non-compete provisions of Section 5.4 in an amount equal
to the actual increase or decrease occurring with respect to that particular
category of asset or amount allocated to the non-compete provisions of Section
5.4. Buyer and Seller agree to (i) be bound by the allocation set forth on such
allocation statement (the "ALLOCATION"), (ii) act in accordance with the
Allocation in the preparation of financial statements and filing of all Tax
Returns (including, without limitation, filing Form 8594 with its federal income
Tax Return for the taxable year that includes the date of the Closing) and (iii)
take no position inconsistent with the Allocation for all Tax purposes.
2.7 CLOSING; PAYMENT OF PURCHASE PRICE.
The closing (the "CLOSING") of the purchase and sale of the Purchased
Assets and the assumption of the Assumed Liabilities shall take place at the
offices of O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New
York, at 10:00 A.M., local time, as soon as possible, but in no event later than
five business days after satisfaction or waiver of the conditions set forth in
Article X, or such other date as may be mutually agreed upon by the parties
hereto (the "CLOSING DATE"). Seller and Buyer specifically acknowledge that time
is of the essence because Seller's intention to exit the Business is or will
become known to its employees, customers, suppliers and others having dealings
with Seller. At the Closing:
(a) Buyer shall deliver to Seller the Purchase Price in immediately
available funds by wire transfer to such bank account as Seller shall designate
in writing to Buyer at least two (2) business days prior to the Closing Date (or
if not so designated, then by certified or official bank check payable in
immediately available funds to the order of Seller in such amount).
(b) Seller and Buyer shall enter into an Assignment and Assumption
Agreement, and, subject to the provisions hereof, Seller shall deliver to Buyer
such bills of sale, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment as the parties and their
respective counsel shall deem reasonably necessary to vest in Buyer all right,
title and interest in, to and under the Purchased Assets. The patents and
trademarks included in the Purchased Assets shall be transferred to Buyer by a
general assignment delivered at Closing and by individual assignments delivered
after Closing pursuant to Section 7.2(b).
(c) Seller and Buyer shall enter into the Transition Services
Agreement.
(d) Seller and Buyer shall deliver or satisfy all other items or
obligations set forth in Article X.
2.8 PREPARATION OF PRICE ADJUSTMENT STATEMENT.
(a) Within sixty (60) days after the Closing Date, Seller shall
prepare and deliver to Buyer a statement as of the Closing Date (in its final
and binding form, the "PRICE ADJUSTMENT STATEMENT") setting forth the difference
between the Net Inventory as of the Closing Date and $5,866,000 (the "TARGET
INVENTORY AMOUNT"). In connection with the preparation of the Price Adjustment
Statement, Buyer and Seller shall cooperate and provide access to personnel and
facilities so that Seller may take and prepare a physical count of Net
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Inventory included in the Purchased Assets as of the close of business on the
Closing Date and deliver to Buyer a certificate that the Price Adjustment
Statement was prepared in accordance with GAAP using Seller's inventory
accounting policies in effect on the date of the Audited Financial Statements.
Representatives of Buyer shall be entitled to observe such physical count at
Buyer's own expense. The Price Adjustment Statement shall become final and
binding upon the parties on the thirtieth day following receipt thereof by Buyer
unless Buyer gives written notice of its disagreement (a "NOTICE OF
DISAGREEMENT") to Seller prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature and amount of any disagreement so
asserted. If a timely Notice of Disagreement is received by Seller, then the
Price Adjustment Statement (as revised in accordance with clause (x) or (y)
below) shall only become final and binding upon the parties on the earlier of
(x) the date the parties hereto resolve any differences they have with respect
to any matter specified in the Notice of Disagreement or (y) the date any
matters in dispute are resolved by an accounting firm (in accordance with the
procedure set forth in this Section 2.8) selected by Seller and Buyer or, if the
parties are unable to agree, an independent accounting firm selected by Seller's
and Buyer's independent accounting firms (such firm, the "ACCOUNTING FIRM").
During the 30 days immediately following the delivery of a Notice of
Disagreement, Seller and Buyer shall seek in good faith to resolve in writing
any differences which they may have with respect to any matter specified in the
Notice of Disagreement. At the end of such 30-day period, or such longer period
as may be mutually agreed, either Seller and Buyer shall submit for review and
resolution by the Accounting Firm any and all matters which remain in dispute
and which were included in the Notice of Disagreement, and the Accounting Firm
shall make a final determination of the Net Inventory as of the Closing Date
(and shall use such determination to prepare the final Price Adjustment
Statement), which determination shall be binding on the Parties, and determine
only those matters which remain in dispute and which were included in the Notice
of Disagreement. The parties agree that the adjustment contemplated by this
Section 2.8 is intended to show the difference in Net Inventory as of the
Closing Date from the Target Inventory, and that such difference can only be
measured if both inventory calculations are done in the same way and use the
Seller's inventory accounting policies in effect on the date of the Audited
Financial Statements. The scope of any dispute to be resolved by the Accounting
Firm shall be limited as to whether such calculation was done in accordance with
this Section 2.8(a), including whether Seller's inventory accounting policies
were used and whether there were mathematical errors in the Price Adjustment
Statement. The Price Adjustment Statement shall become final and binding on
Buyer and Seller on the date the Accounting Firm delivers the final Price
Adjustment Statement to the Parties. The fees and expenses of the Accounting
Firm pursuant to this Section 2.8 shall be borne one half each by Buyer and
Seller. Buyer and Seller acknowledge and agree that the provisions of Sections
11.2(c), 13.6 and 13.7 shall not apply to disputes described in this Section
2.8(a).
(b) If the Price Adjustment Statement discloses a positive net change
to the Target Inventory Amount, then the amount of such positive change (the
"POSITIVE PURCHASE PRICE ADJUSTMENT") shall be added on a dollar-for-dollar
basis to the Purchase Price. If the Price Adjustment Statement discloses a
negative net change to the Target Inventory Amount, then the Purchase Price
shall be reduced on a dollar-for-dollar basis by the amount of such negative net
change (the "NEGATIVE PURCHASE PRICE ADJUSTMENT").
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(c) No payment need be made by either party until the determination of
the final Price Adjustment Statement, provided that not later than three (3)
business days after the determination of the final Price Adjustment Statement
(such third business day being the "PURCHASE PRICE ADJUSTMENT DUE DATE"), Buyer
shall pay to Seller by wire transfer of immediately available funds to such bank
account as Seller shall designate in writing to Buyer, the Positive Purchase
Price Adjustment, if any, plus interest thereon from the Closing Date through
the date of payment at the prime rate published by the Wall Street Journal as
that rate may vary from time to time, or if that rate is no longer published, a
comparable rate (the "AGREED RATE").
(d) On or before the Purchase Price Adjustment Due Date, Seller shall
pay to Buyer, by wire transfer of immediately available funds to such bank
account as Buyer shall designate in writing to Seller, the Negative Purchase
Price Adjustment, if any, plus interest thereon from the Closing Date through
the date of payment at the Agreed Rate.
2.9 CLOSING STATEMENT.
Within five (5) business days after the receipt of the Price Adjustment
Statement, Buyer shall prepare and deliver to Seller a statement of the
Purchased Assets and the Assumed Liabilities as of the Closing Date (the
"CLOSING STATEMENT").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Buyer acknowledges and agrees that the Purchased Assets are sold "as is"
and Buyer agrees to accept the Purchased Assets in the condition they are in on
the Closing Date based on its own inspection, examination and determination with
respect to all matters, and without reliance upon any express or implied
representations or warranties of any nature made by, on behalf of or imputed to
Seller, except as expressly set forth in this Agreement or the Schedules or
Exhibits hereto. Without limiting the generality of the foregoing and except as
expressly set forth in this Agreement or the Schedules or Exhibits hereto, Buyer
acknowledges that Seller makes no representation or warranty with respect to (i)
any forecasts, projections, estimates or budgets delivered or made available to
Buyer of future revenues, future results of operations (or any component
thereof), future cash flows or future financial condition (or any component
thereof) of the Business or (ii) any other information or documents made
available to Buyer or its counsel, accountants or advisors with respect to the
Business, except as expressly set forth in this Agreement or the Schedules or
Exhibits hereto. BUYER AGREES THAT THE REPRESENTATIONS AND WARRANTIES GIVEN
HEREIN BY SELLER IS IN LIEU OF, AND BUYER HEREBY EXPRESSLY WAIVES ALL RIGHTS TO,
ANY IMPLIED WARRANTIES WHICH MAY OTHERWISE BE APPLICABLE BECAUSE OF THE
PROVISIONS OF THE UNIFORM COMMERCIAL CODE OR ANY OTHER STATUTE, INCLUDING,
WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
Subject to the foregoing and except as set forth in the disclosure schedule
attached hereto, Seller represents and warrants to Buyer as of the date hereof
as follows:
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3.1 CORPORATE EXISTENCE AND POWER.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Seller has all requisite corporate power
and authority and all Permits required to own, lease and operate its properties
and assets as they are now owned, leased and operated and to carry on the
Business as now conducted, except for those Permits the absence of which would
not have a Material Adverse Effect. Seller is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the Business
or the ownership, leasing or operation of its properties and assets makes such
qualification necessary, except for those qualifications the absence of which
would not have a Material Adverse Effect.
3.2 CORPORATE AUTHORIZATION; SUBSIDIARIES.
(a) Seller has the requisite corporate power and authority to enter into
this Agreement and the Assignment and Assumption Agreement, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Seller of this Agreement and the Assignment and Assumption Agreement and the
consummation of the transactions contemplated hereby and thereby are within
Seller's corporate powers and have been, or will be as of the Closing Date, duly
authorized by all necessary corporate action on the part of Seller. Each of this
Agreement and the Assignment and Assumption Agreement has been or will be at or
prior to the Closing duly and validly executed and delivered by Seller and is or
will be when executed, a valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, subject to general principles of
equity and except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws of general
application relating to creditors' rights.
(b) Seller does not own or hold, directly or indirectly, any equity
interest in any other Person.
3.3 GOVERNMENTAL AUTHORIZATIONS.
Except as set forth in Schedule 3.3, the execution, delivery and
performance by Seller of this Agreement and the consummation of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
Governmental Entity.
3.4 NONCONTRAVENTION.
The execution, delivery and performance by Seller of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate, conflict with or result in any violations of the certificate of
incorporation or bylaws of Seller, (ii) assuming compliance with the matters
referred to in Section 3.3, violate any applicable Law, (iii) assuming the
obtaining of all Required Consents, require any consent or other action by an
Person or constitute a default or breach under or give rise to any right of
termination, cancellation or acceleration of any right or obligation or to a
loss of any benefit relating to the Business to which Seller is entitled under
any provision or any agreement or other instrument binding upon Seller or (iv)
result in the creation or imposition of any Lien on any Purchased Assets, except
for Permitted Liens.
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3.5 REQUIRED CONSENTS.
Schedule 3.5 sets forth each agreement or instrument binding upon Seller
requiring a consent or other action by any Person as a result of the execution,
delivery and performance of this Agreement, except such consents or actions as
would not, individually or in the aggregate, have a Material Adverse Effect if
not taken or received by the Closing Date (the "REQUIRED CONSENTS").
3.6 FINANCIAL STATEMENTS.
(a) Prior to the date hereof, Seller has delivered true, complete and
correct copies (which copies are attached hereto as Exhibit B) of the:
(i) audited combined balance sheet of Seller as of December 31,
1998 and the audited combined balance sheet as of December 31, 1999
and the related audited combined statements of operations and changes
in invested equity and combined statements of cash flows of Seller for
the fiscal year ended December 31, 1999, the period October 29, 1998
through December 31, 1998, the period January 1, 1998 through October
28, 1998 and for the fiscal year ended December 31, 1997, and the
statement of revenues and expenses for the period January 1, 1998
through October 28, 1998 and for the fiscal year ended December 31,
1997 for the Bracing and Supports Business of Seller, each including
the footnotes thereto, as audited by Seller's accountants (the
"AUDITED FINANCIAL STATEMENTS"); and
(ii) unaudited combined balance sheet of Seller as of March 31,
2000 (the "STATEMENT OF ASSETS AND LIABILITIES" and such date the
"DETERMINATION DATE"), and the related unaudited combined statements
of operations and changes in invested equity and combined statements
of cash flows of the Seller for the three months ended March 31, 1999
and 2000, as reviewed by Seller's accountants ( such statements
together with Statements of Assets and Liabilities, the "UNAUDITED
FINANCIAL STATEMENTS").
(b) Each of the Audited Financial Statements and the Unaudited
Financial Statements, to the best of Seller's knowledge and belief, fairly
present, in conformity with GAAP applied on a consistent basis, the financial
position of Seller as of the dates indicated and the consolidated results of
operations of Seller for the periods indicated.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Seller has no Liability, except (i) those expressly reflected or reserved
against on the Statement of Assets and Liabilities and (ii) Liabilities under
Contracts set forth on Schedule 3.9 (excluding Liabilities arising from any
breach thereof).
3.8 ABSENCE OF CERTAIN CHANGES.
Except as set forth in Schedule 3.8, since the Determination Date, Seller
has operated the Business in the ordinary course, consistent with past practice,
and there has not been:
(a) any Material Adverse Change;
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(b) any payment or distribution whether of cash or assets to the
holder of the capital stock of Seller;
(c) any general uniform increase in the compensation of employees
(including, without limitation, any increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) of Seller, or any increase in any
such compensation payable to any officer, or key employee;
(d) any change in the tax or other accounting methods or practices
followed by Seller, any change in depreciation or amortization policies or rates
previously adopted or any write-up of inventory or other assets;
(e) any change in the manner in which products or services of Seller
are manufactured and marketed (including, without limitation, any change in
prices), any change in the manner in which Seller extends discounts or credits
to customers or any change in the manner or terms by which Seller collects its
accounts receivable or otherwise deals with customers;
(f) any failure by Seller to make scheduled capital expenditures;
(g) any incurrence by Seller of any Liability outside the ordinary
course of business consistent with past practice; or
(h) agree or commit to do any of the foregoing.
3.9 CONTRACTS; NO DEFAULTS.
(a) Schedule 3.9(a) contains a true and complete list and brief
description of all written or oral contracts, agreements, leases, licenses,
commitments, sales orders, third party payor agreements, purchase orders (with
purchase obligations in excess of $5,000 or extending beyond 90 days from the
Closing Date) and other instruments ("CONTRACTS") to which Seller is a party.
Except for the Contracts disclosed in Schedule 3.9(a), with respect to the
Business, Seller is not a party to or bound by any Contracts involving total
payments or receipts of more than $25,000 per annum, per such Contract (or, in
the case of purchase orders, those with purchase obligations in excess of $5,000
or extending beyond 90 days from the Closing Date).
(b) Each of the Contracts constitutes a legal, valid and binding
agreement of Seller (subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general equity principles) and is in full force and
effect. Seller is not in, nor, to the best of Seller's Knowledge, alleged to be
in, breach or default under, any of the Contracts and, to the best of Seller's
Knowledge, no other party to any of the Contracts is in breach or default
thereunder.
3.10 LITIGATION.
Except as set forth on Schedule 3.10, there (i) is no Proceeding pending
against, or to the Knowledge of Seller, threatened in writing against Seller in
respect of the Business or the Purchased Assets, whether at law or in equity,
before any court or arbitrator or any
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Governmental Entity or (ii) are no Orders against Seller in respect of the
Business or the Purchased Assets.
3.11 COMPLIANCE WITH LAWS AND COURT ORDERS.
(a) Except as set forth on Schedule 3.11(a), Seller is not in any
respects in violation of any Law or Order applicable to the Purchased Assets or
the conduct of the Business. Schedule 3.11(a) contains a true and complete list
of all material Permits and all Orders under which Seller is operating or bound
and Seller has furnished to Buyer true and complete copies thereof. Seller is in
compliance with the terms of all such material Permits and all such material
Permits are in full force and effect, no material violations with respect to any
thereof occurred or are or have been recorded, no Proceeding is pending or, to
Seller's knowledge, threatened in writing to revoke or limit any thereof.
(b) All products of Seller are in compliance with all premarketing,
facility registration and product listing requirements, as well as manufacturing
laws, regulations, standards and procedures of the United States Food and Drug
Administration (the "FDA") and applicable Governmental Entities, including,
without limitation, the International Standards Organization.
(c) All material reports, documents, claims and notices required to be
filed, maintained, or furnished to any Governmental Entity by Seller have been
so filed, maintained or furnished (excluding any Tax Returns that are
exclusively covered in Article 9). Except as set forth on Schedule 3.11(c), all
such reports, documents, claims and notices were complete and correct, including
having met insurance coverage and medical necessity requirements, in all
material respects on the date filed (or were corrected in or supplemented by a
subsequent filing) such that no liability exists with respect to such filing.
3.12 PROPERTIES.
(a) Seller owns no real property used in the Business. Schedule
3.12(a) correctly describes all real property used or held for use exclusively
in the Business which Seller leases, operates or subleases (the "REAL
PROPERTY"). None of the Purchased Assets consist of an interest in real property
on which a Tax is imposed, or the value of the interest is reassessed, on the
transfer of such interest.
(b) Seller has good title to, or in the case of any leased Real
Property or personal property, has a valid leasehold interest in, all Purchased
Assets, except where the failure to have such good title or valid leasehold
interests would not have a Material Adverse Effect. No Purchased Assets are
subject to any Lien, except:
(i) Liens disclosed on Schedule 3.12(b);
(ii) Liens disclosed on the Statement of Assets and Liabilities
or the notes thereto or securing Liabilities reflected on Statement of
Assets and Liabilities or notes thereto;
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(iii) Liens for Taxes, assessment and similar charges that are
not yet due or are being contested in good faith;
(iv) mechanic's, materialman's, carrier's, repairer's and other
similar Liens arising or incurred in the ordinary course of business or
that are not yet due and payable or are being contested in good faith;
(v) other Liens which would not have a Material Adverse Effect
(clauses (i) - (iv) of this Section 3.12(b) are, collectively, the
"PERMITTED Liens").
3.13 INTELLECTUAL PROPERTY.
(a) Schedule 3.13(a) contains a list of all Intellectual Property
owned or licensed by Seller and used or held for use in the Business (except for
computer hardware and software programs and related databases not used
exclusively in conduct of the Business) including, without limitation, the
"OrthoTech" tradename and the Seller's website name and location
"www.softgoods.com" and all of its content relating to the bracing and softgoods
support business on the Worldwide Web (the "BUSINESS INTELLECTUAL PROPERTY").
The Business Intellectual Property is all the Intellectual Property of the
Business as it is currently being conducted. Seller owns, has the right to use,
sell, license and dispose of all Business Intellectual Property other than the
Business Intellectual Property for which Seller has a valid license.
(b) Schedule 3.13(b) sets forth a list of all licenses, sublicenses
and other agreements to which Seller is a party and pursuant to which any person
is authorized to use any of the Business Intellectual Property.
(c) Except as set forth on Schedule 3.13(c), no Business Intellectual
Property is subject to any outstanding judgment, injunction, order, decree or
agreement restricting the use thereof by Seller with respect to the Business or
restricting the licensing thereof by Seller to any Person.
(d) Except as set forth in Schedule 3.13(d), there are no royalties,
honoraria, fees or other payments payable by Seller to any Person by reason of
the ownership, use, license, sale or disposition of Seller's Business
Intellectual Property.
(e) Seller has used reasonable efforts to safeguard and maintain (i)
the secrecy and confidentiality of confidential or proprietary information and
(ii) the proprietary rights of Seller in all of the Business Intellectual
Property.
(f) Seller has not received from any Person in the past two years any
written notice, charge, complaint, claim or assertion that Seller has interfered
with, infringed upon, misappropriated or otherwise come in conflict with any
Intellectual Property of any Person; and
(g) Seller has not sent to any Person in the past two years, or
otherwise communicated in writing to any Person, any notice, charge, complaint,
claim or other assertion of any present, impending or threatened infringement by
or misappropriation of, or other conflict with, any Business Intellectual
Property by such other Person or any acts of unfair competition
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by such other Person, nor, to Seller's Knowledge, is any such infringement,
misappropriation, conflict or act of unfair competition occurring.
3.14 FINDERS' FEES.
There is no investment banker, broker, finder or other intermediary which
has been retained by or is authorized to act on behalf of Seller who might be
entitled to any fee or commission from Buyer or any of its Affiliates in
connection with the transactions contemplated by this Agreement.
3.15 SUPPLIERS AND VENDORS.
Except in the ordinary course of the Business, since December 31, 1999, no
material supplier or vendor to Seller in connection with the Business has
canceled or otherwise terminated, or, to Seller's Knowledge, threatened in
writing to cancel or otherwise terminate, its relationship with Seller or has
decreased, limited or otherwise modified, or to Seller's Knowledge, threatened
in writing to decrease, limit or otherwise modify, the services, supplies or
materials it provides to Seller.
3.16 CUSTOMERS.
Except as set forth on Schedule 3.16, since December 31, 1999, no customer
of Seller in connection with the Business, to which or whom more than $50,000 of
annual sales were made in fiscal year 1999, has notified Seller in writing that
it intends to terminate or materially curtail its relationship or dealings with
Seller.
3.17 SUFFICIENCY OF PURCHASED ASSETS; CONDITION OF PURCHASED ASSETS.
(a) The Purchased Assets constitute all of the tangible and intangible
property currently being used in the conduct of the Business by Seller (whether
owned, leased or held under license by Seller) except for Excluded Assets.
(b) Except as set forth on Schedule 3.17(b), each Purchased Asset
which is material to the Business is in all respects in good working order,
operating condition and state of repair, except for ordinary wear and tear.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the disclosure schedule attached hereto,
Buyer represents and warrants to Seller as of the date hereof as follows:
4.1 LEGAL EXISTENCE AND POWER.
DonJoy is a limited liability company duly organized, validly existing and
in good standing under the laws of Delaware. DonJoy has all requisite power and
authority and all material Permits required to carry on its business as now
conducted, except for those material Permits the absence of which would not have
a material adverse effect on DonJoy. DJ is a
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limited liability company duly organized, validly existing and in good standing
under the laws of Delaware. DJ has all requisite power and authority and all
material Permits required to carry on its business as now conducted, except for
those material Permits the absence of which would not have a material adverse
effect on DJ. All of the equity interests of DJ are owned by DonJoy.
4.2 AUTHORIZATION.
Buyer has the requisite power and authority to enter into this Agreement
and the Assignment and Assumption Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by Buyer of this Agreement
and the Assignment and Assumption Agreement and the consummation of the
transactions contemplated hereby and thereby are within the powers of Buyer and
have been duly authorized by all necessary action on the part of Buyer. Each of
this Agreement and the Assignment and Assumption Agreement has been or will be
at or prior to Closing duly and validly executed and delivered by Buyer and is
or will be when executed, a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, subject to general principles of
equity and except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws of general
application relating to creditors' rights.
4.3 GOVERNMENTAL AUTHORIZATIONS.
Except as set forth on Schedule 4.3, the execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby require no material action by or in respect of, or material
filing with, any Governmental Entity.
4.4 NONCONTRAVENTION.
The execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate, conflict with or result in any violations of the certificate of
formation or company agreement of Buyer, (ii) assuming compliance with the
matters referred to in Section 4.3, violate in any material respects any
applicable Law, (iii) require any consent or other action by any Person under,
constitute a default or breach under or give rise to any right of termination,
cancellation or acceleration of any material right or obligation or a loss of
any material benefit to which Buyer is entitled under any provision or any
agreement or other instrument binding upon Buyer or (iv) result in the creation
or imposition of any material Lien on any asset of Buyer.
4.5 LITIGATION.
There is no action, suit investigation or proceeding pending against, or to
the knowledge of Buyer, threatened against or affecting, any Buyer before any
court or arbitrator or any Governmental Entity which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement.
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4.6 FINDERS' FEES.
There is no investment banker, broker, finder or other intermediary which
has been retained by or is authorized to act on behalf of any Buyer who might be
entitled to any fee or commission from Seller or any of its Affiliates in
connection with the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF SELLER
5.1 CONDUCT OF THE BUSINESS.
From the date hereof until the Closing Date (the "PRE-CLOSING PERIOD"),
Seller shall conduct the Business in the ordinary course consistent with past
practice and shall use commercially reasonable efforts to preserve intact the
business organizations and relationships with third parties and to keep
available the services of the present employees of the Business. Without
limiting the foregoing, during the Pre-Closing Period, Seller will not, without
the prior consent of Buyer:
(a) with respect to the Business, acquire a material amount of assets
from any Person;
(b) sell, lease, license or otherwise dispose of any Purchased Assets
except (i) pursuant to existing contracts or commitments or (ii) in the ordinary
course consistent with past practice;
(c) increase or promise to increase the compensation payable to its
employees (other than normal compensation reviews and raises consistent with
past practices or any retention plan put in place by Seller);
(d) fail to pay, discharge or satisfy any material claims, Liabilities
or obligations (whether absolute, accrued, contingent or otherwise), except with
respect to Taxes that are exclusively covered in Article 9;
(e) change in any material respect the accounting methods or practices
followed by it, including any material change in any assumption underlying, or
method of calculating, any bad debt, contingency or other reserve, except as may
be required by changes in GAAP;
(f) amend or modify in any way its certificate of incorporation or
by-laws; and
(g) agree or commit to do any of the foregoing.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) During the Pre-Closing Period, Seller will, upon reasonable and
adequate prior notice, (i) give Buyer, its counsel, financial advisors, auditors
and other authorized
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representatives ("REPRESENTATIVES") reasonable access to the offices,
properties, books and records, including, without limitation, historical
financial records, of Seller pertaining to the Business, (ii) furnish to Buyer
and its Representatives such financial and operating data and other information
relating to the Business as such Persons may reasonably request and (iii)
instruct the Representatives of Seller to cooperate with Buyer in its
investigation of the Business. Any investigation pursuant to this Section shall
be conducted in such manner as not to interfere unreasonably with the conduct of
the business of Seller. Notwithstanding the foregoing, Buyer shall not have
access to personnel records of Seller relating to individual performance or
evaluation records, medical histories or other information or agreements which
in Seller's good faith opinion is sensitive or the disclosure of which could
subject Seller to risk of liability.
(b) On and after the Closing Date, Seller will, upon reasonable and
adequate prior notice, afford promptly to Buyer and its Representatives
reasonable access to its books of account, financial and other records,
including, without limitation, historical financial records, information and
employees to the extent necessary or useful to Buyer in connection with any
audit, investigation, dispute or litigation or any other reasonable business
purpose relating to the Business; provided that any such access by Buyer shall
not unreasonably interfere with the conduct of business by Seller. Buyer shall
bear all out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for general overhead, salaries and
employee benefits) reasonably incurred in connection with the foregoing.
5.3 NOTICES OF CERTAIN EVENTS.
Seller shall promptly notify Buyer of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced relating to Seller or the Business that, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 3.10.
5.4 NON-COMPETITION.
In furtherance of the transactions contemplated hereby, Seller covenants
and agrees that, for the period commencing on the Closing Date and ending on the
fourth anniversary of the Closing Date (the "NON-COMPETE PERIOD"), neither
Seller nor any of its Affiliates will engage directly or indirectly in the
Seller's Restricted Business (it being understood by the parties that such
restriction shall not apply to a Non-Orthopedic Affiliate if such Non-Orthopedic
Affiliate ceases to be an Affiliate during the Non-Compete Period); provided,
however, that nothing set forth in this Section 5.4 shall prohibit (A) any
Affiliate from engaging in the Seller's Restricted Business if and solely to the
extent that such Affiliate is engaging in such Seller's Restricted Business as
of the Closing Date (a "COMPETING BUSINESS"), which existence of such a
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Competing Business is in good faith not known (after reasonable inquiry) on the
Closing Date by Seller or (B) Seller or its Affiliates from:
(a) owning not in excess of 5% in the aggregate of any class of
capital stock or other equity interest of any Person engaging directly or
indirectly in the Seller's Restricted Business;
(b) owning an interest in any Person engaging directly or indirectly
in the Seller's Restricted Business acquired as a creditor in bankruptcy or
otherwise than by a voluntary investment decision;
(c) acquiring all or substantially all of the assets or all or
substantially all of the capital stock or other equity interests of any other
Person engaged directly or indirectly in the Seller's Restricted Business if
less than 20% of the assets (on a book accounting basis) or gross sales of such
Person as reflected in its most recent financial statements relate to the
Seller's Restricted Business; provided, however, that if Seller or any of its
Affiliates acquires all or substantially all of the assets or all or
substantially all of the capital stock or other equity interests of any other
Person, greater than 20% but not greater than 40% of the assets (on a book
accounting basis) or gross sales of which, as reflected in such Person's most
recent financial statements, relate to the Seller's Restricted Business, then
Seller or such acquiring Affiliate shall, within nine months of the acquisition
of the assets or capital stock or other equity interest of such Person, divest
assets to the extent necessary so that less than 20% of the acquired assets (on
a book accounting basis) or gross sales of the entity or business so acquired
relate to the Seller's Restricted Business; or
(d) engaging in any of the activities in the first paragraph of this
Section 5.4 if and to the extent they are activities (i) to be performed by
Seller and its Affiliates pursuant to the Transition Services Agreement, (ii)
related to the casting and splinting products, whether existing or in
development, of Seller and its Affiliates, (iii) related to the participation by
Seller and its Affiliates as a lender to, or an equity holder of, or supplier of
Internet/WWW content to, and promoter of, the e-commerce business initiative of
Recovery Care, or (iv) the subject matter of the Letter dated July 7, 2000, from
Seller to Buyer.
ARTICLE VI
COVENANTS OF BUYER
Buyer agrees that:
6.1 CONFIDENTIALITY.
From and after the date hereof, Buyer will hold, and will cause its
Representatives to hold, in confidence, all confidential documents and
information concerning the Business or Seller furnished to Buyer or its
Representatives in connection with the transactions contemplated by this
Agreement, except to the extent such information can be shown to have been (i)
previously known on a nonconfidential basis by Buyer, (ii) in the public domain
through no fault of Buyer or (iii) later lawfully acquired by Buyer from sources
other than Seller; provided that Buyer may disclose such information (x) to its
Representatives who have a need to know such
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information in connection with the transactions contemplated by this Agreement
or the Related Documents and so long as such Representatives are informed by
Buyer of the confidential nature of such information and are directed by Buyer
to treat such information confidentially, and (y) compelled by judicial or
administrative process or by other requirements of Law. Buyer shall be
responsible for any failure to treat such information confidentially by such
Representatives. The obligation of Buyer and its Representatives to hold any
information in confidence shall be satisfied if they exercise the same care with
respect to such information as they would to preserve the confidentiality of
their own similar information. If this Agreement is terminated, Buyer will, and
will cause its Representatives to, destroy or deliver to Seller, upon request,
all documents and other materials, and all copies thereof, obtained by Buyer or
its Representatives or on their behalf from Seller in connection with this
Agreement that are subject to such confidence.
6.2 ACCESS; CONFIDENTIALITY.
On and after the Closing Date, Buyer will afford promptly to Seller and its
Representatives reasonable access to its properties, books, records, employees
and auditors to the extent directly relevant to the Business and necessary to
permit Seller to determine any matter relating to its rights and obligations
hereunder or its rights and obligations with respect to any Person in connection
with any period ending on or before the Closing Date; provided that any such
access shall not unreasonably interfere with the conduct of the Business of
Buyer. Seller will hold, and will cause its Representatives to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of Law, all confidential documents and information
concerning Buyer or the Business provided to it pursuant to this Section 6.2.
Seller shall be responsible for any failure to treat such information
confidentially by Seller or its Representatives.
6.3 TRADEMARKS; TRADENAMES.
After the Closing, Buyer shall not use any of the Seller Intellectual
Property; provided that Buyer may sell any finished Products or use any
packaging supplies or promotional materials included in the Purchased Assets on
Products manufactured by Buyer, in each case which bears any trademark or
tradename included in Seller Intellectual Property (such trademark or tradename
being hereinafter referred to as a "SELLER MARK"), for a period up to twelve
(12) months after the Closing in the case of any finished Products which exist
on the Closing Date and for a period up to six (6) months after the Closing in
the case of Products manufactured by Buyer on or after the Closing Date. In
connection with the sale or use of such Products, packaging supplies or
promotional materials bearing a Seller Mark, Buyer agrees:
(i) to identify any Products manufactured by Buyer, but on which
such Buyer uses packaging supplies bearing a Seller Mark pursuant to this
Section 6.3, with a special product code marking to be advised and agreed
between Buyer and Seller prior to Closing and to affix a label indicating
that such Products are manufactured and/or distributed by or on behalf of
Buyer over any Seller Mark showing on such packaging supplies, and
(ii) in all promotional material included in the Purchased Assets
and used by Buyer, to affix a label indicating that Buyer is the owner of
the Business and that
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the Products are manufactured and/or distributed by or on behalf of Buyer
over any Seller Mark showing in such promotional materials. Notwithstanding
the above, Buyer understands and agrees that Seller shall not be
responsible for, and makes no warranties regarding, the content of any
packaging supplies or promotional materials included in the Purchased
Assets and that Buyer's use, dissemination and distribution of any such
packaging supplies and promotional material shall be at Buyer's own risk.
6.4 RETURNED GOODS.
For the period commencing on the Closing Date and ending on the 90th day
following the Closing Date, Buyer shall use its reasonable efforts to process
all returns of Products sold by Seller prior to the Closing Date. Upon receipt
of notice from any of Seller's customers requesting the return of Products sold
by Seller prior to the Closing Date, Buyer will deliver any such notice to
Seller's designated representative for purposes of Seller determining, in good
faith, if such returned Product should be accepted in accordance with Seller's
published returned goods policy and procedures in effect on the Closing Date.
Upon receipt of such approval from Seller's representative, Buyer shall (i)
process all approved returned Products and pay to such customer the amount paid
by such customer for any such returned Product (plus taxes and shipping costs)
and (ii) either (A) deliver to Seller such returned Product and an invoice for
the amount paid to such customer (plus taxes and shipping costs) or (B) accept
such returned Product into Buyer's inventory and deliver to Seller an invoice
for the amount paid to such customer (plus taxes and shipping costs), less the
cost of goods sold of such returned Product. In the case of any customer dispute
by Seller relating to returned Products, Seller and Buyer shall fully cooperate
to resolve the dispute in a manner designed to preserve the continuing
relationship with the customer. Seller shall pay the amount set forth on any
such invoice within thirty (30) days of the receipt by Seller of such invoice.
Nothing in this Section 6.4 shall prevent Seller from donating any returned
Products to charity after such returned Products have been delivered by Buyer to
Seller; provided that in connection with such donation, Seller shall use
reasonable efforts to ensure that such charity not sell or transfer for value
any of such returned Products.
ARTICLE VII
COVENANTS OF BUYER AND SELLER
Buyer and Seller agree that:
7.1 GENERAL.
Each of the parties will use reasonable efforts to take all action and to
do all things necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions hereto).
7.2 FURTHER ASSURANCES.
(a) Seller and its Affiliates, as necessary, and Buyer shall from time
to time, and without further consideration, promptly execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or
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desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement and to vest in Buyer good title to the Purchased
Assets (including obtaining the consents reasonably requested by Buyer) and to
cause Buyer to assume the Assumed Liabilities and to cause Seller to retain the
Excluded Liabilities and Excluded Assets. All out-of-pocket expenses involved in
honoring such requests shall promptly be reimbursed by the requesting party to
the other.
(b) Promptly after the Closing Date (but in no case later than nine
(9) months thereafter), Buyer shall, at its expense, prepare and submit to
Seller for signature the documentation necessary to record the transfers of the
trademarks included in the Purchased Assets. Buyer shall thereafter exert
reasonable efforts to promptly complete the recordation of such transfers. After
the Closing, Seller's obligation with respect to the maintenance of trademark
registrations, patent and patent applications not yet transferred to Buyer shall
be limited to prompt transmittal to Buyer of written notices relating thereto
which are received by Seller.
7.3 CERTAIN FILING.
(a) Seller and Buyer shall cooperate in good faith to file promptly
all filings required by the HSR Act. Seller and Buyer shall also promptly file
any additional information as required with respect to the HSR Act as soon as
practicable after receipt of request therefor.
(b) Seller and Buyer shall cooperate with one another (i) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required (other than pursuant to the HSR Act) and (ii) in
taking such actions or making any such filings, furnishing information required
in connection therewith and timely seeking to complete or obtain any such
actions, filings, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS.
No party to this Agreement shall originate any publicity, news release or
other public announcement, written or oral, whether relating to this Agreement
or any Related Document or the existence of any arrangement between the parties,
without the prior written consent of the other party whether named in such
publicity, news release or other public announcement or not, except where such
publicity, news release or other public announcement is compelled by judicial or
administrative process or by other requirements of Law or by the rules of any
securities exchange or national securities quotative system pursuant to a
listing agreement therewith; provided that in such event, the party issuing same
shall still be required to consult with the other party whether named in such
publicity, news release or public announcement or not, a reasonable time prior
to its release to allow the other party to comment thereon and, after its
release, shall provide the other party with a copy thereof.
7.5 CONSENTS.
Each party shall fully cooperate with the other to obtain all the Required
Consents set forth on Schedule 3.5 and any other consents and approvals of, or
effect the notification of or filing with, each Person, whether private or
governmental, whose consent or approval is required in order to permit the
consummation of the transactions contemplated hereby. If the Required
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Consents are not obtained, Seller and Buyer will cooperate in a mutually
agreeable arrangement under which such Buyer would obtain the benefits and
assume the obligations thereunder in accordance with this Agreement.
7.6 MISDIRECTED PROCEEDS.
If any moneys or other assets are received by a party after the Closing Date
to which the other party is entitled under the terms of this Agreement
(including, without limitation, any insurance proceeds), such party shall
promptly pay such moneys or other assets to the other party.
7.7 CORPORATE NAME CHANGE.
Within two (2) years of the Closing Date, Seller shall take all steps
necessary to change its corporate name to a name sufficiently dissimilar from
"DePuy Orthopaedic Technology, Inc." that, in the reasonable judgment of Buyer,
there will be no confusion of the public including, without limitation, removing
"Orthopaedic Technology" from such name; provided that Seller shall be under no
obligation to remove the word "DePuy" from its name. From and after the Closing
Date, Seller may only use the "DePuy Orthopaedic Technology, Inc." name until
the date which is (i) the first anniversary of the Closing Date, for purposes of
finalizing business transacted prior to the Closing with those customers of
Seller which were customers of Seller as of the Closing Date and (ii) the second
anniversary of the Closing Date, for purposes of making required filings with
Governmental Entities. Except as set forth above, from and after the Closing
Date, Seller shall refrain from trading or otherwise conducting business under
the name "DePuy Orthopaedic Technology, Inc." Notwithstanding the foregoing, the
parties hereto agree that, from and after the Closing Date, the tradenames
"OrthoTech" and "Orthopaedic Technology" are and shall at all times remain the
property of Buyer.
7.8 PHYSICAL TRANSFER OF PURCHASED ASSETS.
(a) Seller shall assemble and prepare for delivery to Buyer at its
Tracy, California facility the tangible Purchased Assets specified by Buyer on
the Termination Date (as defined in the Transition Services Agreement). Such
designated Purchased Assets shall be delivered F.O.B. Seller's location, to a
carrier designated by Buyer, or in the absence of a designation by Buyer, to a
carrier reasonably designated by Seller, in either case with the freight and
other carriage charges to be paid by Buyer.
(b) Promptly after the Closing, Buyer shall cause Seller's employees
who are providing services to Buyer under the Transition Services Agreement to
assemble, prepare for delivery and deliver all inventory of the "Global Shoulder
Kit", at Seller's cost, to a location designated in writing by Seller to Buyer.
7.9 TERMINATION OF DISTRIBUTION AGREEMENTS.
Promptly following the Closing Date, Seller shall provide notice of
terminations to distributors and independent sales representatives of the
Business pursuant to the terms of any distributor or independent sales
representative agreements. Seller shall be responsible for any costs associated
with such terminations.
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ARTICLE VIII
EMPLOYEE MATTERS
8.1 EMPLOYEES.
Within 90 days of the Closing Date, DJ may, in its sole discretion, make
offers of "Comparable Employment" (as defined below) to certain employees of the
Business. DJ shall provide Seller with prior written notice of its intent to
make such offers of "Comparable Employment", which notice shall include the
names of such employees. Seller shall provide Buyer with all employment
agreements, offer letters or similar writings, and will provide a description of
all verbal understandings or agreements, containing the terms of employment of
all such employees. From the date hereof until the date which is thirty (30)
days after the Closing Date, neither Seller nor any of its Affiliates shall (i)
solicit, induce or attempt to induce any of Seller's employees to remain
employed by, or accept employment with, Seller or any of its Affiliates, or (ii)
otherwise interfere with Buyer's ability to make offers of Comparable Employment
to any of Seller's employees and the willingness or ability of Seller's
employees to accept such offers; provided it is being acknowledged by Buyer that
certain offers have been extended by Seller to certain employees prior to the
date hereof and Buyer agrees this provision shall not apply to any employee to
whom such offer has been extended. During such period, DJ and Seller shall
reasonably cooperate to ensure that the process to retain the services of such
employees is completed. Each such employee who accepts DJ's offer of employment
and is hired by DJ shall at such time become a "TRANSFERRED EMPLOYEE." For the
purposes of this Article VIII, "COMPARABLE EMPLOYMENT" means a position that has
substantially similar duties and responsibilities as the position the relevant
employee currently holds with Seller and that has a salary or wages and benefits
(other than stock options) comparable to employees of Buyer who are similarly
situated. Seller shall not at any time on or after the Closing Date, without
prior written notice to Buyer, provide notice of or otherwise effectuate a
"Plant Closing" or "Mass Layoff", as those terms are defined in the Worker
Adjustment and Retraining Notification Act of 1988, affecting in whole or in
part any facility, site of employment, operating unit or employee of Seller.
8.2 TERMS OF EMPLOYMENT.
DJ agrees to use reasonable efforts to maintain and continue such
Comparable Employment for each Transferred Employee for a period of at least
eighteen (18) months following the date on which each Transferred Employee is
hired, except that DJ may terminate a Transferred Employee at any time for any
reason or for "Just Cause." For the purposes of this Agreement, the term "JUST
CAUSE" shall mean: (i) the failure of a Transferred Employee to perform his or
her duties and obligations (assuming no substantial change in duties or
obligations) in any material respect; (ii) a Transferred Employee's conviction
of, or pleading nolo contendere to, any crime; or (iii) a violation of any Law
in connection with a Transferred Employee's employment which is injurious to the
Business. If a Transferred Employee is terminated other than for Just Cause
during such eighteen (18)-month period, such terminated Transferred Employee
shall receive from DJ severance benefits, recognizing all service with Seller
and DJ and their respective Affiliates, equal to the greater of (i) those
severance benefits (including the continuation of medical and dental insurance
coverage at the same premium cost
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as was applicable during active employment with Buyer) which such Transferred
Employee would have received under the severance pay benefit formula in Seller's
severance plan in effect immediately prior to closing (a copy of which has been
delivered to Buyer prior to the date hereof), (ii) those severance benefits in
effect under Buyer's severance plan at such time, or (iii) any other severance
benefits required by Law. Further, Seller agrees to reimburse the Buyer for
those severance payments made to such Transferred Employees (including
applicable premiums for the continuation of medical and dental insurance
coverage) provided such terminated Transferred Employees would have been
entitled to such severance payments under Seller's severance plan in effect
immediately prior to closing. Such reimbursements by Seller will be limited to
the severance and medical and dental premium amounts which would have been
payable to the Transferred Employee had such employee been terminated by Seller
as of the Closing Date. Buyer shall not have any Liability to Seller for
termination of a Transferred Employee pursuant to this Section 8.2 (other than
for Just Cause) during the above referenced eighteen (18) month period, except
as set forth in the preceding sentence. Notwithstanding the terms of this
Section 8.2, Buyer shall not be obligated to maintain the organizational
structure of the Business as in effect prior to the Closing Date. All employees
of the Business who are not Transferred Employees shall remain the
responsibility of Seller.
8.3 BENEFITS.
Unless otherwise specified in this Article VIII and except as provided in
Section 8.2, each Transferred Employee will be entitled to benefits under the
employee benefit plans of DJ available to other employees of DJ who are employed
in similar categories of employment. DJ shall offer each Transferred Employee
the opportunity, as of each Transferred Employee's date of hire by Buyer, to
participate in all of DJ's employee benefit plans for which each such employee
would be eligible under the guidelines for such plans. For vesting and
eligibility purposes under all of DJ's employee benefit plans, all Transferred
Employees shall be given full credit for all service with Seller, Seller's
Affiliates or Seller's former Affiliates. In addition to such recognition of all
such prior service for purposes of vesting and eligibility, all Transferred
Employees shall be given credit for such prior service for purposes of (i)
accrual of severance benefits and (ii) accrual of vacation benefits. Seller
shall promptly provide to Buyer, for each employee to whom DJ shall offer
employment pursuant to Section 8.1, the applicable start date and all periods of
service with Seller, Seller's Affiliates or Seller's former Affiliates, and DJ
shall be entitled to rely on such Schedule for the purposes of determining
periods of prior service under this Section 8.3.
8.4 BENEFITS REQUIREMENTS.
DJ agrees that in complying with the benefit requirements set forth in this
Article VIII: (a) no pre-existing medical condition of any Transferred Employee
or his or her eligible dependents shall cause DJ to deny, delay or otherwise
alter coverage under DJ's benefit plans to any such person and (b) subject to
the approval of DJ's insurance carriers, all expenses incurred by Transferred
Employees in calendar year 2000 prior to the Closing Date for deductible amounts
or maximum out-of-pocket amounts for calendar year 2000 under Seller's
comprehensive medical/dental benefit plan will be applied towards and reduce, on
a dollar for dollar basis, any such amounts under DJ's analogous plans.
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8.5 SELLER'S BENEFIT PLANS.
After the Closing Date, Transferred Employees will accrue no further
service credit under any Employee Benefit Plan of Seller; provided, however,
that any Transferred Employee who shall have vested rights or entitlement to
benefits under any of the Employee Benefit Plans of Seller or its Affiliates
shall remain entitled to receive such benefits in accordance with the terms of
such plans and Seller shall be responsible for paying or providing such
benefits.
ARTICLE IX
TAX MATTERS
9.1 TAX DEFINITIONS.
The following terms, as used herein, have the following meanings:
"CODE" means the Internal Revenue Code of 1986, as amended.
"PRE-CLOSING TAX PERIOD" means (i) any Tax period ending on or before
the Closing Date and (ii) with respect to a Tax period that commences before but
ends after the Closing Date, the portion of such period up to and including the
Closing Date.
"TAX" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, registrations, recording, documentary,
conveyancing, gains, withholding on amounts paid to Seller, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any Governmental Entity
(a "TAXING AUTHORITY") responsible for the imposition of any such tax (domestic
or foreign), or (ii) liability for the payment of any amounts of the type
described in clause (i) as a result of (A) being party to any agreement or any
express or implied obligation to indemnify any other Person, (B) being a
"transferee" within the meaning of Section 6901 of the Code, or similar
provisions of state, local or foreign law or (C) being a member of an
affiliated, combined or unitary or consolidated group (by reason of Treas. Reg.
Section 1.1502-6 or otherwise).
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9.2 TAX MATTERS.
Seller hereby represents and warrants to Buyer that:
(a) Other than any Taxes being contested in good faith by appropriate
Proceedings and disclosed on Schedule 9.2(a), Seller has timely paid all Taxes,
and all interest and penalties due thereon payable by it for the Pre-Closing Tax
Period which have been required to be paid on or prior to the Closing Date, the
non-payment of which would result in a Lien on
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any Purchase Asset, would otherwise adversely affect the Business or would
result in Buyer becoming liable or responsible therefor.
(b) Seller has complied in all material respects with all applicable
laws, rules and regulations relating to the withholding of Taxes and payment
thereof (including employment and sales Taxes).
(c) Seller has not been notified by any Taxing Authority to which it
does not file Tax Returns that it may be obligated to file Tax Returns to such
jurisdiction.
9.3 TAX COOPERATION; ALLOCATION OF TAXES.
(a) Buyer and Seller agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information and assistance
relating to the Business and the Purchased Assets (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax returns, the making of an election relating to Taxes, the
preparation of any audit by any Taxing Authority and the prosecution or defense
of any claim, suit or proceeding relating to any Tax. Buyer and Seller shall
retain all books and records with respect to Taxes for the Pre-Closing Period
pertaining to the Purchased Assets for a period of at least six years following
the Closing Date. At the end of such period, each party shall provide the other
with at least ten days prior written notice before destroying any such books and
records, during which period the party receiving such notice can elect to take
possession, at its own expense, of such books and records. Seller and Buyer
shall cooperate with each other in the conduct of any audit or other proceeding
relating to the Taxes involving the Purchased Assets or the Business.
(b) All real property Taxes, personal property Taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end) on the Closing Date (collectively, the
"APPORTIONED OBLIGATIONS") shall be apportioned between Buyer and Seller based
on the number of days of such taxable period included in the Pre-Closing Tax
Period and the number of days of such taxable period after the Closing Date
(with respect to any such taxable period, the "POST-CLOSING TAX PERIOD"). Seller
shall be liable for the proportionate amount of such Taxes that is attributable
to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate
amount of such Taxes that is attributable to the Post-Closing Tax Period. Upon
receipt of any bill for real or personal property Taxes relating to the
Purchased Assets, the party that receives such bill shall present a statement to
the other party setting forth the amount of such Tax for which such other party
is responsible, together with such supporting evidence as is reasonably
necessary to calculate the pro-ration amount. The pro-ration amount shall be
paid by the party owing it to the other party within 10 days after delivery of
such statement. In the event that either Seller or Buyer shall make any payment
for which the other party is responsible, such Buyer or Seller shall be entitled
to be reimbursed for the amount of such payment and the other party shall make
such reimbursement promptly but in no event later than ten (10) days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled, together with such supporting evidence as is
reasonably necessary to calculate the amount of such reimbursement.
(c) All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, transfer, and similar Taxes, levies,
charges and fees (collectively,
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the "TRANSFER TAXES") incurred in connection with the transactions contemplated
by this Agreement shall be borne by Buyer. Buyer and Seller shall cooperate in
providing each other with any appropriate resale exemption certifications and
other similar documentation. The party that is required by applicable law to
make the filings, reports or returns with respect to any applicable Transfer
Taxes shall do so, and the other party shall cooperate with respect thereto as
necessary.
ARTICLE X
CONDITIONS TO CLOSING
10.1 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER.
The obligations of Buyer and Seller to consummate the Closing are subject
to satisfaction of the following conditions: All consents and approvals of and
filings with (and the expiration of any associated waiting period) any
Governmental Entity listed on Schedule 10.1, which must be obtained, in order
not to violate applicable Law, prior to the consummation of the transactions
contemplated hereby. No Governmental Entity listed on Schedule 10.1 has enacted
or adopted a Law, obtained an Order or commenced a Proceeding seeking to
interfere with, or make illegal, the transactions contemplated hereby.
10.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligation of Buyer to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Accuracy of Representations and Warranties; Performance of
Covenants.
(i) Seller shall have performed or complied with in all material
respects all of its obligations, agreements and covenants required to be
performed by it under this Agreement on or prior to the Closing Date; and
(ii) the representations and warranties of Seller contained in
this Agreement and in any certificate or other writing delivered by Seller
pursuant hereto shall be true and correct (without giving effect to any
qualification contained therein as to materiality, including, without
limitation, the phrases "material", "in all material respects" and
"Material Adverse Effect") at and as of the Closing Date, as if made at and
as of such date except for those representations and warranties which
address matters only as of a particular date, which representations and
warranties shall be true and correct in all material respects of such date
(without giving effect to language in the beginning paragraph of Article
III which states "Seller represents and warrants to Buyer as of the date
hereof as follows"), with only such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
(b) Related Documents. Seller shall have executed and delivered to
Buyer the Related Documents.
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(c) Consents and Approvals. All consents, approvals, authorizations,
filings and notices identified on Schedule 10.2(c) shall have been obtained,
made or given and shall be in full force and effect, except where the failure to
obtain, make or gain such consents, approvals, authorizations, filings and
notices would not have a Material Adverse Effect.
(d) Related Certificates. The following certificates:
(i) a certificate of the secretary of Seller and DePuy, Inc.,
respectively, dated as of the Closing Date, certifying (A) that true and
complete copies of Sellers' and DePuy, Inc.'s, respectively, certificate of
incorporation and by-laws as in effect on the Closing Date are attached
thereto, (B) as to the incumbency and genuineness of the signatures of each
officer of Seller and DePuy, Inc., respectively, executing this Agreement
or any of the Related Documents on behalf of Seller, and (C) the
genuineness of the resolutions (attached thereto) of the board of directors
of Seller and DePuy, Inc., respectively, authorizing the execution,
delivery and performance of this Agreement and the Related Documents to
which Seller and DePuy, Inc., respectively, is a party and the consummation
of the transactions contemplated hereby and thereby;
(ii) a certificate of the principal executive officer of Seller
dated as of the Closing Date, certifying as to (A) the accuracy of the
representations and warranties of each Seller contained herein, as
contemplated by Section 10.2(a)(ii), and (B) the performance of the
covenants of Seller as contemplated by Section 10.2(a)(i).
10.3 CONDITIONS TO THE OBLIGATIONS OF SELLER.
The obligation of Seller to consummate the Closing is subject to the
satisfaction of the following conditions:
(a) Accuracy of Representatives and Warranties; Performance of
Covenants.
(i) Buyer shall have performed or complied with in all material
respects all of its obligations, agreements and covenants required to be
performed by it under this Agreement on or prior to the Closing Date; and
(ii) the representations and warranties of Buyer contained in
this Agreement and in any certificate or other writing delivered by Buyer
pursuant hereto shall be true and correct (without giving effect to any
qualification contained therein as to materiality, including, without
limitation, the phrases "material", "in all material respects" and
"Material Adverse Effect") at and as of the Closing Date, as if made at and
as of such date, except for those representations and warranties which
address matters as of a particular date, which representations and
warranties shall be true and correct in all material respects as of such
date (without giving effect to language in the beginning paragraph of
Article IV which states "Buyer represents and warrants to Seller as of the
date hereof as follows"), with only such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
(b) Related Documents. Buyer shall have executed and delivered to
Seller the Related Documents.
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(c) Related Certificates. The following certificates:
(i) a certificate of the secretary of DJ and DonJoy,
respectively, dated as of the Closing Date, certifying (A) that true and
complete copies of the certificate of formation and company agreement of DJ
and DonJoy, respectively, as in effect on the Closing Date are attached
thereto, (B) as to the incumbency and genuineness of the signatures of each
officer or managing member of DJ and DonJoy, respectively, executing this
Agreement or any of the Related Documents on behalf of DJ and DonJoy,
respectively, and (C) the genuineness of the resolutions (attached thereto)
of the officer or managing member of DJ and DonJoy, respectively,
authorizing the execution, delivery and performance of this Agreement and
the Related Documents to which DJ and DonJoy, respectively, is a party and
the consummation of the transactions contemplated hereby and thereby;
(ii) a certificate signed by an officer or managing member of DJ
and DonJoy, respectively, dated as of the Closing Date, certifying as to
(A) the accuracy of the representations and warranties of DJ and DonJoy,
respectively, contained herein, as contemplated by Section 10.3(a)(ii), and
(B) the performance of the covenants of DJ and DonJoy, respectively, as
contemplated in Section 10.3(a)(i).
(d) Purchase Price. Seller shall have received the Purchase Price.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 SURVIVAL.
The representations and warranties of the parties shall survive the Closing
until fifteen (15) months after the Closing Date; provided that the
representations and warranties contained in Sections 3.1, 3.2, 3.13, 4.1, 4.2
and Article IX shall survive until the expiration of the statute of limitations
applicable to the matters covered thereby (giving effect to any waiver,
mitigation or extension thereof), if later. The covenants and other agreements
of each of the parties hereto contained in this Agreement shall survive the
Closing until fifteen months after the Closing Date; provided that Sections
5.2(b), 5.3, 5.4, 6.1, 6.2, 6.3, 7.2, 7.4 and 8.2 shall survive the Closing Date
until the earlier of the sixth (6) anniversary of the Closing Date or until they
are earlier terminated by their terms. The agreements contained in Article IX
and this Article XI shall survive until the expiration of the statute of
limitations applicable to the matters covered thereby (giving effect to any
waiver, mitigation or extension thereof). Notwithstanding the foregoing, any
claim asserted by either party prior to the applicable survival date shall
survive until the final resolution thereof.
11.2 INDEMNIFICATION.
(a) Seller hereby indemnifies Buyer and its Affiliates against and
agrees to hold each of them harmless from any and all damage, loss, diminution
in value, liability and expense (including, without limitation, reasonable
attorneys' fees and expenses in connection
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with any action, suit or proceeding) ("DAMAGES") incurred or suffered by Buyer
or any of its Affiliates resulting from, based upon or arising out of:
(i) any inaccuracy, misrepresentation or breach of any
representation or warranty made by Seller pursuant to this Agreement;
(ii) any breach of any covenant or agreement to be performed by
Seller pursuant to this Agreement; or
(iii) any Excluded Liability;
provided that (A) Seller shall not be liable under Section 11.2(a)(i) until the
aggregate amount of Damages with respect to all matters referred to in Section
11.2(a)(i) exceeds $700,000, and then to the extent of Damages incurred in
excess of such amount only, provided that items of Damage that are individually
in an amount less than $15,000 shall not be applied against such $700,000
amount, (B) Seller's maximum Liability under Section 11.2(a)(i) and 11.2(a)(ii)
(except for any covenant and agreement to be performed by Seller under Section
5.4) shall not exceed $25,000,000 and (C) Seller's maximum Liability for any
breach of any covenant or agreement to be performed by Seller under Section 5.4
shall not exceed $56,500,000.00 less any amount actually paid pursuant to clause
(B) above.
(b) Buyer hereby indemnifies Seller and its Affiliates against and agrees
to hold each of them harmless from any and all Damages incurred or suffered by
Seller or any of its Affiliates arising out of:
(i) any inaccuracy, misrepresentation or breach of any
representation or warranty made by Buyer pursuant to this Agreement or any
Related Document;
(ii) any breach of any covenant or agreement to be performed by
Seller pursuant to this Agreement or any Related Document;
(iii) any Assumed Liability; or
(iv) any claim, proceeding, investigation or other action made or
taken by any third party relating to or arising out of Buyer's
dissemination and use of the packaging supplies and promotional materials
bearing any Seller Mark pursuant to Section 6.3;
provided that (A) Buyer shall not be liable under Section 11.2(b)(i) until the
aggregate amount of Damages with respect to all matters referred to in Section
11.2(b)(i) exceeds $700,000, and then to the extent of Damages incurred in
excess of such amount only, provided that items of Damage that are individually
in an amount less than $15,000 shall not be applied against such $700,000 amount
and (B) Buyer's maximum liability under Section 11.2(b)(i) and Section
11.2(b)(ii) shall not exceed $25,000,000.
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11.3 PROCEDURES.
(a) The party seeking indemnification under Section 11.2 (the
"INDEMNIFIED PARTY") agrees to give prompt notice to the party against whom
indemnity is sought (the "INDEMNIFYING PARTY") of the assertion of any claim or
the commencement of any Proceeding in respect of which indemnity may be sought
under such Section and will provide the Indemnifying Party such information with
respect thereto that the Indemnifying Party may reasonably request. The failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party of
its obligations hereunder, except to the extent such failure shall have
adversely prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate in the
defense of any claim asserted by any third party (the "THIRD PARTY CLAIM") and,
subject to the limitations set forth in this Section 11.3, shall be entitled to
control and appoint lead counsel for such defense, in each case at its expense.
Notwithstanding anything to the contrary herein, with respect to an
indemnification relating to Taxes, the Indemnifying Party shall be entitled to
participate in the defense of any claim asserted by a Governmental Entity
relating to Taxes, but the Indemnified Party shall control such defense. The
Indemnified Party will not settle any such claim without the prior consent of
the Indemnifying Party, such consent not to be unreasonably withheld.
(c) If the Indemnifying Party shall assume control of the defense of
any Third Party Claim in accordance with the provisions of this Section 11.3,
(i) the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) before entering
into any settlement of such Third Party Claim, if the settlement does not
release the Indemnified Party from all Liabilities and obligations with respect
to such Third Party Claim or the settlement imposes injunctive or other
equitable relief against the Indemnified Party and (ii) the Indemnified Party
shall be entitled to participate in the defense of such Third Party Claim and to
employ separate counsel of its choice for such purpose. The fees and expenses of
such separate counsel shall be paid by the Indemnified Party.
(d) Each Party shall cooperate, and cause their respective Affiliates
to cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith.
11.4 CALCULATION OF DAMAGES.
(a) The amount of any Damages payable under Section 11.2 by the
Indemnifying Party shall be net of any amounts recovered by the Indemnified
Party under applicable insurance policies. The Indemnifying Party shall not be
liable under Section 11.2 for any (i) Damages relating to any matter to the
extent that the Indemnified Party had been fully compensated for such matter
pursuant to the Purchase Price adjustment under Section 2.8, (ii) punitive,
exemplary or Damages that are increased or multiplied pursuant to applicable Law
(unless such Damages are the actual damages incurred by the Indemnified Person).
(b) Notwithstanding any other provision of this Agreement to the
contrary, if on the Closing Date the Indemnified Party has actual knowledge of
information that would cause
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one or more of the representations and warranties made by the Indemnifying Party
to be inaccurate as of the date made, the Indemnified Party shall have no right
or remedy after the Closing with respect to such inaccuracy of such
representation or warranty and shall be deemed to have waived its rights to
indemnification in respect thereof.
11.5 ASSIGNMENT OF CLAIMS.
If the Indemnified Party receives any payment from the Indemnifying Party
in respect of any Damages pursuant to Section 11.2 and the Indemnified Party
could have recovered all or part of such Damages from a third party (a
"POTENTIAL CONTRIBUTOR"), the Indemnified Party shall assign such of its rights
to proceed against the Potential Contributor as are necessary to permit the
Indemnifying Party to recover from the Potential Contributor the amount of, or
any part of, such payment.
11.6 EXCLUSIVITY.
Upon and after the execution of this Agreement, all disputes arising out of
this Agreement or the transactions contemplated hereby (other than those under
Section 2.8) shall be resolved in accordance with Sections 13.6 and 13.7. After
the Closing, Section 11.2 shall provide the exclusive method of calculation of
monetary Damages for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the transactions
contemplated hereby. Except as set forth above, each party expressly waives any
other rights and claims (other than claims based on fraud, willful misconduct or
similar claims) it may have against the other, whether in law or equity,
relating to the Business or the transactions contemplated hereby.
ARTICLE XII
TERMINATION
12.1 GROUNDS FOR TERMINATION.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by either Seller or Buyer if the Closing shall not have occurred
on or before September 1, 2000;
(c) by either Buyer or Seller if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any Governmental Entity listed on Schedule 10.1 having competent
jurisdiction; or
(d) by Buyer pursuant to Section 13.12.
The party desiring to terminate this Agreement pursuant to clause 12.1(b)
or 12.1(c) shall give written notice of termination to the other party.
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12.2 EFFECT OF TERMINATION.
If this Agreement is terminated as permitted by Section 12.1 or 13.12, such
termination shall be without Liability of either party (or any stockholder,
director, officer, employee, agent, consultant or representative of such party)
to the other party to this Agreement; provided, that if such termination shall
result from the willful failure of a party to fulfill (unless such willful
failure is due to the inability of such party to obtain commercially reasonable
terms) any closing condition under Article 10, where fulfillment is solely
within such party's control, such party shall be fully liable for any and all
Damages incurred or suffered by the other party as a result of such failure. The
provisions of Sections 5.2, 6.2, 13.3 and 13.13 shall survive any termination
hereof pursuant to Section 12.1 or 13.12.
ARTICLE XIII
MISCELLANEOUS
13.1 NOTICES.
Any notice, request, instruction or other document to be given hereunder by
a party hereto shall be in writing and shall be deemed to have been given, (a)
when received if given in person or by courier or a courier service, (b) on the
date of transmission if sent by telex, facsimile or other wire transmission or
(c) three (3) business days after being deposited in the U.S. mail, certified or
registered mail, postage prepaid:
if to Seller, addressed to:
DePuy Orthopaedic Technology, Inc.
c/o DePuy, Inc.
700 Orthopaedic Drive
Warsaw, IN 46561-0988
Attention: Vice President; New Business Development
Fax No.: (219) 372-7458
with a copy to:
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Attention: Associate General Counsel, Corporate
Fax No.: (732) 524-2788
and if to Buyer, addressed to:
dj Orthopedics, LLC
2985 Scott Street
Vista, CA 92083-8229
Attention: President and CEO
Fax No.: (760) 734-3530
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with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Fax No.: (212) 408-2420
or to such other individuals or addresses as may be specified from time to time
in a written notice given by such party.
13.2 WAIVERS.
(a) Any provision in this Agreement may be amended or waived, but only
if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
13.3 EXPENSES.
Except as otherwise provided herein, all costs and expenses incurred in
connection with this Agreement, including the fees of counsel and accountants,
shall be paid by the party incurring such expenses.
13.4 SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that no party may assign, delegate or otherwise transfer any of its
rights and obligations under this Agreement without the consent of the other
party hereto, except that Seller (except in the case of Seller's obligations
under Section 5.4) or any Buyer may assign, delegate or transfer any of its
rights and obligations to any of their respective Affiliates (and with respect
to Buyer only, Buyer may assign rights and obligations to its lenders necessary
to obtain the financing contemplated hereby).
13.5 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law rules of
such state, in all respects, including all matters of validity, construction and
performance of this Agreement.
13.6 MEDIATION.
(a) Any dispute, controversy or claim arising from or related in any
way to this Agreement or the interpretation, application, breach, termination or
validity thereof,
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including any claim of inducement of this agreement by fraud or otherwise (in
each case, a "Dispute"), shall, before submission to arbitration, first be
mediated through non-binding mediation in accordance with the Model Procedures
for the Mediation of Business Disputes promulgated by the CPR Institute for
Dispute Resolution ("CPR")then in effect, except where those rules conflict with
these provisions, in which case these provisions control. The mediation shall be
conducted in New York, New York and shall be attended by a senior executive of
each of the parties with authority to resolve the dispute.
(b) The mediator shall be neutral, independent, disinterested and
shall be selected from a professional mediation firm such as ADR Associates or
JAMS/ENDISPUTE or CPR.
(c) The parties shall promptly confer in an effort to select a
mediator by mutual agreement. In the absence of such an agreement within fifteen
(15) days of initiation of the mediation, the mediator shall be selected by CPR
from a list generated by CPR with each party having the right to exercise
challenges for cause and two (2) peremptory challenges within three (3) business
days of receiving the CPR list.
(d) The mediator shall confer with the parties to design procedures to
conclude the mediation within no more than thirty (30) days after initiation.
Under no circumstances shall the commencement of arbitration under Section 13.7
below be delayed more than thirty (30) days by the mediation process specified
herein.
(e) Each party agrees to toll all applicable statutes of limitation
during the mediation process and not to use the period or pendency of the
mediation to disadvantage the other party procedurally or otherwise. No
statements made by either side during the mediation may be used by the other
during any subsequent proceedings.
(f) Each party has the right to pursue provisional or permanent
equitable relief from any court, such as attachment, injunction, specific
performance or replevin, to avoid irreparable harm, maintain the status quo, or
preserve the subject matter of the arbitration, even though mediation has not
been commenced or completed.
13.7 DISPUTE RESOLUTION.
(a) Any Dispute which was not resolved pursuant to Section 13.6 above
will be submitted for resolution to arbitration pursuant to the commercial
arbitration rules then pertaining of the CPR, except where those rules conflict
with these provisions, in which case these provisions control. The arbitration
will be held in New York, New York.
(b) The panel shall consist of three arbitrators chosen from the CPR
Panels of Distinguished Neutrals (or, by mutual agreement, from another provider
of arbitrators) who shall be a lawyer specializing in business litigation with
at least fifteen (15) years experience with a law firm or corporation of over
twenty-five (25) lawyers or a former judge of a court of general jurisdiction.
In the event the aggregate damages sought by the claimant are stated to be less
than Five Million Dollars ($5,000,000.00), and the aggregate damages sought by
the counterclaimant are stated to be less than Five Million Dollars
($5,000,000.00), and neither side seeks equitable relief, then a single
arbitrator shall be chosen, having the same qualifications and experience
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specified above. Each arbitrator shall be neutral, independent, disinterested,
impartial and shall abide by The Code of Ethics for Arbitrators in Commercial
Disputes approved by the American Arbitration Association. There shall be no ex
parte communications with an arbitrator either before or during the arbitration,
relating to the dispute or the issues involved in the dispute or the
arbitrator's views on any such issues.
(c) The parties agree to cooperate (i) to obtain selection of the
arbitrator(s) within thirty (30) days of initiation of the arbitration,
including jointly interviewing the final candidates, (ii) to meet with the
arbitrator(s) within thirty (30) days of selection (or as soon thereafter as the
arbitrator(s) is available), and (iii) to agree at that meeting or before upon
procedures for discovery and as to the conduct of the hearing which will result
in the hearing being concluded within no more than five (5) months after
selection of the arbitrator(s) and in the award being rendered within thirty
(30) days of the conclusion of the hearings, or of any post-hearing briefing,
which briefing will be completed by both sides with thirty (30) days after the
conclusion of the hearings. In the event no such agreement is reached, (A) the
CPR will select an arbitrator(s), allowing appropriate challenges for cause and
three (3) peremptory challenges for each side, and permitting parties, prior to
exercising their final peremptory challenge, jointly to interview each of the
top three final candidates (for no more than one hour each) if a single
arbitrator is being selected or the top five finalists if a panel of three is
being selected, (B) the arbitrator(s) shall set a date for the hearing, commit
to the rendering of the award within thirty (30) days of the conclusion of the
evidence at the hearing, and (C) the arbitrator(s) shall provide for discovery
according to these time limits, giving recognition to the understanding of the
parties hereto that they contemplate reasonable discovery, including document
demands and depositions, but that such discovery be limited so that the time
limits specified herein may be met without undue difficulty. In no event will
the arbitrator(s), absent agreement of the parties, allow more than a total of
ten (10) days for the hearing or permit either side to obtain more than a total
of forty (40) hours of deposition testimony from all witnesses, including both
fact and expert witnesses, or serve more than twenty (20) individual requests
for documents, including subparts, or twenty (20) individual requests for
admission or interrogatories, including subparts. Multiple hearing days will be
scheduled consecutively to the greatest extent possible.
(d) The arbitrator(s) must render an award following the substantive
law of New York and are not free to apply "amiable compositeur" or their own or
another's view of natural justice and equity." The arbitrator(s) shall render an
opinion setting forth findings of fact and conclusions of law with the reasons
therefor stated. A transcript of the evidence adduced at the hearing shall be
made, with the cost thereof to be paid one-half by Seller and one-half by Buyer,
and shall, upon request, be made available to either party. The arbitrator(s)
shall have power to exclude evidence on grounds of hearsay, prejudice beyond its
probative value, redundancy, or irrelevance and no award shall be overturned by
reason of such ruling on evidence.
(e) To the extent possible, the arbitration hearings and award will be
maintained in confidence.
(f) The United States District Court for the Southern District of New
York may enter judgment upon any award. In the event the arbitrator's award
exceeds Five Million Dollars ($5,000,000.00) in monetary damages or includes or
consists of equitable relief, or
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rejects a claim in excess of that amount or for that relief, then the court
shall vacate, modify or correct any award (including remanding to the
arbitrator(s) for further proceedings) where the arbitrators' findings of fact
are clearly erroneous, and/or where the arbitrators' conclusions of law are
erroneous; in other words, the court will undertake the same review as if it
were a federal appellate court reviewing a district court's findings of fact and
conclusions of law rendered after a bench trial. An award for less than Five
Million Dollars ($5,000,000.00) in damages and not including equitable relief
may be vacated, modified or corrected only pursuant to the Federal Arbitration
Act. The parties consent to the jurisdiction of the above-specified Court for
the enforcement of these provisions and the entry of judgment on any award and
the vacatur, modification and correction of any award as above specified. In the
event such Court lacks subject matter jurisdiction, then any court having
jurisdiction of this matter may enter judgment upon any award and provide the
same relief, and undertake the same review, as specified herein.
(g) In the event the expanded judicial review provided for under
paragraph (f) above is not available from the court as a matter of law, the
party unable to obtain such review may instead obtain review of the arbitrators'
award or decision by a single appellate arbitrator (the "APPEAL ARBITRATOR")
selected from the CPR list of distinguished neutrals and pursuant to then
current CPR selection procedures. No Appeal Arbitrator shall be selected unless
he or she can commit to rendering a decision within forty-five (45) days
following oral argument as provided in this Section. Any such review must be
initiated with the CPR within thirty (30) days following the date the district
court declines the expanded review specified in paragraph (f) above. In the
event timely review is sought, the Appeal Arbitrator will make the same review
of the arbitration panel's ruling and its bases that the Court of Appeals of the
federal circuit where the arbitration hearings are held would make of findings
of fact and conclusions of law rendered by a district court after a bench trial
and then modify, vacate or affirm the arbitration panel's award or decision
accordingly. The Appeal Arbitrator will consider only the arbitration panel's
findings of fact and conclusions of law, pertinent portions of the hearing
transcript and evidentiary record as submitted by the parties, opening and reply
briefs of the party pursuing the review, and the answering brief of the opposing
party, plus a total of no more than four (4) hours of oral argument evenly
divided between the parties. The party seeking review must submit its opening
brief and any reply brief within seventy-five (75) and one hundred twenty (120)
days, respectively, following the date the court declines the expanded review
specified in paragraph (f); whereas, the opposing Party must submit its
responsive brief within one hundred ten (110) days of that date. Oral argument
shall take place within five (5) months after the district court declines the
expanded review specified in paragraph (f), and the Appeal Arbitrator shall
render a decision within forty-five (45) days following oral argument.
(h) Each party has the right before or, if the arbitrator(s) cannot
hear the matter within an acceptable period, during the arbitration to seek and
obtain from the appropriate court provisional or permanent equitable remedies
such as attachment, injunction, specific performance, replevin, etc. to avoid
irreparable harm, maintain the status quo, or preserve the subject matter of the
arbitration.
(i) EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.
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13.8 COUNTERPARTS; THIRD PARTY BENEFICIARIES.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received a counterpart signed by the
other party hereto. No provision of this Agreement is intended to confer upon
any Person other than the parties hereto any rights or remedies hereunder.
13.9 ENTIRE AGREEMENT.
This Agreement and each Related Document constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
each Related Document and supersedes all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
this Agreement and each Related Document, including without limitation the
Letter of Exclusivity and Term Sheet dated May 17, 2000 among the parties;
provided, however, that notwithstanding the foregoing, the Confidentiality
Agreement shall remain in full force and effect unless and until the Closing
Date. Each of the parties acknowledge that in deciding to enter into this
Agreement and each Related Document and to consummate the transactions
contemplated hereby and thereby neither of them has relied upon any statements
or representations, written or oral, other than those explicitly set forth
herein and therein.
13.10 BULK SALES LAW.
Buyer and Seller each hereby waive compliance by Seller with the provisions
of the "bulk sales" and "bulk transfer" or similar laws of any state.
13.11 HEADINGS.
The Article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning and
interpretation of this Agreement.
13.12 DISCLOSURE SCHEDULES.
(a) Seller may revise the disclosure schedules to this Agreement (the
"SCHEDULES") by delivering revised Schedules to Buyer at any time prior to the
Closing Date. Buyer shall have the right to review the revised Schedules for a
period of not more than 5 business days after receipt thereof. At any time
within such 5-business-day-period, Buyer shall have the right to terminate this
Agreement by delivery of a notice to Seller if the revised information would
have a Material Adverse Effect. This notice, if given, shall specify the
information forming the basis for the decision to terminate. Seller shall have 5
business days after receipt of such notice to review with Buyer the information
forming the basis for the decision to terminate and attempt to agree on
corrective measures, if any. If the parties cannot agree on corrective measures,
then this Agreement shall terminate. If this Agreement is not terminated as
permitted by this Section 13.12, Buyer shall be deemed to have accepted such
revisions, and the Schedules attached to this Agreement as of the date hereof
shall be deemed to be superseded by the revised Schedules.
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(b) The parties acknowledge and agree that (i) the Schedules to this
Agreement may include certain items and information solely for informational
purposes for the convenience of Buyer and are intended only to qualify and limit
the representations or warranties of Seller contained in this Agreement and any
exhibits hereto and shall not be deemed to expand in any way the scope or effect
of any of such representations or warranties and (ii) the disclosure by Seller
of any matter in the Schedules shall not be deemed to constitute an
acknowledgment by Seller that the matter is required to be disclosed by the
terms of this Agreement or that the matter is material. Except as provided in
the representations and warranties of the Agreement, no reference in any
Schedule to any agreement or document shall be construed as an admission or
indication that such agreement or document is enforceable or currently in effect
or that there are any obligations remaining to be performed or any rights that
may be exercised under such agreement or document. No disclosure in the
Schedules relating to any possible breach or violation of any agreement, law or
regulation shall be construed as an admission or indication that any such breach
or violation exists or has actually occurred. The contents of each document
specifically identified in the Schedule is incorporated by reference into the
Schedules as though fully set forth in the Schedules. Notwithstanding anything
to the contrary contained in the Schedules or in this Agreement (including the
exhibits hereto), the information and disclosures contained in each section of
the Schedules shall be deemed to be disclosed and incorporated by reference in
each of the other sections of the Schedules as though fully set forth in such
other sections (whether or not specific cross-references are made), and shall be
deemed to qualify and limit all representations, warranties and covenants of
Seller contained in this Agreement and the exhibits hereto.
13.13 CONFIDENTIALITY AGREEMENT.
The Confidentiality Agreement between the parties dated August 16, 1999
shall remain in effect until the Closing Date notwithstanding any termination
provisions of such Confidentiality Agreement.
13.14 NO SHOP.
(a) Seller acknowledges that substantial time of Buyer and
out-of-pocket expenses (including attorneys' and accountants' fees and expenses)
have been and will continue to be expended and incurred in connection with
conducting legal, business and financial due diligence investigations of Seller
and the Business, drafting and negotiating this Agreement and the Related
Documents and consummating the transactions contemplated hereby and thereby
(collectively, "ACQUISITION EXPENSES"). Accordingly, until the Closing Date
(unless this Agreement is sooner terminated), Seller shall not, and shall use
its best efforts to not permit any its Representatives, (i) enter into any
written or oral agreement or understanding with any Person (other than Buyer)
regarding Another Transaction (as defined below); (ii) enter into or continue
any negotiations or discussions with any Person (other than Buyer) regarding the
possibility of Another Transaction (as defined below); or (iii) provide any
non-public financial or other confidential or proprietary information regarding
Seller or the Business (including this Agreement and any other financial
information, projections or proposals regarding Seller or the Business) to any
Person (other than Buyer) who the Company knows, or has reason to believe, would
have any interest in participating in Another Transaction. As used herein, the
term "ANOTHER TRANSACTION" means (x) the sale of the Business or any of the
Purchased Assets, other
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than the sale of inventories in the ordinary course consistent with past
practice or (y) the sale (whether by sale of stock, merger, consolidation or
otherwise) of more than 50% of the voting securities of Seller. Seller
represents that it is not a party to, or bound by, any agreement with respect to
Another Transaction other than this Agreement.
(b) Each party recognizes and acknowledges that a breach of this
Section 13.14 will cause irreparable and material loss and damage for Buyer,
which cannot be adequately compensated for in damages by an action at law.
Therefore, Seller agrees that Buyer shall be entitled, in addition to any other
remedies and damages available, to the equitable remedies of injunction and
specific performance with respect to Seller's obligations hereunder.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
BUYER:
DJ ORTHOPEDICS, LLC
By: /s/ CHARLES T. ORSATTI
------------------------------------------
Name: Charles T. Orsatti
Title: Chairman
DONJOY, L.L.C.
By: /s/ CHARLES T. ORSATTI
------------------------------------------
Name: Charles T. Orsatti
Title: Chairman
SELLER:
DEPUY ORTHOPAEDIC TECHNOLOGY, INC.
By: /s/ THOMAS J. OBERHAUSEN
------------------------------------------
Name: Thomas J. Oberhausen
Title: Vice President
<PAGE> 52
GUARANTOR
DePuy, Inc. hereby unconditionally and
irrevocably guarantees to Buyer the full and
timely performance and payment of all of
Seller's obligations under the Agreement and
each Related Document. DePuy, Inc. agrees
that Buyer may proceed against DePuy, Inc.
for the performance or payment of such
obligations. In addition, DePuy, Inc. hereby
waives all special suretyship defenses and
notice requirements.
DEPUY, INC.
By: /s/ THOMAS J. OBERHAUSEN
-----------------------------------------
Name: Thomas J. Oberhausen
Title: Vice President
