SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of report (Date of earliest event reported) March 3, 1997
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OrthoLogic Corp.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-21214 86-0585310
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(Commission File Number) (I.R.S. Employer Identification No.)
2850 South 36th Street, Phoenix, Arizona 85034
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(Address of Principal Executive Offices) (Zip Code)
(602) 437-5520
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(Registrant's Telephone Number, Including Area Code)
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Item 2. Acquisition or Disposition of Assets.
On March 3, 1997, OrthoLogic Corp., a Delaware corporation
("OrthoLogic"), through Toronto Medical Orthopaedics Ltd., a Canada corporation
and its wholly-owned subsidiary, consummated its acquisition of substantially
all of the assets and business and assumed substantially all of the liabilities
of Toronto Medical Corp., an Ontario corporation ("Toronto"), pursuant to a
Purchase and Sale Agreement (the "Agreement") dated as of December 30, 1996, as
amended, which is filed as an exhibit to this report. As contemplated by the
Agreement, OrthoLogic contemporaneously acquired the assets and assumed certain
liabilities of Toronto's United States subsidiaries. OrthoLogic paid an
aggregate purchase price of approximately $4,000,000 in cash plus assumed
liabilities from existing corporate resources.
The acquisition transaction was negotiated at arm's length between
OrthoLogic and Toronto. Prior to the acquisition, none of the directors,
officers or associates of Toronto, or their affiliates, were or are affiliated
with OrthoLogic, its affiliates, its directors and officers and their
associates. OrthoLogic is accounting for the acquisition of Toronto as a
purchase. OrthoLogic is in the process of evaluating the current status and
future integration of the operations, personnel and facilities of Toronto, and
is planning on closing certain facilities and terminating or relocating certain
employees. The costs related to these activities have not been estimated.
Accordingly, OrthoLogic cannot determine or allocate the total purchase price at
this time.
Toronto's principal business is the manufacturing, marketing and
distribution of orthopaedic rehabilitation products, including continuous
passive motion ("CPM") devices.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
(b) Pro forma Financial Information.
At the time of filing this report on Form 8-K, it is impracticable to
provide the financial statements and pro forma financial information required by
Item 7 of Form 8-K. The required financial statements and pro forma financial
information will be filed as soon as practicable, but no later than 60 days
after this report on Form 8-K must be filed.
(c) Exhibits. See the Exhibit Index, which is incorporated herein
by reference, immediately following the Signature page to this Report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ORTHOLOGIC CORP.
March 17, 1997 By /s/ Allen R. Dunaway
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Allen R. Dunaway
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Paginated No.
- ------------------ ---------------------------------------------------------- ---------------------
<S> <C> <C>
2.1 Purchase and Sale Agreement dated as of December 30, 1996
by and among OrthoLogic Corp., a Delaware corporation and
Toronto Medical Corp., an Ontario corporation.............
2.2 Amendment to Purchase and Sale Agreement dated as of
January 13, 1997 by and among OrthoLogic Corp., a
Delaware corporation and Toronto Medical Corp., an Ontario
corporation...............................................
2.3 Second Amendment to Purchase and Sale Agreement dated as
of March 1, 1997 by and among OrthoLogic Corp., a
Delaware corporation and Toronto Medical Corp., an Ontario
corporation...............................................
2.4 Assignment of Purchase and Sale Agreement dated as of
March 1, 1997 by and among OrthoLogic Corp., a Delaware
corporation, Toronto Medical Orthopaedics Ltd., a Canada
corporation and Toronto Medical Corp., an Ontario
corporation...............................................
</TABLE>
E-1
PURCHASE AND SALE AGREEMENT
BETWEEN
ORTHOLOGIC CORP.
AND
TORONTO MEDICAL CORP.
DATED AS OF DECEMBER 30, 1996
<PAGE>
TABLE OF CONTENTS
Page
RECITALS.................................................................... 1
ARTICLE I DEFINITIONS...................................................... 1
1.1 "Accepting Employees"..................................... 1
1.2 "Accounts"................................................ 1
1.5 "Agent Litigation"........................................ 1
1.6 "Agreement"............................................... 2
1.7 "Assumed Liabilities"..................................... 2
1.8 "August 1996 Financial Statements"........................ 2
1.9 "Bill of Sale"............................................ 2
1.10 "Business"................................................ 2
1.12 "Buyer"................................................... 2
1.14 "Buyer's Closing Certificate"............................. 3
1.15 "Canadian Dollars"........................................ 3
1.16 "Chapter 11 Filings"...................................... 3
1.17 "Closing"................................................. 3
1.18 "Closing Date............................................. 3
1.20 "Colorado Court".......................................... 3
1.21 "Contracts"............................................... 3
1.22 "Damages"................................................. 3
1.23 "December 1996 Statements"................................ 3
1.24 "Deposit"................................................. 3
1.25 "Employee Benefit Plans".................................. 3
1.26 "Employee Agreements"..................................... 4
1.27 "Environmental Claim"..................................... 4
1.28 "Environmental Laws"...................................... 4
1.29 "Environmental Release"................................... 4
1.30 "Excluded Technology"..................................... 4
1.31 "Financial Information"................................... 4
1.32 "Fixed Assets"............................................ 5
1.33 "Hazardous Materials"..................................... 5
1.34 "Income Tax Payable"...................................... 5
1.35 "Income Tax Recoverable".................................. 5
1.36 "Intangible Assets"....................................... 5
1.37 "Inter-Company Indebtedness".............................. 5
1.38 "Inventory"............................................... 5
1.39 "Knowledge"............................................... 5
1.40 "Law"..................................................... 5
1.41 "Lease"................................................... 6
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1.42 "Leased Assets"........................................... 6
1.43 "Lien".................................................... 6
1.44 "Net Book Value".......................................... 6
1.45 "Noncompete Agreements"................................... 6
1.46 "Opinion of Buyer's Counsel".............................. 6
1.47 "Opinion of Seller's Counsel"............................. 6
1.48 "Original NBV"............................................ 6
1.49 "Permits"................................................. 6
1.50 "Permitted Liens.......................................... 6
1.51 "Plan of Reorganization".................................. 6
1.52 "Premises"................................................ 6
1.53 "Prepaid Expenses"........................................ 7
1.54 "Product Liability Matters"............................... 7
1.55 "Product Warranty Claims"................................. 7
1.56 "Projected NBV"........................................... 7
1.57 "Purchase Price".......................................... 7
1.58 "Purchased Assets"........................................ 7
1.59 "Records"................................................. 7
1.60 "Rental Fleet"............................................ 7
1.61 "Retained Assets"......................................... 7
1.62 "Retained Contracts"...................................... 7
1.63 "Retained Employees ...................................... 8
1.64 "Retained Liabilities".................................... 8
1.65 "Saringer Agreement"...................................... 8
1.66 "Saringer Research"....................................... 8
1.67 "Section 363 Sale"........................................ 8
1.68 "Seller".................................................. 8
1.69 "Seller Closing Certificate".............................. 8
1.70 "Signing NBV"............................................. 8
1.71 "TK Settlement"........................................... 8
1.72 "TMI"..................................................... 8
1.73 "United States Dollars"................................... 8
1.74 "US Purchased Assets"..................................... 8
1.75 "US Assumed Liabilities".................................. 9
1.76 "US Retained Assets"...................................... 9
1.77 "USORTHO"................................................. 9
ARTICLE II PURCHASE AND SALE OF PURCHASED ASSETS;
OTHER AGREEMENTS............................................................ 9
2.1 Purchase and Sale......................................... 9
2.2 Payment of Purchase Price................................. 9
2.4 Allocation of Purchase Price.............................. 13
2.5 Referrals and Deliveries.................................. 13
2.6 Risk of Loss.............................................. 13
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2.7 Noncompetition; Confidentiality........................... 13
2.8 Employee Matters.......................................... 14
2.9 Access to Records......................................... 15
2.10 Noncompete Agreements..................................... 16
2.11 Investment Canada......................................... 16
2.12 GST....................................................... 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER....................... 16
3.1 Organization; Business.................................... 16
3.2 Authorization; Enforceability............................. 16
3.3 No Violation or Conflict.................................. 17
3.4 Purchased Assets.......................................... 17
3.5 Financial Information..................................... 18
3.6 Absence of Certain Changes; Conduct of Business........... 18
3.7 Contracts................................................. 19
3.8 Performance of Contracts; Business Relationships.......... 19
3.9 Accounts.................................................. 20
3.10 Intangible Assets......................................... 20
3.11 Violations of Law......................................... 21
3.12 Books of Account.......................................... 21
3.13 Disclosure................................................ 21
3.14 Brokers................................................... 21
3.15 Taxes..................................................... 22
3.16 Permits................................................... 22
3.17 Environmental Matters..................................... 22
3.18 Employment Matters........................................ 23
3.19 Litigation................................................ 24
3.20 Insurance................................................. 24
3.21 Product Matters........................................... 24
3.22 Nondisclosure Agreements.................................. 25
3.23 Products.................................................. 25
3.24 Pricing................................................... 25
3.25 Distributors.............................................. 25
3.26 Transactions with Related Parties......................... 26
3.27 Customers and Suppliers................................... 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER......................... 26
4.1 Organization.............................................. 26
4.2 Authorization; Enforceability............................. 26
4.3 No Violation or Conflict.................................. 27
4.4 Brokers................................................... 27
ARTICLE V CERTAIN MATTERS PENDING THE CLOSING.............................. 27
5.1 Full Access............................................... 27
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5.2 Conduct of Business....................................... 27
5.3 Prohibited Action......................................... 28
5.4 Preservation of Relationships............................. 29
5.5 No Default................................................ 29
5.6 Publicity................................................. 29
5.7 Compliance with Laws...................................... 29
5.8 Exclusive Dealing......................................... 29
5.9 Cooperation............................................... 29
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER................ 30
6.1 Compliance with Agreement................................. 30
6.2 Proceedings and Instruments Satisfactory.................. 30
6.3 Litigation................................................ 30
6.4 TK Settlement............................................. 30
6.5 Plan of Reorganization.................................... 30
6.6 Representations and Warranties............................ 31
6.7 Deliveries at Closing..................................... 31
6.8 Other Deliveries.......................................... 32
6.9 Approvals and Consents.................................... 32
6.10 Payments.................................................. 33
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER.............. 33
7.1 Compliance with Agreement................................. 33
7.2 Proceedings and Instruments Satisfactory.................. 33
7.3 Litigation................................................ 33
7.4 Representations and Warranties............................ 33
7.5 Payment of Purchase Price................................. 33
7.6 Deliveries at Closing..................................... 33
7.7 Other Documents........................................... 34
7.8 Approvals and Consents.................................... 34
ARTICLE VIII INDEMNITY; TERMINATION; MISCELLANEOUS......................... 34
8.1 Seller's Indemnity........................................ 34
8.2 Buyer's Indemnity......................................... 37
8.3 Termination............................................... 38
8.4 Rights on Termination; Waiver............................. 38
8.5 Further Assurances........................................ 38
8.6 Survival of Representations and Warranties................ 38
8.7 Entire Agreement; Amendment............................... 39
8.8 Expenses.................................................. 39
8.9 Governing Law............................................. 39
8.10 Assignment................................................ 39
8.11 Notices................................................... 39
8.12 Counterparts; Headings.................................... 40
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8.13 Income Tax Position....................................... 40
8.14 Taxes and Fees............................................ 40
8.15 Successors and Assigns.................................... 40
8.16 Interpretation............................................ 40
8.17 Severability.............................................. 40
8.18 No Reliance............................................... 41
8.19 Legal Proceedings......................................... 41
8.20 Currency.................................................. 41
SIGNATURES.................................................................. 42
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of this 30th day of
December, 1996, by and among ORTHOLOGIC CORP., a Delaware corporation ("Buyer")
and TORONTO MEDICAL CORP., an Ontario corporation ("Seller").
RECITALS
WHEREAS, Seller, is and has been engaged for many years in the
ownership and operation of the Business as defined in Section 1.10; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, as an operating business, certain of the assets, rights and
properties relating to the Business, on the terms and conditions set forth in
this Agreement.
NOW THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions, and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings specified:
1.1 "Accepting Employees" shall have the meaning set forth in Section
2.8(a) hereto.
1.2 "Accounts" shall mean the accounts receivable, rights to payment
for goods and services sold, notes and associated rights related to the
Business.
1.3 "Accrued Employee Benefits" shall have the meaning set forth in
Section 2.8(a) hereof.
1.4 "Adjustment Statement" shall have the meaning set forth in Section
2.3(e).
1.5 "Agent Litigation" shall mean any threatened, anticipated or
pending litigation or arbitration proceeding with current or former employees,
agents or distributors of Seller, TMI or USORTHO listed on Schedule 1 hereto.
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1.6 "Agreement" shall mean this Purchase and Sale Agreement, together
with the Schedules and Exhibits hereto, as the same shall be amended from time
to time in accordance with the terms hereof.
1.7 "Assumed Liabilities" shall mean:
(a) those liabilities of Seller, TMI and/or USORTHO reflected
in the August 1996 Financial Statements, which liabilities are listed and
described in Schedule 1 hereto, as adjusted in accordance with the December 1996
Statements; and
(b) those liabilities which are incurred or which arise
subsequent to the date of the December 1996 Statements which relate only to the
business operations of the Seller, TMI and/or USORTHO and which, in any event,
will not exceed an amount equal to the operating losses of Seller, if any,
calculated on a consolidated basis, for the period from January 1, 1997 to the
Closing Date reflected in the Closing Statements; and
(c) includes, without limitation, the Accrued Employee
Benefits, the Agent Litigation and those liabilities arising after the Closing
Date under any of the Contracts and Product Warranty Matters; and
(d) shall not include the Retained Liabilities.
1.8 "August 1996 Financial Statements" shall mean the unaudited interim
consolidated financial statements of Seller for the period ending August 31,
1996 attached as Exhibit 1 hereto.
1.9 "Bill of Sale" shall mean the Bill of Sale and Assumption of
Liabilities, substantially in the form of Exhibit 2 hereto.
1.10 "Business" shall mean the business currently conducted by Seller,
TMI and USORTHO, which consists of the manufacturing, marketing, renting and
selling of continuous passive motion devices and other derivative orthopedic
devices, if any, and all activities relating or incidental thereto.
1.11 "Business Plan" shall mean Seller's consolidated financial
projections for the period from January 1, 1997 to April 30, 1997, attached as
Exhibit 10 hereto.
1.12 "Buyer" shall mean OrthoLogic Corp., a Delaware corporation,
provided, however, that OrthoLogic Corp. shall have the right to assign its
rights and obligations under this Agreement to a wholly owned subsidiary of
OrthoLogic Corp. If OrthoLogic Corp. so elects, then "Buyer" shall refer instead
to such subsidiary.
1.13 "Buyer's Business" shall mean the business currently conducted by
Buyer and/or any of Buyer's wholly-owned subsidiaries which consists of the sale
of continuous passive motion devices, bracing and bone-growth stimulation
devices and derivative orthopedic products.
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1.14 "Buyer's Closing Certificate" shall mean a certificate of Buyer,
substantially in the form of Exhibit 3 hereto.
1.15 "Canadian Dollars" shall mean the lawful currency of Canada, and
shall also be denoted by a "C" after a dollar amount.
1.16 "Chapter 11 Filings" shall mean the voluntary filings made by
USORTHO and TMI with the Colorado Court on June 6, 1996 under Chapter 11 of the
United States Bankruptcy Code, and all proceedings subsequently taken, and
business subsequently conducted, pursuant thereto.
1.17 "Closing" shall mean the conference to be held at 8:00 a.m. on the
Closing Date at the offices of Quarles & Brady, One East Camelback Road, Suite
400, Phoenix, Arizona, or such other time and place as the parties may mutually
agree at which the transactions contemplated by this Agreement shall be
consummated.
1.18 "Closing Date" shall mean the effective date of the Plan of
Reorganization as approved by the Colorado Court, which Plan of Reorganization
must be approved on or before March 15, 1997, provided, however, that Seller,
for reasons related to the Plan of Reorganization, can extend the Closing Date
to a date not later than April 30, 1997.
1.19 "Closing Statements" shall have the meaning set forth in Section
2.3(f) hereto.
1.20 "Colorado Court" shall mean the United States Bankruptcy Court for
the District of Colorado.
1.21 "Contracts" shall mean all of the agreements whether written, oral
or implied, under which Seller conducts the Business which are listed and
described on Schedule 1 hereto, except for the Retained Contracts and any
contracts rejected in connection with the Plan of Reorganization.
1.22 "Damages" shall have the meaning set forth in Section 8.1(a)
hereof.
1.23 "December 1996 Statements" shall have the meaning set forth in
Section 2.3(a) hereto.
1.24 "Deposit" shall mean the deposit in the amount of $25,000 US
previously paid by Buyer to Seller.
1.25 "Employee Benefit Plans" shall mean any pension plan, profit
sharing plan, bonus plan, incentive compensation plan, stock purchase plan,
stock option plan, stock appreciation plan, benefit plan, benefit policy,
retirement plan, fringe benefit program, insurance plan, severance plan or any
other plan or program to provide income or benefits to active or former
employees of Seller, TMI or USORTHO.
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1.26 "Employee Agreements" shall mean all noncompetition or similar
agreements executed by any present or former employee of the Business, which
have not otherwise expired according to their terms, which shall be listed and
described on Schedule 1 hereto, which schedule shall be provided by Seller to
Buyer not later than fifteen (15) days after the date of signing of this
Agreement.
1.27 "Environmental Claim" shall mean any and all administrative,
regulatory, judicial, or third party actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity alleging
damage or other adverse effect on the environment, or potential liability
(including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (i) the presence, or
release into the environment, of any Hazardous Materials; or (ii) environmental
aspects of the transportation, storage, treatment or disposal of Hazardous
Materials in connection with the operation of the Business; or (iii)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law; or (iv) any and all claims by any person or entity seeking
damages, contribution, indemnification, cost, recovery, compensation or
injunctive relief resulting from the presence or release of any Hazardous
Materials.
1.28 "Environmental Laws" shall mean all federal, provincial, local,
and other applicable jurisdiction Laws relating to the environment, occupational
health and safety or the use, disposal, existence, or release of any Hazardous
Materials, including but not limited to any and all Laws concerning, affecting,
controlling, or in any way relating to, whether in whole or in part, noise
levels, ground vibrations, air pollutants, water pollutants, process waste
water, or Hazardous Materials.
1.29 "Environmental Release" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
1.30 "Excluded Technology" shall mean: (a) cryotherapy machines,
products and devices, whether for orthopedic rehabilitation purposes or
otherwise; (b) hot-cold fluid flow machines, products and devices, whether for
orthopedic rehabilitation purposes or otherwise; and (c) all derivative products
of the machines, products and devices set forth in subsections (a) and (b) of
this Section 1.
1.31 "Financial Information" shall mean: (a) the audited consolidated
financial statements of the Business for the fiscal year ended May 31, 1996; (b)
the August 1996 Financial Statements, (c) the books and records of account of
Seller relating to the Business; and (d) all other financial information
relating to the financial condition of the Business delivered or to be delivered
by Seller to Buyer.
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1.32 "Fixed Assets" shall mean the machinery, equipment, supplies,
furniture, fixtures, molds, tooling, any products currently under development,
and, except for improvements, fixtures and appurtenances forming part of the
Premises and the Inventory, all other tangible property owned and used by or
useful in the operation of the Business, including but not limited to those
assets which are listed and set forth on Schedule 1 hereto.
1.33 "Hazardous Materials" shall mean: (a) any waste, hazardous waste,
pollutant, contaminant, or hazardous or toxic substance as specified, listed,
identified, or defined in any Environmental Law.
1.34 "Income Tax Payable" shall mean any income tax payable by Seller,
TMI and/or USORTHO.
1.35 "Income Tax Recoverable" shall mean any income tax recoverable of
the Seller, TMI and/or USORTHO, which, as at August 31, 1996, had a value of
$515,539 C as shown on the August 1996 Financial Statements.
1.36 "Intangible Assets" shall mean, except for the tradename "Toronto
Medical Corp.", all of the intangible assets owned or used in the Business,
including but not limited to any products currently under development, trade
secrets, know-how, operating methods and procedures, proprietary information,
processes, technical knowledge, formulae, advertising formats, logos,
trademarks, trade designations, service marks, tradenames, patents, copyrights,
applications for any of the foregoing, goodwill, advertising and promotional
rights, franchise rights, customer lists, telephone number(s), and related
rights.
1.37 "Inter-Company Indebtedness" shall mean any indebtedness
outstanding directly or indirectly between and among Seller, TMI and/or USORTHO.
1.38 "Inventory" shall mean all inventories of raw materials and
supplies, work in process, and finished goods owned or used in the Business,
including but not limited to the finished continuous passive motion device
inventory set forth on Schedule 1 hereto (which Schedule includes the Rental
Fleet) as at November 30, 1996, which Schedule shall be updated as at the
Closing Date.
1.39 "Knowledge" shall mean, with respect to a corporate party, the
knowledge of any officer of such party, and, with respect to an individual
party, the knowledge of such party after due inquiry.
1.40 "Law" shall mean any federal, state, provincial, foreign, local or
other law, ordinance, rule, regulation, or governmental requirement or
restriction of any kind, including any rules, regulations, and orders
promulgated thereunder, and any final orders, decrees, consents, or judgments of
any regulatory agency or court.
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1.41 "Lease" shall mean the lease of the Premises for two years at a
fair market rental, with two five year options by Buyer to renew, substantially
in the form of Exhibit 4 hereto.
1.42 "Leased Assets" shall mean all items of personal property which
are leased and used in the Business including but not limited to those assets
which are set forth on Schedule 1 hereto.
1.43 "Lien" shall mean with respect to any asset: any mortgage, pledge,
lien, charge, claim, restriction, reservation, condition, easement, covenant,
lease, encroachment, title defect, imposition, security interest, inchoate lien,
or other encumbrance of any kind and the interest of a vendor or lessor under
any conditional sale agreement, financing lease or other title retention
agreement related to such asset.
1.44 "Net Book Value" shall have the meaning set forth in Section
2.3(b) hereof.
1.45 "Noncompete Agreements" shall mean the five-year noncompetition
and nonsolicitation agreements between Buyer and John Saringer and Jean-Pierre
Scheidegger, substantially in the form of Exhibit 5 hereto, and the two-year
noncompetition and nonsolicitation agreement between Buyer and Kevin Lunau,
substantially in the form of Exhibit 6 hereto.
1.46 "Opinion of Buyer's Counsel" shall mean the opinion of Quarles &
Brady, substantially in the form of Exhibit 7 hereto.
1.47 "Opinion of Seller's Counsel" shall mean the opinion of Koskie
Minsky, substantially in the form of Exhibit 8 hereto.
1.48 "Original NBV" shall have the meaning set forth in Section 2.3(b)
hereto.
1.49 "Permits" shall mean those permits, licenses, approvals,
registrations, filings, notices, and governmental authorizations required or
valuable for the conduct of the Business as presently conducted. Said Permits
are listed and briefly described, and may be transferred by Seller to Buyer in
accordance with the terms of this Agreement except as conspicuously noted, on
Schedule 1 hereto.
1.50 "Permitted Liens" shall mean those Liens which are listed on
Schedule 1 attached hereto.
1.51 "Plan of Reorganization" shall mean that certain Plan of
Reorganization for USORTHO and TMI filed with the Colorado Court on October 18,
1996, as amended as contemplated in Section 6.5 hereof.
1.52 "Premises" shall mean the land and building located at 901
Dillingham Road, in the Town of Pickering, Province of Ontario, which is shown
on the August 1996 Financial
6
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Statements with a value of $1,377,909 C, together with all improvements,
fixtures and appurtenances located therein, situated thereon or forming a part
thereof.
1.53 "Prepaid Expenses" shall mean those prepaid expenses (including
security deposits) relating to the Business. The Prepaid Expenses existing as at
August 31, 1996 are set forth on Schedule 1 hereto.
1.54 "Product Liability Matters" shall mean any and all product
recalls, and liabilities or obligations or damages of any kind for death,
disease, or injury to persons, business, or property relating to products sold
or rented by Seller, TMI or USORTHO in connection with the Business prior to the
Closing.
1.55 "Product Warranty Claims" shall mean all product warranty claims
(other than Product Liability Matters) for any products manufactured,
distributed, marketed, sold, or shipped by Seller, TMI or USORTHO in connection
with the Business.
1.56 "Projected NBV" shall have the meaning set forth in Section 2.3(c)
hereto.
1.57 "Purchase Price" shall mean Four Million U.S. Dollars ($4,000,000
US) as adjusted pursuant to Section 2.3 hereof.
1.58 "Purchased Assets" shall mean all assets of Seller used or useful
in the conduct of the Business except the Retained Assets, including but not
limited to all of Seller's right, title and interest in and to the Accounts,
Contracts, Employee Agreements, Fixed Assets, Intangible Assets, Inventory,
Leased Assets, Permits, Prepaid Expenses, Records and Rental Fleet.
1.59 "Records" shall mean the books, documents and records owned or
used in the conduct of the Business, including personnel, medical and accounting
records, correspondence, governmentally required records, manuals, engineering
data, designs, drawings, blueprints, plans, specifications, lists, customer
lists, computer media, software and software documentation, sales literature,
catalogues, promotional items, advertising materials, and other written
materials, but not including any Records relating to the ownership of the
Premises.
1.60 "Rental Fleet" shall mean any Inventory which is either leased by
TMI to authorized dealers or distributed by USORTHO to its employees or agents
for rental to customers.
1.61 "Retained Assets" shall mean the following assets of Seller as of
the Closing Date which, although they relate to the Business, are not Purchased
Assets and are to be retained by Seller: (a) the Premises; (b) the Income Tax
Recoverable and (c) any Inter-Company Indebtedness.
1.62 "Retained Contracts" shall mean those agreements listed and
described on Schedule 1 which are not being assigned by Seller to Buyer.
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1.63 "Retained Employees" shall have the meaning set forth in Section
2.8(a) hereof.
1.64 "Retained Liabilities" shall mean the following liabilities of
Seller, TMI and/or USORTHO as of the Closing Date which, although they relate to
the Business, are not Assumed Liabilities and are to be retained by Seller: (a)
all employment, agency, authorized distributor and other contracts discharged in
bankruptcy by the Plan of Reorganization; (b) all liabilities known or unknown
which are not specifically assumed by Buyer hereunder; (c) any liabilities
arising from or relating to threatened, anticipated or pending litigation or
arbitration proceedings, including, but not limited to, the litigation described
on Schedule 3.19 hereto, but not including the TK Settlement and the Agent
Litigation; (d) the Retained Contracts; (e) any Inter-Company Indebtedness; (f)
any Income Tax Payable, (g) any Product Liability Matters and (h) Product
Warranty Claims arising prior to the Closing Date.
1.65 "Saringer Agreement" shall mean the Consulting Agreement dated the
Closing Date among Sutter Corporation (a wholly-owned subsidiary of Buyer),
Saringer Research and John H. Saringer, substantially in the form of Exhibit 11
hereto.
1.66 "Saringer Research" shall mean Saringer Research Inc., an Ontario
corporation.
1.67 "Section 363 Sale" shall mean a sale of the US Purchased Assets to
Buyer pursuant to Section 363 of the United States Bankruptcy Code, as
contemplated in Section 6.5 hereof.
1.68 "Seller" shall mean Toronto Medical Corp, an Ontario corporation.
1.69 "Seller Closing Certificate" shall mean a certificate of the
Seller, substantially in the form of Exhibit 9 hereto.
1.70 "Signing NBV" shall have the meaning set forth in Section 2.3(b)
hereto.
1.71 "TK Settlement" shall mean the settlement agreement included in
Schedule 3.19 hereto, which settles the lawsuit brought by Thera-Kenetics, Inc.
against, among others, Seller, TMI and USORTHO, as more fully described in the
Financial Information.
1.72 "TMI" shall mean Toronto Medical, Inc., a Delaware corporation and
a wholly-owned subsidiary of Seller.
1.73 "United States Dollars" shall mean the lawful currency of the
United States of America, and shall also be denoted by a "US" after a dollar
amount.
1.74 "US Purchased Assets" shall mean all assets of TMI and/or USORTHO
used or useful in the conduct of the Business, not including the US Retained
Assets, and including but not limited to all of TMI's and/or USORTHO's right,
title and interest in and to the Accounts,
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Contracts, Employee Agreements, Fixed Assets, Intangible Assets, Inventory
(including the Rental Fleet), Leased Assets, Permits, Prepaid Expenses and
Records.
1.75 "US Assumed Liabilities" shall mean all liabilities of TMI and
USORTHO that form part of the Assumed Liabilities, not including the Retained
Liabilities.
1.76 "US Retained Assets" shall mean the following assets of TMI and/or
USORTHO as of the Closing Date which, although they relate to the Business, are
not US Purchased Assets and are to be retained by TMI and/or USORTHO: (a) the
Income Tax Recoverable; and (b) any Inter-Company Indebtedness.
1.77 "USORTHO" shall mean United States Orthopedic Corporation, a
Delaware corporation and a wholly-owned subsidiary of TMI.
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS;
OTHER AGREEMENTS
2.1 Purchase and Sale. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement:
(a) Seller shall sell, assign, convey, and deliver to Buyer,
and Buyer shall purchase and accept from Seller, the Purchased Assets; and
(b) Buyer shall assume and agree to perform in accordance with
and be bound by all of the covenants, terms, and obligations under the Assumed
Liabilities. Except as otherwise specifically provided for herein, Buyer is not
assuming any liabilities or obligations of Seller, and Seller shall satisfy all
of the Retained Liabilities in the ordinary course of business. If an Assumed
Liability cannot, for any reason, be assumed by Buyer, Buyer shall pay at
Closing the amount of such Assumed Liability directly to the debtor of Seller
which is owed such Assumed Liability via bank cashier's check or wire transfer.
Buyer specifically acknowledges and agrees that any Assumed Liability to the
Royal Bank of Canada shall be paid at Closing as described in this subsection.
(c) Seller shall retain and be responsible for all liability
in connection with all insurance payments in connection with the TK Settlement.
2.2 Payment of Purchase Price. At the Closing, Buyer shall pay the
Purchase Price to TMI and/or USORTHO or as they may otherwise direct in writing
at the Closing, in accordance with the Plan of Reorganization, in payment of the
purchase of the US Purchased Assets and the Purchased Assets, via bank cashier's
check or wire transfer. At the Closing, Seller shall refund to Buyer the Deposit
(without interest) and pay to Buyer any Accrued
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Employee Benefits payable as contemplated in Section 2.8(a) hereof via bank
cashier's check or wire transfer.
2.3 Adjustment to Purchase Price.
(a) Delivery of December Statements. No later than ten (10)
business days prior to the Closing Date, the Seller shall deliver to the Buyer
unaudited consolidated financial statements of the Business as at December 31,
1996 (the "December 1996 Statements").
(b) Signing Adjustment. If the aggregate value of the
Purchased Assets and the US Purchased Assets less the aggregate value of the
Assumed Liabilities and the US Assumed Liabilities (the "Net Book Value")
calculated on the basis of the December 1996 Statements (the "Signing NBV")
differs from the Net Book Value calculated on the basis of the August 1996
Financial Statements (the "Original NBV") the Purchase Price payable by the
Buyer as at the Closing Date will be adjusted in the following manner:
(i) if the Original NBV is greater than the Signing
NBV, the Purchase Price will be decreased by an amount equal to the
amount by which the Original NBV exceeds the Signing NBV; and
(ii) if the Original NBV is less than the Signing
NBV, the Purchase Price will be increased by an amount equal to the
amount by which the Original NBV is less than the Signing NBV.
(c) Closing Adjustment. If the Net Book Value as at December
31, 1996 set forth in the Business Plan (the "Base NBV") differs from the Net
Book Value as at the Closing Date projected in the Business Plan (the "Projected
NBV"), the Purchase Price payable by the Buyer on the Closing Date will be
adjusted in the following manner:
(i) if the Projected NBV is greater than the Base
NBV, the Purchase Price will be increased by an amount equal to the
amount by which the Projected NBV exceeds the Base NBV; and
(ii) if the Projected NBV is less than the Base NBV,
the Purchase Price will be decreased by an amount equal to the amount
by which the Projected NBV is less than the Base NBV.
For purposes of calculating the Projected NBV, if the Closing
Date does not occur on the last business day of a month, the net operating
profit or loss for the Business projected in the Business Plan for such month
will be prorated based upon the number of business days which have occurred in
such month to the Closing Date.
(d) Bankruptcy Adjustment. If the implementation of the Plan
of Reorganization, as amended, causes a decrease or increase in the aggregate
value of the US
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Purchased Assets or US Assumed Liabilities, the Purchase Price will be adjusted
in the following manner:
(i) if the aggregate value of the US Assumed
Liabilities is decreased or the aggregate value of the US Purchased
Assets is increased in connection with the implementation of the Plan
of Reorganization, the Purchase Price will be increased by an amount
equal to the amount of such decrease or increase; and
(ii) if the aggregate value of the US Assumed
Liabilities is increased or the aggregate value of the US Purchased
Assets is decreased in connection with the implementation of the Plan
of Reorganization, the Purchase Price will be decreased by an amount
equal to the amount of such increase or decrease.
Not later than five (5) business days prior to the Closing Date, Seller
shall provide Buyer with financial statements setting forth all increases and
decreases in the aggregate value of the US Purchased Assets or US Assumed
Liabilities in connection with the implementation of the Plan of Reorganization.
(e) Extraordinary Item Adjustment.
(i) If the December 1996 Statements or the Business
Plan either excluded or inaccurately made provision for any
extraordinary, non-operational or non-business related items
(collectively the "Extraordinary Items") set out on Schedule 2.3(e)
attached hereto, adjustments will be made between Buyer and Seller to
the Purchase Price based upon the actual results realized by either
Buyer, TMI or USORTHO in respect of such Extraordinary Items.
Adjustments for Extraordinary Items will be made on Closing, in respect
of those Extraordinary Items for which actual results are then
available, and subsequent to the Closing on a monthly basis within 10
business days from the end of each month based upon the actual results
of Extraordinary Items realized during such month. Not later than five
business days prior to the Closing Date, or five business days from the
end of each month after the Closing Date, Seller shall provide Buyer
with a statement (an "Adjustment Statement") setting out the
adjustments to the Purchase Price which are to be made between Buyer
and Seller in respect of Extraordinary Items. Notwithstanding the
foregoing, any Agent Litigation recovery shall be applied as follows:
(i) first, to Buyer, on account of any Purchased Assets or US Purchased
Assets to the extent they are included in the December 1996 Statements;
(ii) second, to reimburse Buyer or Seller for reasonable attorneys'
fees incurred in connection with such recovery; and (iii) third, the
remainder divided equally between Buyer and Seller.
(ii) Seller shall, prior to the Closing, obtain
insurance coverage for Product Liability Matters arising after the
Closing Date, fifty percent of the cost of which will be the
responsibility of Buyer and fifty percent of the cost of which will be
the
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responsibility of Seller. The Purchase Price will be increased in an
amount equal to the Buyer's portion of the cost of such insurance.
(f) Closing Value. Not later than thirty (30) business days
after the Closing Date, the Seller shall deliver to the Buyer unaudited
consolidated financial statements of the Business for the period from the date
of signing of this Agreement to the Closing Date (the "Closing Statements"). If
the Net Book Value for the Closing Date calculated on the basis of the Closing
Statements differs from the Projected NBV the Purchase Price payable by the
Buyer on the Closing Date will not be adjusted.
(g) Aggregation of Adjustments. At the Closing the adjustments
to the Purchase Price calculated pursuant to subsections (b), (c), (d), and (e)
of this Section 2.3 shall be aggregated as of the Closing Date. If the positive
adjustments to the Purchase Price differ from the negative adjustments to the
Purchase Price by an amount equal to or greater than $100,000.00 US, the
following payments shall be made by the following parties no later than ten (10)
business days following the Closing Date:
(i) If the positive adjustments to the Purchase Price
exceed the negative adjustments to the Purchase Price, Buyer shall pay
the positive difference, to the extent it exceeds $100,000.00 US, to
Seller via bank cashier's check or wire transfer.
(ii) If the negative adjustments to the Purchase
Price exceed the positive adjustments to the Purchase Price, Seller or,
at Seller's option, TMI, shall pay the negative difference, to the
extent it exceeds $100,000.00 US, to Buyer via bank cashier's check or
wire transfer.
(h) Adjustment Threshold. The $100,000.00 threshold described
in Section 2.3(g) above shall continue to be aggregated to include, in addition
to adjustments made pursuant to subsections (b), (c), (d) and (e) of this
Section 2.3 as at the Closing Date, adjustments made subsequent to the Closing
Date pursuant to subsection (e) of this Section 2.3, and Damages calculated
pursuant to Article VIII hereto. Any excess payments made by either party
because of the ongoing adjustment of the threshold shall be refunded to the
other party.
(i) Preparation of Statements. Notwithstanding the foregoing,
the Buyer may, at its own expense, have its employees or auditors review the
working papers or other background materials used to prepare any of the
statements described in this Section 2.3, and the Seller shall ensure that the
Buyer and its employees and agents have full access to such working papers and
other background materials. Any disagreement as to the statements described in
this Section 2.3 which cannot be settled by the parties shall be settled by
arbitration in accordance with Section 8.19. Seller and its employees and agents
will have access to and use of, at no cost, the Retained Employees (including,
without limitation, Christopher Pigott) and the computer systems and Records of
the Business after the Closing Date in order to complete the statements
described in this Section 2.3, the calculation and adjustment of the Purchase
Price and year-end financial statements in all respects.
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2.4 Allocation of Purchase Price. The Purchased Assets and the US
Purchased Assets will be allocated as set forth in Section 6.5 of this
Agreement.
2.5 Referrals and Deliveries. After the Closing, Seller shall promptly:
(a) Deliver to Buyer, in the form received with the addition
of any required endorsements by Seller, any cash, checks, or other payments
received after the Closing Date by Seller relating to the Accounts as well as to
the conduct of the Business after the Closing;
(b) Refer to Buyer any and all inquiries or purchase orders
from customers or suppliers of Seller or other persons relating to the Business;
and
(c) Cooperate with Buyer in setting up a "lock box" procedure
for collection of Accounts, if Buyer so elects.
2.6 Risk of Loss. Risk of loss with respect to the Purchased Assets
shall remain with Seller until the Closing and shall pass to Buyer upon the
Closing.
2.7 Noncompetition; Confidentiality.
(a) Subject to the Closing, and as an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Business being acquired
pursuant to this Agreement, Seller hereby covenants and agrees that for a period
of five (5) years from and after the Closing Date, it will not, directly or
indirectly, within the Territory described below:
(i) engage in, continue in or carry on any business
which competes with the Business or the Buyer's Business or is substantially
similar thereto, including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization which is
so engaged;
(ii) consult with, advise or assist in any way,
whether or not for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Buyer in any
aspect with respect to the Business or the Buyer's Business including, but not
limited,to, advertising or otherwise endorsing the products of any such
competitor; soliciting customers or otherwise serving as an intermediary for any
such competitor; loaning money or rendering any other form of financial
assistance to or engaging in any similar form of business transaction with any
such competitor provided, however, that Seller shall not be prevented or
restricted from either leasing or selling the Premises to any such competitor of
Buyer after Buyer has ceased occupying the premises pursuant to the Lease;
(iii) hire, offer to hire, or solicit for employment
any employee of Buyer, without the prior consent of Buyer, until such person has
been separated from employment by Buyer for at least one year; or
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(iv) engage in any practice the purpose of which is
to evade the provisions of this covenant not to compete or to commit
intentionally any act which adversely affects the Business, the Buyer's
Business, the Purchased Assets, or the Assumed Liabilities; provided, however,
the foregoing prohibition does not extend to passive ownership of less than 1%
of the outstanding stock of any entity whose stock is traded on an established
stock exchange or quoted on NASDAQ. For purposes hereof, "Territory" is defined
as any county or similar geographic subdivision in which Seller or Buyer
conducted its business as of the date of this Agreement. The parties intend that
this noncompete covenant shall be construed as separate covenants, one for each
county and subdivision to which the covenant applies. The parties agree further
that Buyer may sell, assign or otherwise transfer this covenant not to compete,
in whole or in part, to any person, corporation, firm or entity that purchases
all or part of the Buyer's business or the Business or the Purchased Assets
being acquired by Buyer hereunder. In the event a court of competent
jurisdiction determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographic scope or activity, it is expressly
agreed that this covenant not to compete shall be construed so that the
remaining provisions shall not be affected, but shall remain in full force and
effect, and any such over broad provisions shall be deemed, without further
action on the part of any person, to be modified, amended and/or limited, but
only to the extent necessary to render the same valid and enforceable in such
jurisdiction.
(b) Seller acknowledges that: (i) the Business connections,
customers, customer lists, marketing, production, sales techniques, procedures,
operations, and other Intangible Assets and aspects of the Business which are to
be acquired by Buyer hereunder have been established and maintained by Seller at
great expense, have been protected as confidential information and trade
secrets, and are of great value to Buyer; and (ii) Buyer would suffer great loss
and injury if Seller would disclose this information or use it in any way to the
detriment of Buyer. Therefore, Seller shall not, directly or indirectly, use or
disclose, or cause or allow to be used or disclosed, to Buyer's detriment, any
secret, confidential, or proprietary information relating to the Business.
(c) After the date hereof, Seller shall use its reasonable
best efforts, on behalf of Buyer, to continue amicable business relationships
with Business customers and suppliers. Seller shall not make or publish any
disparaging remarks about Buyer, the Buyer's business or the Business as long as
Buyer continues the Buyer's business and/or the Business, and shall not induce,
encourage, or cause any customer or supplier to terminate doing business with
Buyer.
2.8 Employee Matters.
(a) Buyer shall, on or before the Closing Date, offer to
employ Kevin Lunau, Christopher Pigott and at least seventy-five percent (75%)
of the remaining employees of Seller, excluding any employees of TMI or USORTHO,
and excluding John Saringer and Jean-Pierre Scheidegger, employed on the Closing
Date (the "Retained Employees") on terms and conditions of employment including
without limitation, salary, benefits, position and responsibilities, which are
no less favorable than those paid to and/or enjoyed by such Retained Employees
on the
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Closing Date. Without limiting the generality of the foregoing, the Buyer will
not offer employment to either John Saringer or Jean-Pierre Scheidegger. The
Buyer shall provide, within fifteen (15) days after the date of signing of this
Agreement, to the Seller a list identifying the Retained Employees, failing
which the Retained Employees shall consist of all employees of the Seller
employed on the Closing Date. Buyer shall recognize the period of employment of
the Retained Employees who accept the Buyer's offer of employment (the
"Accepting Employees") with Seller up to the Closing Date for all purposes as if
such service had occurred with Buyer. Buyer agrees to assume all liabilities
associated with the Retained Employees including, without limitation, payment of
any Accrued Employee Benefits (as hereinafter defined) and all costs incurred in
connection with the termination or lay-off of any such employee, and Buyer shall
indemnify and save harmless Seller in respect of such assumed liabilities.
Seller and Buyer shall cooperate to provide an orderly transfer for accrued
employee vacation and sick leave benefits (the "Accrued Employee Benefits") from
Seller to Buyer in order to preserve the benefits available to the Retained
Employees. Seller shall prepare a comprehensive list of such Accrued Employee
Benefits by employee as of the date ten (10) days prior to the Closing Date,
shall value such Accrued Employee Benefits at the rates of pay in effect as of
such date, and shall pay Buyer at the Closing cash equal to the value of such
Accrued Employee Benefits, for that portion of the Accrued Employee Benefits not
already provided for in the December 1996 Statements or the Business Plan.
(b) With respect to employees of Seller, TMI and USORTHO who
are not offered continuing employment with Buyer, Seller shall provide written
notices to such employees and, Seller, TMI or USORTHO, as the case may be, shall
be responsible for all payments to said employees for wages, commissions,
bonuses, vacations, severance and other similar forms of compensation owing to
or accrued by such employees.
(c) Subject to subsections (a) and (b) above, Buyer shall not
be obligated to Seller or any other party for any labor-related obligations or
liabilities arising out of any person's employment with Seller, TMI and USORTHO
and Seller agrees to satisfy said obligations and/or liabilities.
2.9 Access to Records.
(a) Seller shall permit Buyer, and its attorneys, accountants,
agents and designees, such access to, and right to copy, all books, papers and
records of Seller which are not a part of the Purchased Assets, from and after
the Closing Date hereof as Buyer may deem necessary or desirable. Any such
examination shall be at the expense of Buyer, shall be performed during normal
business hours at the place where such records are regularly maintained by
Seller and shall not unreasonably interfere with the normal business activities
of Seller. Seller shall notify Buyer at any time within the five (5) year period
after the Closing Date if it intends to destroy any or all of the books, papers,
and records described above, and Buyer shall have the right to review and remove
any of such books, papers and records at Buyer's expense.
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(b) Buyer shall preserve any Records in its possession for a
period of five (5) years from the Closing Date, or for such longer period as
required by any applicable Laws, and shall keep Seller advised at all times of
the location of such Records. Buyer shall permit Seller, and its attorneys,
accountants, agents and designees, such access to, and right to copy, all
Records from and after the Closing Date hereof as Seller may deem necessary or
desirable. Any such examination shall be at the expense of Seller, shall be
performed during normal business hours at the place where the Records are
regularly maintained by Buyer and shall not unreasonably interfere with the
normal business activities of Buyer. Buyer shall notify Seller at any time
within the five (5) year period after the Closing Date if it intends to destroy
any or all of the Records, and Seller shall have the right to review and remove
any of such Records at Seller's expense.
2.10 Noncompete Agreements. At Closing, Seller shall cause each of John
Saringer, Jean-Pierre Scheidegger and Kevin Lunau to enter into their respective
Noncompete Agreement.
2.11 Investment Canada. Within thirty (30) days of the Closing Date,
Buyer shall make all required filings under the Investment Canada Act. Buyer has
otherwise complied with the requirements of the Investment Canada Act.
2.12 GST. On or prior to the Closing Date, Buyer shall become a
registrant for the purposes of the Excise Tax Act (Canada).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.1 Organization; Business. Seller is a corporation duly and validly
organized and existing and in good standing under the Laws of the Province of
Ontario and has full corporate power to own its assets and to convey the
Purchased Assets to Buyer pursuant to this Agreement. Seller is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions in which Seller is required to be so qualified. Seller is not a
non-resident person of Canada within the meaning of the Income Tax Act (Canada).
3.2 Authorization; Enforceability. The execution, delivery, and
performance of this Agreement, and all of the documents and instruments required
hereby, by Seller are within the corporate power of Seller and have been duly
authorized by all necessary corporate action by Seller, except for the approvals
contemplated in Section 6.9(b). This Agreement is, and the other documents and
instruments required hereby will be, when executed and delivered by Seller, the
valid and binding obligations of Seller, enforceable against Seller in
accordance with their respective terms, and sufficient to transfer and convey to
Buyer all of Seller's right, title, and interest in and to the Purchased Assets.
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3.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement and the other documents and instruments to be executed and
delivered by Seller pursuant hereto, and the consummation by Seller of the
transactions contemplated herein or therein:
(a) will not violate or conflict with any applicable Law;
(b) will not require any authorization, consent, approval,
exemption or other action by or notice to any government entity (including,
without limitation, under any "plant closing" or similar law); or
(c) subject to obtaining consents required by the Contracts,
which consents are listed in Schedule 3.3(c) hereto, or as otherwise set forth
in this Agreement, will not materially violate or conflict with, or constitute a
material default (or event which, with notice or lapse of time, or both, would
constitute a default) under, or will not result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the Purchased Assets under, any term or provision of the Seller's
articles of incorporation or bylaws, or any material contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which Seller is a party or by which Seller or any of the Purchased Assets may be
bound or affected.
3.4 Purchased Assets.
(a) Seller owns and will convey to Buyer at Closing good and
marketable title to all of the Purchased Assets, free and clear of all Liens of
any nature whatsoever other than the Permitted Liens. Seller is in sole
possession of, and has sole control of, the Purchased Assets. Except as set
forth on Schedule 1 hereto none of the Purchased Assets or US Purchased Assets
is leased, rented, licensed, or otherwise not owned by either Seller, TMI or
USORTHO.
(b) The Purchased Assets and the US Purchased Assets include
all of the assets of Seller, TMI or USORTHO which are used in or necessary for
the operation of the Business, excepting therefrom only any Retained Assets.
(c) The Fixed Assets, Leased Assets and Rental Fleet are in
good operating condition and repair, normal wear and tear excepted, free from
any defects (except minor defects as do not interfere with the use thereof in
the conduct of the normal operations of the Business), have been maintained
consistent with the standards generally followed in the industry, and are
sufficient to carry on the Business as previously conducted by Seller, TMI and
USORTHO.
(d) Except as otherwise provided in the August 1996 Financial
Statements as obsolete Inventory, the Inventory (including the Rental Fleet) of
Seller, TMI and USORTHO is current, merchantable, usable, and as to finished
goods, resalable at normal prices and discounts in the ordinary course of
business. The quantity of the Inventory on the Closing Date
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will be at a level appropriate and adequate for Buyer to conduct the Business in
substantially the same manner as the Business was carried on by Seller, TMI and
USORTHO during the twelve (12) months immediately prior to the date hereof.
(e) Except as set forth on Schedule 3.4(e) hereto, which
Schedule shall be updated, to the extent necessary, on the Closing Date, as at
November 30, 1996 and as at the Closing Date, all of the tangible Purchased
Assets and US Purchased Assets were physically located at either 901 Dillingham
Road, Pickering, Ontario, or 1390 South Potomac Street, Suite 124, Aurora,
Colorado.
3.5 Financial Information.
(a) The Financial Information is (and the statements referred
to in Section 2.3 hereof will be) accurate and complete in all material
respects, was prepared in accordance with generally accepted accounting
principles consistently applied throughout all periods, was prepared on a
consistent basis, and presents fairly the financial condition and the results of
operations of the Business as of the relevant dates thereof and for the periods
covered thereby.
(b) As at August 31, 1996, Seller had no material liabilities
or indebtedness, contingent, absolute, accrued, or otherwise, in connection with
the Business, other than as set forth in the Financial Information.
3.6 Absence of Certain Changes; Conduct of Business.
Except as set forth in this Agreement or the Exhibits hereto,
during the period from the date of the August 1996 Financial Statements to the
date hereof:
(a) there has not been any material adverse change in the
business, financial condition, results of operations or prospects (financial or
otherwise) of Seller;
(b) no event has occurred (or to the Knowledge of Seller is
likely to occur) which so far as reasonably can be foreseen at this time, may
result in any such change;
(c) there has not been any loss, damage or destruction to the
properties of the Seller (whether or not covered by insurance) materially
adversely affecting Seller's business or properties;
(d) there has not been any labor dispute or disturbance which
has or may materially adversely affect the Seller's business;
(e) except for the Chapter 11 Filings, the Seller has
conducted its business only in, and has not taken any action other than in, the
usual and ordinary course of its business; and
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(f) the Seller has not:
(i) except for the TK Settlement, entered into any commitment
or transaction (including, without limitation, any capital expenditure)
other than in the ordinary course of business;
(ii) except for the TK Settlement, granted any security
interest in, mortgage, pledge or other lien or encumbrance affecting or
relating to any of its properties or assets;
(iii) sold or otherwise disposed of any assets or properties
other than in the ordinary course of business or entered into any joint
venture, partnership or other agreement with respect thereto;
(iv) except as set forth on Schedules 3.18(a), 3.18(b) and
3.18(c) hereto, entered into any fixed term employment contract or
deferred compensation arrangement with or granted any material increase
in the compensation payable or to become payable to, any of its key
employees, made any material increase in any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for, or
with any of its employees or instituted any retirement plan or policy
for the issuance of severance pay; or
(v) except for the TK Settlement, incurred or guaranteed any
material liability (whether absolute or contingent and whether or not
currently due and payable), or entered into or assumed any material
contract, agreement, arrangement, lease (as lessor or lessee), license
or other commitment, whether written or oral, other than in the
ordinary course of business.
(g) As of the date hereof, Seller knows of no facts,
circumstances, or proposed or contemplated events which would materially
adversely affect the operations, results, or prospects of the Business after the
Closing Date. If Seller learns of any such facts, circumstances or proposed or
contemplated events prior to the Closing Date, Seller shall promptly disclose
them to Buyer.
3.7 Contracts. Seller is not a party to any written or unwritten
agreement that is material to the ongoing operations of the Business and that is
not otherwise contained on Schedule 1.21 hereto and being assigned to Buyer
hereunder, other than the Retained Contracts.
3.8 Performance of Contracts; Business Relationships.
(a) Seller and, to the Knowledge of Seller, each party to each
Contract, have performed in all material respects each term, covenant, and
condition of each Contract which is to be performed by them at or before the
date hereof. Each of the Contracts is in full force and effect and constitutes
the legal and binding obligation of Seller and, to the Knowledge of
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Seller, the other parties thereto. Except as conspicuously disclosed on Schedule
3.3(c) hereto, no Contract requires the written consent of, or prior notice to,
any third party in order for Seller to assign such contract to Buyer hereunder.
(b) Seller maintains a good business relationship with each of
the material customers and material suppliers of the Business, and Seller knows
of no unresolved complaint or dispute with any such customer or supplier which
presently exists.
(c) Buyer will not be obligated or liable to any of Seller's
vendors, suppliers, or other parties who may have or may have had a contractual
relationship with Seller, unless said relationship arises from a Contract being
assigned pursuant to Section 2.1 above or is otherwise an Assumed Liability.
3.9 Accounts.
(a) Except as otherwise provided for in the August 1996
Financial Statements as bad debts or doubtful accounts, all of the Accounts of
Seller, TMI and USORTHO have arisen from bona fide transactions by Seller, TMI
or USORTHO, are collectable in the ordinary course, and no portion of any such
Account is subject to counterclaim or set-off or, to Seller's Knowledge, is in
dispute.
(b) Since the date of the August 1996 Financial Statements,
Seller has not discounted any accounts receivable relating to the Business in
order to collect same or implemented any other collection procedures not
consistent with Seller's past practices, except as set forth on Schedule 3.9(b)
hereto.
3.10 Intangible Assets.
(a) Schedule 3.10(a) lists all Intangible Assets relating to
the Business which are material to the conduct of the Business in which either
Seller, TMI or USORTHO now has any interest, specifying whether such Intangible
Assets are owned, controlled, used or held (under license or otherwise) by
Seller, TMI or USORTHO, and also indicating which of such Intangible Assets are
registered. All Intangible Assets shown as registered in Schedule 3.10(a) have
been properly registered, all pending registrations and applications have been
properly made and filed and all annuity, maintenance, renewal and other fees
relating to registrations or applications are current.
(b) There are no license and similar agreements that Seller is
a party to with respect to intellectual property either licensed by or licensed
to Seller in relation to the Business.
(c) Either Seller, TMI or USORTHO owns the entire right,
title, and interest in and to each of the patents, trademarks, and licenses set
forth on Schedule 3.10(a) hereto, and all other Intangible Assets of the
Business. To Seller's Knowledge, neither the Purchased Assets, nor the Business
infringes on any intellectual property rights of others. There are no
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claims, demands or proceedings instituted, pending or, to the Knowledge of
Seller, threatened, by any third party pertaining to or challenging Seller's
rights to any of the intellectual property rights used in the Business. Seller
knows of no facts which would render any of the intellectual property rights
used in the Business invalid or unenforceable. All patents, patent applications,
and rights to discoveries or inventions (whether or not patentable) owned or
held by any officer, director, employee, former employee, or independent
contractor engaged by Seller and relating to the Business have been, or on or
prior to the Closing Date shall have been, duly and effectively transferred to
Seller.
3.11 Violations of Law.
(a) Except as set forth in the Financial Information, none of
the present or past operation of the Business, the products of the Business, or
the Purchased Assets violates or conflicts, in any material respect, with any
Permits, any Law (including Environmental Laws), governmental specification,
authorization, or requirement, or any decree, judgment, order, or similar
restriction. To the Knowledge of Seller, neither Seller nor any supplier of
Seller is the subject of an inspection or inquiry regarding violations or
alleged violations of any Law by any other provincial, federal, or local agency.
(b) Except as set forth in the Financial Information, there
are no proceedings, threatened proceedings, orders, notice of violations,
inspection reports, and other similar occurrences relating to the conduct of the
Business which are material to the conduct of the Business.
(c) Seller has never been (i) to Seller's Knowledge, the
subject of an Ontario Ministry of Labor inspection except as set forth on
Schedule 3.11(c), or (ii) found by any agency to be in violation of any
provincial or federal occupational safety or health Law in the conduct of the
Business.
3.12 Books of Account. The books of account of the Business are
complete and correct in all material respects, and reflect all transactions
entered into by Seller or to which Seller is a party and which relate to the
Business.
3.13 Disclosure. Seller has furnished to Buyer complete and accurate
copies or originals of all documents and/or information requested by Buyer. No
disclosure (including the Schedules hereto) or statement of fact by Seller
contained in this Agreement and no disclosure or statement of fact furnished or
to be furnished by Seller to Buyer pursuant to this Agreement or pursuant to
Buyer's due diligence contains or will contain any untrue statement of a
material fact. The Schedules to this Agreement are complete and accurate in all
material respects with respect to the information the Schedules purport to
provide.
3.14 Brokers. Seller has not incurred, nor will any person or entity be
entitled to, any brokers', finders', or similar fee in connection with the
transactions contemplated by this Agreement.
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3.15 Taxes. Except as set forth in the Financial Information, Seller
has paid or made provision for all federal, provincial and local taxes,
including but not limited to payroll taxes, or other governmental charges with
respect to the Business and/or Purchased Assets that may or could follow the
Purchased Assets or otherwise affect Buyer after the consummation of the
transactions contemplated herein. All required returns and reports with respect
to such taxes and charges have been duly and timely filed.
3.16 Permits. The Permits listed on Schedule 1 constitute all licenses,
permits, approvals, qualifications, and governmental specifications,
authorizations, registrations, or requirements which either Seller, TMI or
USORTHO currently has in connection with the Purchased Assets or the Business
(including the products thereof) which are material to the conduct of the
Business and constitute all such licenses, permits, approvals, qualifications,
and governmental specifications, authorizations, registrations, and requirements
necessary for the ownership or use of the Purchased Assets or conduct of the
Business as currently conducted by Seller, TMI or USORTHO. The Permits may be
transferred by Seller to Buyer in accordance with the terms of this Agreement
except as conspicuously noted on Schedule 1 hereto.
3.17 Environmental Matters.
(a) The Purchased Assets and the Business are in conformance
in all material respects with all applicable Environmental Laws, and there are
no past or present (or, to the Knowledge of Seller, future) events, conditions,
circumstances, activities, practices, incidents, actions, omissions or plans (i)
which, in connection with the Business or the Purchased Assets, may interfere
with or prevent compliance or continued compliance with Environmental Laws in
all material respects or with any order issued, entered, promulgated or approved
thereunder, or (ii) which may subject Seller or Buyer to damages, penalties,
injunctive relief, or cleanup costs under any Environmental Laws or pursuant to
any third-party claim, or which require or are likely to require reporting,
cleanup, removal, remedial action, or other response pursuant to Environmental
Laws or a third party claim.
(b) To the Knowledge of Seller, there are not now, nor have
there ever been, tanks or other facilities in, on, or under any property that is
or was owned, leased, used, or occupied by Seller in connection with the conduct
of the Business or at any time in its care, custody, charge, management or
control, that contain materials which, if known to be present in soils or
groundwater, would require reporting, clean up, removal, or some other action
under Environmental Laws.
(c) Neither Seller, nor, to the Knowledge of Seller, any other
person or entity has caused or permitted any Environmental Releases of materials
on, under, or at the Premises, or at any other real estate previously owned or
occupied by Seller or at any time in its care, custody, or control, which
materials, if known to be present, would require reporting, clean-up, removal,
or some other action under Environmental Laws.
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(d) Seller is not subject to any judgment, decree, order, or
citation related to or arising out of applicable Environmental Laws in
connection with the conduct of the Business.
(e) Seller possesses all permits, licenses, and approvals, if
any, required under applicable Environmental Laws in connection with the conduct
of the Business, all of which are included on Schedule 1 hereto.
(f) Seller has not received (nor, to the Knowledge of Seller,
has there been issued) any notice, whether from a public or governmental
authority, citizens' group, employee or any other person or entity, that alleges
that the Business is or may not be in compliance with any Environmental Law or
Permit.
(g) No friable asbestos or asbestos requiring remediation
under applicable Environmental Laws is present on or at the Premises.
(h) Seller has not disposed of any Hazardous Material at any
location outside Canada.
3.18 Employment Matters.
(a) Schedule 3.18(a) hereto lists all employees of the
Business, their current rates of compensation and most recent pay increase, date
of hire, benefits, location of employment, and other related information
requested by Buyer.
(b) Seller has not increased the rate of compensation of any
key employee of the Business since August 31, 1996, except as set forth on
Schedule 3.18(b) hereto.
(c) Schedule 3.18(c) hereto lists and describes all of
Seller's present Employee Benefit Plans. Each Employee Benefit Plan is and at
all times has been in full compliance with all applicable Laws. Any past
Employee Benefit Plan that has been terminated was done so in full compliance
with all applicable Laws, and there is no basis for further liability or
obligation of Seller pursuant to any and all past Employee Benefit Plans.
(d) Seller has no Employee Benefit Plan or other agreements
(including collective bargaining agreements), arrangements, or plans which would
bind or in any way affect Buyer after the Closing Date, regardless of whether
Buyer employs any such employees.
(e) Seller is in material compliance with all federal,
provincial, or other applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and has not and
is not engaged in any unfair labor practice that would in any way affect Buyer
after the Closing Date.
(f) No present or former employee of the Business has any
claim against Seller (whether under federal or provincial Law, under any
employee agreement or otherwise),
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that would in any way affect Buyer after the Closing Date, on account of or for
(i) overtime pay, other than overtime pay for the current payroll period; (ii)
wages or salaries, other than wages or salaries for the current payroll period;
or (iii) vacations, time off or pay in lieu of vacation or time off, other than
vacation or time off (or pay in lieu thereof) earned in the past twelve-month
period or as otherwise included in the Accrued Employee Benefits.
3.19 Litigation.
(a) Except as described on Schedule 3.19 hereto or as set
forth in the Financial Information, there is not any (i) litigation; (ii)
charge, grievance or other labor-related claim, strikes, lockouts or union
organizing drives; (iii) product liability claim; (iv) Environmental Claim; (v)
arbitration; (vi) proceeding; (vii) governmental investigation or inquiry;
(viii) citation; (ix) action of any kind; or (x) order, notice of violation or
inspection report, pending, or, to the Knowledge of Seller, proposed or
threatened against Seller, relating to the Business or any of the Purchased
Assets, which is material to the Business, nor is there any basis known to
Seller for any such action.
(b) There are no actions, suits or proceedings pending, or, to
the Knowledge of Seller, proposed or threatened, by any person or governmental
agency which question the legality, validity, or propriety of the transactions
contemplated by this Agreement.
(c) The TK Settlement has been settled or otherwise resolved
as described on Schedule 3.19 hereto.
3.20 Insurance.
(a) Schedule 3.20(a) hereto lists and describes all of
Seller's insurance policies covering any of the Purchased Assets or the
Business. Said policies are in full force and effect.
(b) Schedule 3.20(b) hereto lists and summarizes all claims in
excess of $10,000 under said insurance policies made during the last five (5) or
currently pending.
(c) During the last five (5) years, no lapse of insurance
coverage has occurred, and Seller has not had any application for such insurance
coverage denied or any insurance policy or coverage thereunder canceled,
withdrawn, or not renewed.
(d) To Seller's Knowledge, the insurance policies, with
respect to their amounts and types of coverage, are adequate to insure fully
against risks to which the Purchased Assets and the Business are normally
exposed.
3.21 Product Matters.
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(a) All instances of Product Warranty Claims involving amounts
in excess of $5,000 per occurrence that have occurred and for which notice has
been received by Seller within the past two (2) years are listed on Schedule
3.21 hereto.
(b) All instances of Product Liability Matters involving
amounts in excess of $5,000 that have occurred and for which notice has been
received by Seller within the past two (2) years, if any, are listed on Schedule
3.21 hereto.
(c) To the Knowledge of Seller, no facts or circumstances
exist that would likely cause a material Product Warranty Claim or Product
Liability Matter to occur prior to or after the Closing Date.
3.22 Nondisclosure Agreements. Those persons listed on Schedule 3.22
have executed nondisclosure or secrecy agreements relating to the Business with
Seller during the last five (5) years. All key employees during the last five
(5) years have executed a nondisclosure or secrecy agreement, except for those
persons listed on an updated Schedule to be delivered by Seller to Buyer no
later than fifteen (15) days after the date of signing of this Agreement. At the
request of Buyer, Seller shall diligently enforce said nondisclosure agreements
for a two (2) year period commencing on the Closing Date. Said enforcement shall
be at the specific request of Buyer and any legal fees or costs incurred as a
result of said request shall be borne solely by Buyer.
Seller shall assign its rights under said agreements to Buyer.
3.23 Products.
(a) Schedule 3.23 hereto lists all products of Seller relating
to the Business currently offered for sale and all material products offered for
sale during the last five (5) years. Such products meet all product and/or
process specifications (including product testing procedures) that they purport
or are required to meet.
(b) The products of the Business currently offered for sale
satisfy in all material respects all applicable Laws, and all other governmental
agency requirements (including those of the United States Environmental Agency
and United States Food and Drug Administration), including registration, notice,
and label requirements, and Seller is current on all applicable fees, renewals,
reports, and other similar obligations.
3.24 Pricing. Schedule 3.24 describes all special (i.e., differs from
published price list) pricing and rebate arrangements and/or commitments of
Seller currently in effect which relate to the Business. Except as set forth on
Schedule 3.24, no customer of the Business will be entitled to or, to the
Knowledge of Seller will be expectant of, any rebates, or similar commitments
after the Closing Date.
3.25 Distributors.
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(a) Schedule 3.25 hereto: (i) lists all persons or entities
that purchased Seller's products as distributors during the last fiscal year of
Seller; (ii) lists all nonemployee persons or entities that currently serve as a
manufacturer's representative for Seller's products; and (iii) describes and
sets forth the terms of the arrangement or agreement (written or unwritten) with
each such distributor or representative.
(b) Except as set forth on Schedule 3.25, all contracts with
distributors and/or manufacturer's representatives of the Business can be
terminated by Seller upon sixty (60) days' notice, with or without cause,
without liability, penalty, or premium or any nature whatsoever.
3.26 Transactions with Related Parties. Except as set forth on Schedule
3.26 hereto or otherwise disclosed herein, Seller is not a party to any
transaction or proposed transaction, including, without limitation, the leasing
of property, the purchase or sale of raw materials or finished goods, the
furnishing of services or the borrowing or lending of money with any director,
officer or stockholders of Seller, or any person or entity who is an affiliate
of such director, officer or stockholders of Seller. Except for the business
relating to the Excluded Technology of John Saringer and Saringer Research, no
director or officer of Seller, nor any of their affiliates, own or have any
ownership interest in any corporation or other entity which is involved in the
Business or Buyer's Business.
3.27 Customers and Suppliers. Schedule 3.27 hereto sets forth a list of
Seller's ten (10) largest customers relating to the Business and Seller's ten
(10) largest suppliers relating to the Business during each of Seller's two (2)
most recent fiscal years and for the period from the beginning of the current
fiscal year to August 31, 1996 determined on the basis of the total dollar
amount of net sales to such customers and purchases from such suppliers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
4.1 Organization. Buyer is a corporation duly and validly organized and
existing and in good standing under the laws of the State of Delaware and has
full corporate power to consummate the transactions contemplated in and pursuant
to this Agreement.
4.2 Authorization; Enforceability. The execution, delivery, and
performance of this Agreement, and all of the documents and instruments required
hereby, by Buyer are within the corporate power of Buyer and have been duly
authorized by all necessary corporate action by Buyer. This Agreement is, and
the other documents and instruments required hereby will be, when executed and
delivered by Buyer, the valid and binding obligations of Buyer, enforceable in
accordance with their respective terms.
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4.3 No Violation or Conflict. The execution, delivery, and performance
of this Agreement (and the transactions contemplated herein) by Buyer do not and
will not conflict with or violate any Law, judgment, order, decree, the Articles
of Incorporation or Bylaws of Buyer, or any contract or agreement to which Buyer
is a party or by which Buyer is bound.
4.4 Brokers. Buyer has not incurred, nor will any person or entity be
entitled to, any brokers', finders', or similar fee in connection with the
transactions contemplated by this Agreement.
ARTICLE V
CERTAIN MATTERS PENDING THE CLOSING
From and after the date of this Agreement and until the Closing Date:
5.1 Full Access.
(a) Buyer and its authorized agents, officers, and
representatives shall have full and complete access to the Seller, the Business,
Seller's key personnel, customers and suppliers and the Purchased Assets and
Seller's books, records, financial statements, facilities and other documents
and materials relating to Sellers' financial condition, assets, liabilities and
business during normal business hours in order to conduct such examination and
investigation of the Purchased Assets and the Business as it deems necessary,
provided that such examinations shall not unreasonably interfere with Seller's
operations and activities.
(b) If the transactions provided for herein are not
consummated, Buyer and its respective officers, agents, and representatives will
hold in strict confidence all information obtained from Seller and their
officers, agents, or representatives, and will promptly return to Seller, or
destroy at the request of Seller, all documents obtained from Seller and their
officers, agents, or representatives, and all copies of such documents made by
Buyer and its officers, agents, and representatives, excepting however, any such
information or documents which: (i) was, is, or becomes in the public domain;
(ii) was in fact lawfully known or lawfully furnished to Buyer prior to
disclosure to Buyer by Seller or their officers, agents, or representatives; or
(iii) is lawfully disclosed or lawfully furnished to Buyer by a third party
(other than officers, directors, employees, and agents of Seller) after
disclosure to Buyer by Seller.
5.2 Conduct of Business. With regard to the Business, Seller shall:
(a) carry on its business in the regular course as
contemplated in the Business Plan;
(b) satisfy its obligations under all material agreements and
commitments;
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(c) maintain its books of account and records in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles applied on a consistent basis;
(d) continue to withhold and deposit all payroll withholding
taxes as and when due; and
(e) maintain its properties in customary repair, order and
condition, reasonable wear and tear excepted.
Seller shall promptly advise Buyer of any adverse change in
the financial condition, properties, business, results of operations or
prospects (financial or otherwise) of the Business, including the Purchased
Assets and US Purchased Assets and the Assumed Liabilities and US Assumed
Liabilities. Seller shall use the sales force of Sutter Corporation, a
wholly-owned subsidiary of Buyer, to market, rent and sell continuous passive
motion devices in the United States to the extent such use does not conflict
with an existing contract of either Seller, TMI or USORTHO or compromise the
confirmation of Plan of the Reorganization or Section 363 Sale. Seller shall
promptly notify Buyer of any deviation from any provision of the Business Plan.
Buyer shall have the right to propose changes to the Business Plan to Seller,
which proposals Seller shall consider in good faith, provided, however, that the
Business Plan may only be amended by the written consent of both Buyer and
Seller.
5.3 Prohibited Action. With regard to the Business, except with the
prior written consent of Buyer, which consent shall not be unreasonably
withheld, or as expressly contemplated by this Agreement, Seller shall not:
(a) deviate from any provision of the Business Plan;
(b) sell or otherwise dispose of, or grant any mortgage,
pledge security interest in, lien or encumbrance on, any of its assets or
properties other than in the ordinary course of business, or enter into any
agreement with respect thereto, except as contemplated in the TK Settlement;
(c) enter into any employment contract or deferred
compensation arrangement with or grant any material increase in the compensation
payable or to become payable to any of its employees, make any material increase
in any bonus, insurance, or other employee benefit plan, payment, arrangement or
policy made to, for or with any such or employees, or institute any employee
benefit plan or institute any retirement plan or policy for the issuance of
severance pay;
(d) incur or guaranty any indebtedness for borrowed money
other than current liabilities incurred in the ordinary course of business;
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(e) extend credit on sales other than sales in the ordinary
course of business or lend money to any party except in connection with the sale
of merchandise in the ordinary course of business;
(f) alter or modify its pricing policies with respect to the
sales of merchandise or the terms of any such sales;
(g) enter into any material commitment or transaction other
than in the ordinary course of business; or
(h) waive any rights of substantial value in connection with
its operations or take any other material action which is not in the ordinary
course of business.
5.4 Preservation of Relationships. Seller will use its best efforts to
preserve its customers and suppliers and will generally assist Buyer in
arranging for the orderly transfer and reception of the Purchased Assets from
Seller to Buyer.
5.5 No Default. Except for the failure to obtain any required consents
under any of the Contracts, the Seller shall not do any act or omit to do any
act, or permit any act or omission to act, which will cause a breach of any of
the Contracts.
5.6 Publicity. All general notices, releases, statements and
communications to employees, suppliers, and customers of the Business and to the
general public and the press relating to the transactions covered by this
Agreement shall be made only at such times and in such manner as may be mutually
agreed upon by Buyer and Seller; provided however, that any party shall be
entitled to make a public announcement of the proposed transaction if, in the
opinion of its counsel, such announcement is required to comply with any Law or
any rule or regulation of any securities exchange or securities quotation system
and such party shall, to the extent practicable, consult with the other party
with respect to such announcement and give reasonable prior written notice of
its intent to issue such announcement.
5.7 Compliance with Laws. Seller shall comply in all material respects
with all applicable Laws and orders of any court or federal, provincial,
municipal, or other governmental department.
5.8 Exclusive Dealing. Seller shall not, and shall not permit its
officers, directors, or shareholders to, negotiate or have discussions with any
other party relating to a sale of any portion of the Business or the Purchased
Assets, without the prior written consent of Buyer.
5.9 Cooperation. Seller and Buyer shall:
(a) fully cooperate with each other and their respective legal
counsel and accountants in connection with any steps to be taken as part of
their obligations under this
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Agreement including, without limitation, in connection with the preparation,
filing and confirmation of the amended Plan of Reorganization contemplated in
Section 6.5 hereof;
(b) use their reasonable efforts to satisfy those conditions
set forth in Articles VI and VII which are to be satisfied by them; and
(c) promptly give notice to the other party of the existence
or occurrence of any fact or condition which would make any representation or
warranty contained herein untrue in any material respect or which might
reasonably be expected to prevent the consummation of the transactions
contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (any or all of which Buyer may expressly waive in
writing):
6.1 Compliance with Agreement. Seller shall have performed and complied
with all of their obligations under this Agreement in all material respects
which are to be performed or complied with by them prior to or on the Closing
Date.
6.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Buyer and Buyer's counsel, and Seller
shall have made available to Buyer for examination the originals or true and
correct copies of all documents which Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
6.3 Litigation. No investigation, suit, action, or other proceeding
with merit determined on a reasonable basis shall be threatened or pending
before any court or governmental agency that seeks the restraint, prohibition,
damages, or other relief in connection with this Agreement or the consummation
of the transactions contemplated by this Agreement.
6.4 TK Settlement. The TK Settlement shall have been settled as set
forth on Schedule 3.19 hereto.
6.5 Plan of Reorganization. Either a Section 363 Sale or an amended
Plan of Reorganization on terms acceptable to Seller shall have been approved by
Buyer, which approval shall not be unreasonably or arbitrarily withheld, and
shall have been filed with and confirmed by order of the Colorado Court. Any
Section 363 Sale or amended Plan of Reorganization shall:
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(a) provide for the creditors of USORTHO and TMI and for the
TK Settlement in the same manner as they are currently provided for in
the Plan of Reorganization filed on October 18, 1996, except that the
note to be provided in connection with the TK Settlement shall instead
be replaced by a cash payment in an amount equal to such note on
confirmation from funds provided by Buyer; and
(b) provide for, among other things:
(i) the purchase of the US Purchased Assets in
consideration for the payment of the Purchase Price as contemplated in
Section 2.2 hereof, and, subject to Section 2.2 hereof, the assumption
of the US Assumed Liabilities by Buyer;
(ii) the Purchase Price payable by Buyer shall be
allocated first to the cash payment required to purchase that portion
of the US Purchased Assets owned by USORTHO, and the balance to be
allocated to the cash payment required to purchase that portion of the
US Purchased Assets owned by TMI;
(iii) the rejection of all employment, agency,
distributorship and other contracts of TMI and USORTHO as Buyer may
require; and
(iv) the assumption of all provider and other
contracts of TMI and USORTHO as Buyer may require;
6.6 Representations and Warranties. The representations and warranties
made by Seller shall be true and correct in all material respects as of the date
hereof and as of the Closing Date with the same force and effect as though said
representations and warranties had been made at such times.
6.7 Deliveries at Closing. Seller shall have delivered to Buyer or
shall have caused to be delivered to Buyer, the following documents, each
properly executed and dated as of the Closing Date:
(a) the Bill of Sale;
(b) Seller's Closing Certificates;
(c) the Noncompete Agreements;
(d) the Lease;
(e) assignments, in form and substance reasonably acceptable
to Buyer, of the Intangible Assets set forth on Schedule 3.10(a) hereto;
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(f) a certificate of payment issued by the Minister of Revenue
of Ontario under Section 6 of the Retail Sales Tax Act (Ontario) or similar
legislation in other relevant provinces (if applicable) to the effect that all
requisite taxes under such Act and similar legislation relating to the Purchased
Assets (other than relating to the conveyance and transfer of the Purchased
Assets to Buyer hereunder) have been paid by Seller;
(g) an election duly executed by Seller and Buyer as to the
sale of Accounts under Section 22 of the Income Tax Act (Canada);
(h) the Opinion of Seller's Counsel; and
(i) the Saringer Agreement.
6.8 Other Deliveries. Seller shall have delivered to Buyer prior to or
at Closing:
(a) such certificates and documents of officers of Seller and
of public officials as shall be reasonably requested by Buyer's counsel to
establish the existence and good standing of Seller and the due authorization of
this Agreement and the transactions contemplated by this Agreement by Seller;
(b) terminations and releases, for any security interests
encumbering the Purchased Assets (unless they relate to an Assumed Liability or
a Permitted Lien);
(c) legal title to and legal possession of the Purchased
Assets; and
(d) such deeds, bills of sale, endorsements, assignments and
other good and sufficient instruments of conveyance and transfer as shall be
effective to vest in Buyer free and clear title to the Purchased Assets as
contemplated by this Agreement.
6.9 Approvals and Consents.
(a) Seller shall have filed all notices and obtained, in
writing, and conveyed to Buyer such permissions, approvals, determinations,
consents and waivers, if any, as may be required by Law, regulatory authorities,
the Contracts, the Permits, secured creditors of Seller or from any third party
pursuant to any contract to which the Seller is a party, in order to consummate
the transactions contemplated by this Agreement and to vest in Buyer good and
marketable title to the Purchased Assets as contemplated by this Agreement.
(b) Seller shall have obtained the necessary approvals of its
shareholders to enter into this Agreement and consummate the transactions
contemplated by this Agreement.
(c) Buyer shall have obtained, at Buyer's expense, all
approvals, authorizations, and permits, governmental and otherwise, that are
necessary to conduct the Business on and after the Closing Date in substantially
the same manner in which it is currently
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<PAGE>
conducted, including the transfer or assignment of the Permits listed on
Schedule 1 hereto which are indicated thereon as being assignable or
transferable.
6.10 Payments. Seller shall have paid to Buyer the refunded Deposit and
Accrued Employee Benefits payable as contemplated in Section 2.8(a).
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (any or all of which Seller may expressly waive):
7.1 Compliance with Agreement. Buyer shall have performed and complied
with all of its obligations under this Agreement in all material respects which
are to be performed or complied with by it prior to or on the Closing Date.
7.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement by Buyer, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to Seller and Seller's counsel.
7.3 Litigation. No investigation, suit, action, or other proceeding
with merit determined on a reasonable basis shall be threatened or pending
before any court or governmental agency that seeks the restraint, prohibition,
damages, or other relief in connection with this Agreement or the consummation
of the transactions contemplated by this Agreement.
7.4 Representations and Warranties. The representations and warranties
made by Buyer in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date with the same force
and effect as though such representations and warranties had been made at such
times.
7.5 Payment of Purchase Price. Buyer shall have paid to Seller the
Purchase Price in accordance with Section 2.2 of this Agreement.
7.6 Deliveries at Closing. Buyer shall have delivered to Seller the
following documents, each properly executed and dated as of the Closing Date:
(a) the Bill of Sale;
(b) Buyer's Closing Certificate;
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(c) the Opinion of Buyer's Counsel;
(d) the Noncompete Agreements;
(e) the Lease; and
(f) the Saringer Agreement.
7.7 Other Documents. Buyer shall have delivered to Seller such
certificates and documents of officers of Buyer and of public officials as shall
be reasonably requested by Seller's counsel to establish the existence and
current status of Buyer and the due authorization of this Agreement and the
transactions contemplated by this Agreement by Buyer.
7.8 Approvals and Consents.
(a) Buyer shall have obtained the necessary approvals of its
Board of Directors to enter into this Agreement and to consummate the
transactions contemplated by this Agreement.
(b) Buyer shall have filed all notices and obtained, in
writing, and conveyed to Seller such permissions, approvals, determinations,
consents and waivers, if any, as may be required by law, regulatory authorities
or from any third party pursuant to any contract to which the Buyer is a party,
in order to consummate the transactions contemplated by this Agreement.
ARTICLE VIII
INDEMNITY; TERMINATION; MISCELLANEOUS
8.1 Seller's Indemnity.
(a) Seller shall indemnify and hold Buyer harmless from and
against and shall defend promptly Buyer from and reimburse Buyer for any and all
losses, damages, costs, expenses, liabilities, obligations, and claims of any
kind (including, without limitation, reasonable attorneys' fees and other costs
and expenses) (collectively, "Damages") which Buyer may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach of this Agreement or inaccuracy of any
of the representations and warranties made by Seller in or pursuant to
this Agreement;
(ii) any failure by Seller to carry out, perform,
satisfy, and discharge any of its covenants, agreements, undertakings,
liabilities, or obligations under this Agreement or under any of the
documents delivered by Seller pursuant to this Agreement;
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<PAGE>
(iii) the Retained Liabilities;
(iv) except for the Assumed Liabilities, the
ownership, occupation, and/or operation of the Business by Seller, the
Purchased Assets or any property occupied or used by Seller in
connection with the Business, prior to the Closing;
(v) noncompliance by Seller, TMI, USORTHO, the
Business of Seller, the Purchased Assets, the US Purchased Assets or
any property occupied or used by Seller with any Law, required
specification, Environmental Law, or the infringement of property
rights of others;
(vi) any Environmental Claim arising out of
conditions existing as of or prior to the Closing at the Premises,
former properties owned or occupied by Seller, or present or former
off-site disposal locations used by Seller;
(vii) any remedial action reasonably taken by Buyer
to prevent an Environmental Claim or to achieve compliance with any
Environmental Laws with which Seller is not in compliance on or prior
to the Closing;
(viii) any other Environmental Claim with respect to
the conduct of the Business of Seller as of or prior to the Closing;
(ix) noncompliance with any bulk sales laws in
connection with the sale of the Purchased Assets, if applicable; and
(x) any suit, action or other proceeding brought by
any governmental authority or person arising out of any of the matters
referred to in this Section 8.1(a) of this Agreement.
(b) Buyer shall promptly notify Seller of any claim, demand,
action, or proceeding for which indemnification will be sought under this
Section 8.1 of this Agreement and, if such claim, demand, action, or proceeding
is a third party claim, demand, action, or proceeding, Seller shall have the
right at their expense to assume the defense thereof using counsel reasonably
acceptable to Buyer. Buyer shall have the right to participate, at its own
expense, with respect to any such third party claim, demand, action, or
proceeding. In connection with any such third party claim, demand, action, or
proceeding, Buyer and Seller shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No such
third party claim, demand, action, or proceeding shall be settled without the
prior written consent of Buyer and Seller. If a firm written offer is made to
settle any such third party claim, demand, action, or proceeding and Buyer
refuses to consent to such settlement, then: (i) Seller shall be excused from,
and Buyer shall be solely responsible for, all further defense of such third
party claim, demand, action, or proceeding; and (ii) the maximum liability of
Seller relating to such third party claim, demand, action, or proceeding shall
be the amount of the proposed settlement if the amount thereafter recovered from
Buyer on such third
35
<PAGE>
party claim, demand, action, or proceeding is greater than the amount of the
proposed settlement. With respect to any direct claim, following the receipt of
notice from Buyer of such claim Seller shall have thirty (30) days to make such
investigation of the claim as is considered necessary or desirable. For the
purpose of such investigation, Buyer shall make available to Seller the
information relied upon by Buyer to substantiate the claim, together with all
such other information as Seller may reasonably request. If the parties agree at
or prior to the expiration of such thirty (30) day period (or any mutually
agreed upon extension thereof) to the validity and amount of such claim, Seller
shall immediately pay to Buyer the fully agreed upon amount of the claim. If
Buyer and Seller fail to agree on the validity and amount of such claim, the
matter shall be settled by arbitration in accordance with Section 8.19.
Notwithstanding the foregoing, Seller shall not be required to indemnify or save
harmless Buyer in respect of any breach of inaccuracy of any representation or
warranty unless Buyer shall have provided notice to Seller in accordance with
this Section 8.1(b) at or prior to the expiration of the period set forth in
Section 8.6.
(c) With respect to the Premises, Seller agrees to grant to
Buyer on the Closing Date a mortgage (the "Buyer's Mortgage") on the Premises,
for a principal amount which does not exceed 50% of the fair market value of the
Premises at the time the Buyer's Mortgage is granted, to satisfy, subject to
Section 2.3(h), any Damages Buyer may suffer in connection with the indemnity
set out in Section 8.1(a), provided however that Buyer agrees:
(i) to postpone and subordinate the Buyer's Mortgage
from time to time as Seller shall request to one or more mortgages, and any
replacements thereof, the principal amount of which, in the aggregate, do not
exceed 50% of the fair market value of the Premises at the time any such
mortgage is granted; and
(ii) that Buyer's Mortgage shall be discharged on,
and shall expire and be of no further force or effect subsequent to, a date (the
"Discharge Date"), which is the earlier of:
(1) two (2) years after the Closing Date;
and
(2) the date on which the Premises is sold
by Seller; provided that Seller provides to Buyer, in form acceptable to Buyer
acting reasonably, security in the form of cash proceeds equal in value to the
principal amount of the Buyer's Mortgage, such replacement security to be
discharged on, and shall expire and be of no further force and effect subsequent
to, the date set out in (1) above. On the Closing Date, Buyer shall execute and
deliver a discharge of the Buyer's Mortgage, in registerable form, to Seller's
counsel, which discharge the Seller's counsel is hereby irrevocably authorized
and directed by Buyer to register against title to the Premises on the Discharge
Date.
(d) If the procedures set forth in Sections 8.1(b) and 8.19
have been fully completed and satisfied, and Seller does not immediately pay to
Buyer any amount that, subject to Section 2.3(h), has become payable pursuant to
Section 8.1(a), Buyer shall have the option
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<PAGE>
recouping all or any part of such claim by offsetting such amount against the
Lease in such order as payments in respect thereof are due to be made. Such
right of offset shall not, however, apply after the expiration of the initial
two (2) year term of the Lease.
8.2 Buyer's Indemnity.
(a) Buyer shall indemnify and hold Seller harmless from and
against, and shall defend promptly Seller from and reimburse Seller for, any and
all Damages which Seller may at any time suffer or incur, or become subject to,
as a result of or in connection with:
(i) any breach or inaccuracy of any representations
and warranties made by Buyer in or pursuant to this Agreement;
(ii) any failure by Buyer to carry out, perform,
satisfy and discharge any of its covenants, agreements, undertakings,
liabilities, or obligations under this Agreement or under any of the
documents and materials delivered by Buyer pursuant to this Agreement;
(iii) any product liability matters or product
warranty claims for products manufactured, distributed, sold or shipped
by Buyer after the Closing;
(iv) the ownership, and/or operation of the Business
and the Purchased Assets after the Closing; and
(v) the Assumed Liabilities; and
(vi) any suit, action, or other proceeding brought
by any governmental authority or person arising out of any of the
matters referred to in Section 8.2 of this Agreement.
(vii) the Buyer's failure to fulfill its obligations
under Sections 2.8(a) and 8.14.
(b) Seller shall promptly notify Buyer of any claim, demand,
action, or proceeding for which indemnification will be sought under this
Section 8.2 of this Agreement and, if such claim, demand, action, or proceeding
is a third party claim, demand, action, or proceeding, Buyer will have the right
at its expense to assume the defense thereof using counsel reasonably acceptable
to Seller. Seller shall have the right to participate, at its own expense, with
respect to any such third party claim, demand, action, or proceeding. In
connection with any such third party claim, demand, action, or proceeding, Buyer
and Seller shall cooperate with each other and provide each other with access to
relevant books and records in their possession. No such third party claim,
demand, action, or proceeding shall be settled without the prior written consent
of Seller and Buyer. If a firm written offer is made to settle any such third
party claim, demand, action, or proceeding and Seller refuse to consent to such
settlement, then: (i)
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Buyer shall be excused from, and Seller shall be solely responsible for, all
further defense of such third party claim, demand, action, or proceeding; and
(ii) the maximum liability of Buyer relating to such third party claim, demand,
action, or proceeding shall be the amount of the proposed settlement if the
amount thereafter recovered from Seller on such third party claim, demand,
action, or proceeding is greater than the amount of the proposed settlement.
Notwithstanding the foregoing, Seller shall not be required to indemnify or save
harmless Seller in respect of any breach or inaccuracy of any representation or
warranty unless Seller shall have provided notice to Seller in accordance with
this Section 8.2(b) at or prior to the expiration of the period set forth in
Section 8.6.
8.3 Termination. Time is of the essence. Unless otherwise agreed to in
writing, this Agreement may be terminated and the transactions contemplated by
this Agreement may be abandoned at any time as follows: (a) by mutual written
agreement of Seller and Buyer; (b) by Buyer (provided that it is not otherwise
in breach hereof) if any of the conditions set forth in Article VI of this
Agreement shall not have been fulfilled on or prior to the Closing Date; (c) by
Seller (provided that it is not otherwise in breach hereof) if any of the
conditions set forth in Article VII of this Agreement shall not have been
fulfilled on or prior to the Closing Date.
8.4 Rights on Termination; Waiver. If this Agreement is terminated
pursuant to Section 8.3 hereof, all further obligations of the parties under or
pursuant to this Agreement shall terminate without further liability of either
party to the other, except for violation of Section 5.9 (cooperation), and
except that Buyer's obligations contained in Section 5.1(b) (confidentiality) of
this Agreement shall survive any such termination. If any of the conditions set
forth in Article VI of this Agreement have not been satisfied, Buyer may
nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement and, if any of the conditions set forth in
Article VII of this Agreement have not been satisfied, Seller may nevertheless
elect to proceed with the consummation of the transactions contemplated by this
Agreement.
8.5 Further Assurances. From time to time after the Closing Date, upon
the request of Buyer, and without further cost or expense to Buyer, Seller shall
execute and deliver, and cause to be executed and delivered, such further
instruments of conveyance, assignment, and transfer and take such further action
as Buyer may reasonably request in order more effectively to sell, assign,
convey, transfer, reduce to possession, and record title to any of the Purchased
Assets. Seller agree to cooperate with Buyer in all reasonable respects to
assure to Buyer the continued title to and possession of the Purchased Assets in
the condition and manner contemplated by this Agreement.
8.6 Survival of Representations and Warranties. All representations and
warranties of Buyer and Seller contained in this Agreement or made pursuant to
this Agreement shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement for a period of two (2) years
following the Closing Date, at which time all such representations and
warranties shall expire and terminate.
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<PAGE>
8.7 Entire Agreement; Amendment. This Agreement and the documents
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all prior and contemporaneous agreements, understandings,
negotiations, and discussions of the parties, whether oral or written, and there
are no warranties, representations, or other agreements between the parties or
on which any of the parties have relied in connection with the subject matter
hereof, except as specifically set forth in this Agreement. No amendment,
supplement, modification, waiver, or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
8.8 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses incurred by it, including the fees of respective counsel, accountants,
brokers, investment bankers, and other experts incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
by this Agreement.
8.9 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the Province of Ontario.
8.10 Assignment. This Agreement shall not be assigned by Seller or
Buyer without the prior written consent of the other party; provided, however,
that Buyer shall have the right to assign all or any portion of its rights under
this Agreement or to delegate all or any portion of its obligations under this
Agreement, in each case with reference to all or any portion of the Purchased
Assets, to a wholly-owned subsidiary of Buyer without Seller's consent. Any such
assignment shall not release Buyer from its obligations herein.
8.11 Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party or on the
fifth business day after having deposited the notice or communication in the
mail, certified or registered mail, postage prepaid, return receipt requested,
or upon delivery by courier or facsimile, and addressed as follows, unless and
until any of such parties notifies the others in accordance with this section of
a change of address:
If to Seller: Toronto Medical Corp.
1370 Don Mills Road, Suite 200
Don Mills, Ontario M3B 3N7
Attention: Jean-Pierre Scheidegger
Fax #: 416-441-2503
with a copy to: Koskie Minsky
20 Queen Street West, Suite 900
Toronto, Ontario, Canada M5H 3R3
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<PAGE>
Attention: George Dzuro, Esq.
Fax #: 416-977-3316
and to: Saringer Research Inc.
176 Bullock Drive, Unit 16
Markham, Ontario L3P 7N1
Attention: John Saringer
Fax #: 905-477-3492
If to Buyer: OrthoLogic Corp.
2850 South 36th Street
Phoenix, Arizona 85034
Attention: Allan M. Weinstein, Ph.D.
Fax #: 602-470-7080
with a copy to: Quarles & Brady
One East Camelback Road, Suite 400
Phoenix, Arizona 85012
Attention: P. Robert Moya, Esq.
Fax #: 602-230-5598
8.12 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part of this Agreement.
8.13 Income Tax Position. Neither Buyer nor Seller shall take a
position for income tax purposes which is inconsistent with this Agreement.
8.14 Taxes and Fees. Buyer shall pay all transfer taxes of any kind,
all sales, use or other taxes and all escrow, documentary, stamp, recording and
filing taxes or fees which arise as a result of the conveyance of the Purchased
Assets to Buyer pursuant to this Agreement.
8.15 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each party hereto, its successors and assigns.
8.16 Interpretation. Unless the context requires otherwise, all words
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular,
and all words in any gender shall extend to and include all genders.
8.17 Severability. If any provision, clause, or part of this Agreement,
or the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement,
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or the application of such provision, clause, or part under other circumstances,
shall not be affected thereby.
8.18 No Reliance. Except for any assignees permitted by section 8.10 of
this Agreement: (a) no third party is entitled to rely on any of the
representations, warranties, and agreements of Buyer or Seller contained in this
Agreement; and (b) Buyer and Seller assume no liability to any third party
because of any such reliance.
8.19 Legal Proceedings. If a dispute arises between the parties
relating to this Agreement or any of the other agreements to be delivered
hereunder, the parties agree to use the following procedure prior to either
party pursuing other available remedies:
(a) A meeting shall be held promptly between the parties,
attended by individuals with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the dispute.
(b) If, within thirty (30) days after such meeting, the
parties have not succeeded in negotiating a resolution of the dispute, they will
jointly appoint a mutually acceptable neutral person not affiliated with either
of the parties (the "neutral"), seeking assistance in such regard from the
Center for Public Resources if they have been unable to agree upon such
appointment within 40 days from the initial meeting. The fees of the neutral
shall be shared equally by the parties.
(c) In consultation with the neutral, the parties will select
or devise an alternative dispute resolution procedure ("ADR") by which they will
attempt to resolve the dispute, and a time and place for the ADR to be held,
with the neutral making the decision as to the procedure, and/or place and time
(but unless circumstances require otherwise, not later than sixty (60) days
after selection of the neutral) if the parties have been unable to agree on any
of such matters within twenty (20) days after initial consultation with the
neutral.
(d) The parties agree to participate in good faith in the ADR
to its conclusion as designated by the neutral. If the parties are not
successful in resolving the dispute through the ADR, then the parties may agree
to submit the matter to binding arbitration or a private adjudicated resolution
through the appropriate court.
(e) In the event legal proceedings through the courts are
commenced to enforce the parties' respective rights and obligations herein, the
prevailing party shall be entitled to reimbursement for its related costs and
expenses, including reasonable legal fees, incurred with respect to said legal
proceedings.
8.20 Currency. Unless otherwise indicated, all references in this
Agreement to dollars are expressed in United States Dollars.
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IN WITNESS WHEREOF, the parties have caused this Purchase and Sale
Agreement to be duly executed as of the day and year first above written.
ORTHOLOGIC CORP.
By:___________________________________
Name:
Title:
TORONTO MEDICAL CORP.
By:___________________________________
Name:
Title:
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EXHIBITS
Exhibit Description
- ------- -----------
1 August 1996 Financial Statements
2 Bill of Sale
3 Buyer's Closing Certificate
4 Lease
5 Five Year Noncompete Agreement
6 Two Year Noncompete Agreement
7 Opinion of Buyer's Counsel
8 Opinion of Seller's Counsel
9 Seller's Closing Certificate
10 Business Plan
11 Saringer Agreement
<PAGE>
SCHEDULES
Schedule No. Description
- ------------ -----------
1 Agent Litigation
1 Assumed Liabilities
1 Contracts
1 Employee Agreements
1 Fixed Assets
1 Inventory
1 Leased Assets
1 Permits and Assignability
1 Permitted Liens
1 Prepaid Expenses
1 Retained Contracts
2.3(e) Extraordinary Items
3.3(c) Consents
3.4(e) Off-Site Assets
3.9(b) Discounted Accounts
3.10(a) Intangible Assets
3.11(c) Inspection Report
3.18(a) Employees
3.18(b) Compensation Increases of Key Employees
3.18(c) Employee Benefits Plans
3.19 Litigation
3.20(a) Insurance Policies
3.20(b) Insurance Claims
3.21 Product Matters
3.22 Nondisclosure Agreements
3.23 Products
3.24 Special Pricing Arrangements
3.25 Distributors
3.26 Related Party Transactions
3.27 Customers and Suppliers
AMENDMENT TO PURCHASE AND SALE AGREEMENT
----------------------------------------
This Amendment to Purchase and Sale Agreement (the "Amendment") is made
as of January 13, 1997 by and among ORTHOLOGIC CORP., a Delaware corporation
("Buyer") and TORONTO MEDICAL CORP., an Ontario corporation ("Seller").
1. Amendment and Effective Date. This Amendment, which shall be
effective as of January 13, 1997, amends the Purchase and Sale Agreement made as
of December 30, 1996 by and among Buyer and Seller (the "Agreement"). Except as
specifically modified by this Amendment, the Agreement shall remain in full
force and effect.
2. Definitions. The defined terms in the Agreement shall have the same
meanings in this Amendment.
3. Amendments. The amendments to the Agreement, which shall be
effective immediately, shall be as set forth in this Section 3.
a. Section 1.18 of the Agreement shall be revised in its
entirety to read as follows:
""Closing Date" shall mean the earlier to occur of the date of
the coming into existence of a final unappealable order
approving (i) the Plan of Reorganization or (ii) the Section
363 Sale, each as contemplated in Sections 2.13 and 6.5
hereof. Such Plan of Reorganization or Section 363 Sale must
be so approved on or before March 15, 1997, provided, however,
that Seller, for reasons related to the Plan of Reorganization
or Section 363 Sale, may extend the Closing Date to a date not
later than May 15, 1997."
b. Section 1.21 of the Agreement shall be revised in its
entirety to read as follows:
""Contracts" shall mean all of the agreements whether written,
oral or implied, under which Seller conducts the Business
which are listed and described on Schedule 1 hereto, except
for the Retained Contracts and any contracts rejected in
connection with the Plan of Reorganization or Section 363
Sale."
c. Section 1.51 of the Agreement shall be revised in its
entirety to read as follows:
<PAGE>
""Plan of Reorganization" shall mean that certain Plan of
Reorganization for USORTHO and TMI filed with the Colorado
Court on October 18, 1996, as amended, if amended as
contemplated in Section 6.5 hereof or as required in
connection with the Section 363 Sale."
d. Subsection (a) of Section 1.64 (Retained Liabilities) of
the Agreement shall be revised in its entirety to read as follows:
"(a) all employment, agency, authorized distributor and other
contracts of TMI and/or USORTHO, unless specifically assumed
and assigned by Buyer in writing;"
e. The first sentence of Section 2.2 (Payment of Purchase
Price) shall be revised in its entirety to read as follows:
"At the Closing, Buyer shall pay the Purchase Price to TMI
and/or USORTHO or as they may otherwise direct in writing at
the Closing, in accordance with the Plan of Reorganization or
Section 363 Sale, in payment of the purchase of the US
Purchased Assets and the Purchased Assets, via bank cashier's
check or wire transfer."
f. The following shall be added to the Agreement as Section
2.13:
"Section 363 Sale. Buyer and Seller shall take all necessary
action to effect a Section 363 Sale, in accordance with the
terms of Section 6.5 hereto. If such Section 363 Sale is not
approved by the Colorado Court, an amended Plan of
Reorganization may be filed with the Colorado Court in
accordance with the terms of Section 6.5 hereto, and if an
objection is or may be raised to the Section 363 Sale, an
amended Plan of Reorganization may be so filed."
g. Subsection (a) of Section 5.9 (Cooperation) of the
Agreement shall be revised in its entirety to read as follows:
"(a) fully cooperate with each other and their respective
legal counsel and accountants in connection with any steps to
be taken as part of their obligations under this Agreement
including, without limitation, in connection with the
preparation, filing and confirmation of the amended Plan of
Reorganization or Section 363 Sale contemplated in Sections
2.13 and 6.5 hereof;"
h. The following shall be added to the Agreement as Section
6.11.
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<PAGE>
"Simultaneous Closings. The Closing under this Agreement shall
occur on the date of the coming into existence of a final
unappealable order approving the Section 363 Sale or the Plan
of Reorganization described in Sections 2.13 and 6.5 hereof."
4. Authorization and Signatures. By signing below, each party
represents that this Amendment has been duly authorized and constitutes an
agreement by which it is bound.
3
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of January 13, 1997 by their respective officers thereunto duly
authorized.
ORTHOLOGIC CORP.
By: /s/ Nicholas A. Skaff
---------------------------------
Name: Nicholas A. Skaff
Title: Vice President
TORONTO MEDICAL CORP.
By: /s/ John Saringer
---------------------------------
Name: John Saringer
Title: Chairman and CEO
4
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
-----------------------------------------------
This Second Amendment to Purchase and Sale Agreement (the "Amendment")
is made as of March 1, 1997 by and among ORTHOLOGIC CORP., a Delaware
corporation ("Buyer") and TORONTO MEDICAL CORP., an Ontario corporation
("Seller").
1. Amendment and Effective Date. This Amendment, which shall be
effective as of March 1, 1997, amends the Purchase and Sale Agreement made as of
December 30, 1996 by and among Buyer and Seller (the "Agreement"), as amended by
the Amendment to Purchase and Sale Agreement made as of January 16, 1997 by and
among Buyer and Seller. Except as specifically modified by this Amendment, the
Agreement shall remain in full force and effect.
2. Definitions. The defined terms in the Agreement shall have the same
meanings in this Amendment.
3. Amendments. The amendments to the Agreement, which shall be
effective immediately, shall be as set forth in this Section 3.
a. The third sentence of Section 2.1(a) of the Agreement shall
be revised in its entirety to read as follows to replace the word "debtor" with
"creditor":
"If an Assumed Liability cannot, for any reason, be assumed by
Buyer, Buyer shall pay at Closing the amount of such Assumed
Liability directly to the creditor of Seller which is owed
such Assumed Liability via bank cashier's check or wire
transfer."
b. Section 2.8(b) of the Agreement shall be revised in its
entirety to read as follows to delete a comma:
"With respect to employees of Seller, TMI and USORTHO who are
not offered continuing employment with Buyer, Seller shall
provide written notices to such employees and Seller, TMI or
USORTHO, as the case may be, shall be responsible for all
payments to said employees for wages, commissions, bonuses,
vacations, severance and other similar forms of compensation
owing to or accrued by such employees."
c. Schedule 3.10(a) to the Agreement shall be amended to
include the following information:
USA H3 patent, which is listed as being "in process" under
patent application number 951.020, has been completed under
patent number 5327.882
<PAGE>
Japanese L4 patent, which is listed as being "in process"
under patent application number 502,160/90, has been completed
under patent number 2118544
European L2, L3, A2E, A2S and H2 patent number 0,078,093 was
revoked on October 17, 1992
USA Pronation/Supination Device patent, which is listed as
being "in process," has been completed for the UK under patent
number UK 96202080.0
USA and International Active/Passive Device patent, which is
listed as being "in process," has been completed for the US
under patent number 08/746,130 abd internationally under
patent number PCT/CA96/00747
USA and International Wrist and Ankle Device patent, which is
listed as "in process," has been completed for the US under
patent number 08/561,193 and internationally under patent
number PCT/CA96/00746
4. Authorization and Signatures. By signing below, each party
represents that this Amendment has been duly authorized and constitutes an
agreement by which it is bound.
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2
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of March 1, 1997 by their respective officers thereunto duly
authorized.
ORTHOLOGIC CORP.
By: /s/ Allan M. Weinstein, Ph.D.
-------------------------------------------
Allan M. Weinstein, Ph.D.
Chairman and Chief Executive Officer
TORONTO MEDICAL CORP.
By: /s/ J. P. Scheidegger
-------------------------------------------
Jean-Pierre Scheidegger
Vice Chairman and Chief Operating Officer
3
ASSIGNMENT OF AGREEMENT
This ASSIGNMENT OF AGREEMENT (this "Agreement") is made as of March 1,
1997 by and between ORTHOLOGIC CORP., a Delaware corporation ("OrthoLogic"),
TORONTO MEDICAL ORTHOPAEDICS LTD., a Canada corporation and wholly-owned
subsidiary of OrthoLogic ("Subsidiary") and TORONTO MEDICAL CORP., an Ontario
corporation ("Toronto Medical").
WHEREAS, OrthoLogic and Toronto Medical entered into a Purchase and
Sale Agreement as of December 30, 1996, as amended (the "Purchase Agreement"),
which provides, among other things, that OrthoLogic has the right to assign its
rights and obligations under the Purchase Agreement to a wholly owned subsidiary
of OrthoLogic; and
WHEREAS, OrthoLogic desires to assign its rights and obligations under
the Purchase Agreement to Subsidiary, a wholly owned subsidiary of OrthoLogic,
and Subsidiary desires to accept the assignment of the Purchase Agreement from
OrthoLogic.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the undersigned do
hereby agree and certify as follows:
1. OrthoLogic hereby assigns, transfers and conveys its rights
and obligations under the Purchase Agreement to Subsidiary,
provided, however, that such assignment, transfer and
conveyance shall not release OrthoLogic from its obligations
under the Purchase Agreement to Toronto Medical;
2. Subsidiary hereby accepts the foregoing assignment and agrees
with Toronto Medical to assume and be bound by the obligations
of OrthoLogic set forth in the Purchase Agreement; and
3. OrthoLogic represents and warrants to Toronto Medical that
Subsidiary is a wholly owned subsidiary of OrthoLogic.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Assignment to be
effective on the date first set forth above.
ORTHOLOGIC CORP.
By: /s/ Allan M. Weinstein, Ph.D.
---------------------------------
Allan M. Weinstein, Ph.D.,
Chairman and Chief
Executive Officer
TORONTO MEDICAL
ORTHOPAEDICS LTD.
By: /s/ Allan M. Weinstein, Ph.D.
---------------------------------
Allan M. Weinstein, Ph.D.,
President
TORONTO MEDICAL CORP.
By: /s/ J. P. Scheidegger
---------------------------------
Jean-Pierre Scheidegger
Vice Chairman and
Chief Operating Officer
