UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: February 11, 1998
MEDPLUS, INC.
(Exact name of registrant as specified in its charter)
Ohio 48-1094982
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8805 Governor's Hill Drive, Suite 100
Cincinnati, OH 45249
(Address of principal executive offices)
(513) 583-0500
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets. On January 30,
1998, the registrant issued the attached press release announcing
the sale of all the assets, consisting primarily of accounts
receivable, inventory, intellectual property and fixed assets, of
IntelliCode Intelligent Bar Coding Systems, a division of the
registrant, to Becton Dickinson and Company for an initial payment
of $17.4 million plus royalty payments. The initial payment is
subject to adjustment after closing based on the actual net book
value of such assets as of the closing date. In connection with
the acquisition, Becton Dickinson also assumed certain liabilities
of IntelliCode Intelligent Bar Coding Systems. The registrant
also sold to Becton Dickinson $2 million worth of shares of the
registrant's common stock.
Item 5. Other Events. On January 30, 1998, the registrant issued
the attached press release announcing that its wholly owned
subsidiary, Universal Document Management Systems, Inc. (UDMS),
withdrew its proposed initial public offering of 2,600,000 shares
of common stock as a result of the existing market for initial
public offerings.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Statements
The following unaudited Pro Forma Consolidated Balance Sheet of
MedPlus, Inc. and Subsidiaries (the "Company") as of September 30,
1997 and the Pro Forma Consolidated Statements of Operations for
the nine months ended September 30, 1997 and the year ended
December 31, 1996 are presented to give effect to the sale of all
the assets of the Company's IntelliCode Intelligent Bar Coding
Systems Division ("IntelliCode") and assumption of certain
liabilities by Becton Dickinson and Company ("Becton") and the
sale of 222,556 shares of the Company's common stock to Becton for
$2,000,000, collectively, the "Transactions."
Historical financial data used to prepare the pro forma financial
statements were derived from the audited consolidated financial
statements included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996 and the unaudited
consolidated financial statements included in the Company's
quarterly report on Form 10-QSB for the quarter ended September
30, 1997. These pro forma financial statements should be read in
conjunction with such historical financial statements.
In December 1997, the Company changed its fiscal year end from
December 31 to January 31 as disclosed in the Company's Form 8-K
filing dated December 19, 1997. Recasting the quarterly financial
information for the fiscal nine months ended October 31, 1997 is
not practical or cost justified at this time. Accordingly, the
Company has elected to present the pro forma financial information
for the nine months ended September 30, 1997. The Company does
not have seasonal trends which would impact the comparability of
the pro forma financial information presented.
The pro forma adjustments reflected herein are based on available
information and certain assumptions that the Company's management
believes are reasonable. Pro forma adjustments made in the Pro
Forma Consolidated Balance Sheet assume that the Transactions were
consummated on September 30, 1997; these adjustments do not
reflect the impact of the operating results of IntelliCode or
changes in the assets and liabilities of IntelliCode subsequent to
September 30, 1997. The pro forma adjustments to the Pro Forma
Consolidated Statements of Operations for the nine months ended
September 30, 1997 and the year ended December 31, 1996 assume the
Transactions were consummated on January 1, 1997 and January 1,
1996, respectively.
The Pro Forma Consolidated Balance Sheet and the Pro Forma
Consolidated Statements of Operations are based on assumptions and
approximations and, therefore, do not reflect in precise numerical
terms the impact of the transactions on the historical financial
statements. In addition, such pro forma financial statements
should not be used as a basis for forecasting future operations of
the Company.
MEDPLUS, INC. and SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 1997
(unaudited)
As Pro Forma Pro Forma
Reported Adjustments Balance
__________ ______________ _________
Revenues $ 12,619,417 (5,148,554)(A) 7,470,863
Cost of revenues 7,183,015 (2,321,469)(A) 4,861,546
__________ _____________ _________
Gross profit 5,436,402 (2,827,085) 2,609,317
Operating expenses:
Sales and marketing 4,665,983 (1,039,379)(A) 3,626,604
Research and
development 662,482 (207,449)(A) 455,033
General and
administrative 2,520,392 (299,969)(A) 2,220,423
Universal Document
offering expenses 144,876 - 144,876
__________ _____________ _________
Total operating
expenses 7,993,733 (1,546,797) 6,446,936
__________ _____________ _________
Operating loss (2,557,331) (1,280,288) (3,837,619)
Other income
(expense), net (99,786) 680,976 (B) 581,190
__________ _____________ _________
Loss before
income tax
benefit (2,657,117) (599,312) (3,256,429)
Income tax benefit - 1,270,007 (D) 1,270,007
__________ _____________ _________
Net loss $(2,657,117) 670,695 (1,986,422)
__________ _____________ _________
__________ _____________ _________
Net loss per
share $ (0.45) (0.32)
__________ _________
__________ _________
Weighted average
number of shares
of common stock
outstanding 5,918,855 6,141,411
__________ _________
__________ _________
MEDPLUS, INC. and SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1996
(unaudited)
As Pro Forma Pro Forma
Reported Adjustments Balance
________ ___________ __________
Revenues $10,940,456 (6,408,184)(A) 4,532,272
Cost of revenues 5,477,932 (2,955,949)(A) 2,521,983
___________ ____________ __________
Gross profit 5,462,524 (3,452,235) 2,010,289
Operating expenses:
Sales and marketing 4,083,250 (1,170,753)(A) 2,912,497
Research and development 660,424 (179,501)(A) 480,923
General and administrative 3,441,526 (511,453)(A) 2,930,073
___________ ____________ __________
Total operating
expenses 8,185,200 (1,861,707) 6,323,493
Operating loss (2,722,676) (1,590,528) (4,313,204)
Other income, net 252,381 825,872(B) 1,078,253
___________ ____________ __________
Loss before
income tax
benefit (expense) (2,470,295) (764,656) (3,234,951)
Income tax benefit (expense) (1,897) 1,261,631(D) 1,259,734
___________ ____________ __________
Net loss $(2,472,192) 496,975 (1,975,217)
___________ ____________ __________
___________ ____________ __________
Net loss per share $ (0.42) (0.32)
___________ __________
___________ __________
Weighted average
number of shares
of common stock
outstanding 5,876,482 6,099,038
___________ __________
___________ __________
MEDPLUS, INC. and SUBSIDIARIES
Pro Forma Consolidated Balance Sheet
As of September 30, 1997
(unaudited)
As Pro Forma Pro Forma
ASSETS Reported Adjustments Balance
__________ ______________ ___________
Current assets:
Cash and cash
equivalents $ 306,287 15,720,817(E)(G)(H) 16,027,104
Accounts receivable,
less allowance for
doubtful accounts
of $ 115,000 6,689,759 (1,635,871)(F) 5,053,888
Inventories 1,164,396 (627,943)(F) 536,453
Unbilled service
contracts 380,227 (380,227)(F) -
Prepaid expenses and
other current assets 658,495 (1,637)(F)(J) 656,858
Deferred acquisition
and offering costs 1,484,716 - 1,484,716
__________ ______________ ___________
Total current assets 10,683,880 13,075,139 23,759,019
Unbilled service
contracts 1,380,272 (1,380,272)(F) -
Other receivables 1,431,832 - 1,431,832
Capitalized software
development costs, net 2,584,767 (165,149)(F) 2,419,618
Fixed assets, net 1,574,513 (275,716)(F) 1,298,797
Excess of cost over
fair value of net
assets acquired, net 834,784 - 834,784
Other assets 77,364 (13,867)(F) 63,497
__________ ______________ ___________
$18,567,412 11,240,135 29,807,547
__________ ______________ ___________
__________ ______________ ___________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments
of obligations under
capital leases $ 32,066 - 32,066
Borrowings on
line of credit 3,637,553 (3,637,553)(H) -
Accounts payable 3,194,901 - 3,194,901
Current income
taxes payable - 2,536,594 (J) 2,536,594
Accrued expenses 1,243,996 882,000 (I) 2,125,996
Deferred revenue
on unbilled service
contracts 380,227 (380,227)(F) -
Deferred revenue 1,283,538 (641,630)(F) 641,908
__________ ______________ ___________
Total current
liabilities 9,772,281 (1,240,816) 8,531,465
Obligations under
capital leases,
excluding current
installments 58,233 - 58,233
Deferred revenue on
unbilled service
contracts 1,380,272 (1,380,272)(F) -
Deferred income taxes - 1,023,589 (J) 1,023,589
__________ ______________ ___________
Total liabilities 11,210,786 (1,597,499) 9,613,287
__________ ______________ ___________
Shareholders' equity:
Common stock 1,076 41 (G) 1,117
Additional paid-in
capital 14,862,247 1,999,959 (G) 16,862,206
Retained earnings
(accumulated
deficit) (7,506,697) 10,837,634 (K) 3,330,937
__________ ______________ ___________
Total shareholders'
equity 7,356,626 12,837,634 20,194,260
__________ ______________ ___________
$18,567,412 11,240,135 29,807,547
__________ ______________ ___________
__________ ______________ ___________
MEDPLUS, INC. and SUBSIDIARIES
Notes to the Pro Forma Consolidated Financial Statements
(A) Represents the elimination of revenues and expenses
related to the operations of IntelliCode.
(B) Represents investment income from excess cash proceeds
over the amount assumed to repay outstanding borrowings and the
elimination of interest expense from the repayment of outstanding
borrowings.
(C) The accompanying Pro Forma Consolidated Statements of
Operations do not include any non-recurring effects directly
attributable to the sale of IntelliCode or the sale of common
stock. The Company will provide a reserve for all expected costs
associated with the Transactions. Such costs are expected to
include severance, bonuses, and a reserve for certain contingent
liabilities related to accounts receivable and inventories. The
amount of such costs is expected to total approximately $882,000
and is included as a decrease in the after-tax income reflected in
retained earnings on the Pro Forma Consolidated Balance Sheet.
(D) The Pro Forma Consolidated Statements of Operations
assume that the sale of IntelliCode occurred as of the beginning
of each period presented. An income tax benefit has been provided
for the net operating losses incurred in 1996 and 1997 as these
net operating losses may be carried back to offset the income
taxes due on the gain from the sale of IntelliCode.
(E) Represents a purchase price for the sale of IntelliCode
of $17,358,370 based on the Consolidated Balance Sheet as of
September 30, 1997.
(F) Represents the elimination of assets and liabilities as
a result of the sale of IntelliCode.
(G) Represents proceeds of $2,000,000 from the sale of
222,556 shares of common stock of the Company .
(H) Represents the use of proceeds from the Transactions to
repay borrowings on the Company's lines of credit.
(I) Represents the accrual of costs associated with the
Transactions of approximately $882,000.
(J) Represents recognition of current income taxes payable
of $2,536,594 and recognition of a reduction in the valuation
allowance on the deferred tax assets associated with net operating
losses utilized to offset the gain on the sale of IntelliCode. The
Company had estimated net operating losses for tax purposes as of
September 30, 1997 of approximately $7,800,000. The Company had
previously provided for a full valuation allowance on its deferred
tax assets arising from the net operating losses to the extent
that these deferred tax assets exceeded the Company's net deferred
tax liabilities. Therefore, the deferred tax expense recognized
is net of a deferred tax benefit associated with the reduction in
the deferred tax asset valuation allowance.
(K) Represents a pre-tax gain of $14,290,204, plus income tax
expense of $3,452,570. The Pro Forma Consolidated Balance Sheet
assumes the Transactions were consummated on September 30, 1997,
and therefore does not give effect to the operating results or
changes in the assets and liabilities of IntelliCode subsequent to
that date.
(c) Exhibits
2 Asset Purchase Agreement (Schedules and Attachments will be
provided to the Commission upon request)
99.1 Press release regarding IntelliCode dated January 30, 1998.
99.2 Press release regarding UDMS dated January 30, 1998.
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 thereunto duly authorized.
MEDPLUS, INC.
Date: February 11, 1998 By:_______________________
Daniel A. Silber
Chief Financial Officer
EXHIBIT 2
_________
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, dated January 28, 1998, by and
among Becton, Dickinson and Company, a New Jersey corporation
("Buyer" or "Becton"), and MedPlus, Inc., an Ohio corporation
("Seller" or "MedPlus").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of manufacturing
and selling a line of electronic bar code systems and other
products, through its IntelliCode division (the "Division"), and
is currently developing the MedEx products (collectively, the
"Business"); and
WHEREAS, Buyer desires to purchase and Seller desires to sell
substantially all of the property, assets and goodwill used in the
Division and all rights of Seller in and to the MedEx products,
and Buyer desires to assume and Seller desires to transfer certain
liabilities of Seller, all upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, pursuant to that certain Stock Purchase Agreement of
even date herewith (the "Stock Purchase Agreement") by and between
Buyer and Seller, Buyer has agreed to purchase and MedPlus has
agreed to sell 222,556 shares of the common stock of MedPlus;
NOW, THEREFORE, in consideration of the premises, the mutual
agreements hereinafter contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller do each hereby agree as follows:
SECTION 1. Assets to be Acquired.
1.1 Assets. Subject to the terms and conditions set forth
herein, and in reliance upon the representations and warranties
contained herein, on the Closing Date (as defined in Section 4
hereof), Seller shall sell, convey, assign, transfer and deliver
to Buyer, and Buyer shall purchase and acquire from Seller, all of
Seller's right, title, and interest in and to the properties,
assets and rights owned, used, useful, acquired for use, or
arising or existing solely in connection with the Business (other
than the Excluded Assets described in Section 1.2 below) wherever
located, whether real or personal, tangible or intangible, and
whether or not recorded on Seller's books and records, all as the
same shall exist at the Closing (as defined in Section 4 hereof),
free and clear of Encumbrances (as defined in Section 5.3 hereof),
including, without limitation, the following:
(a) all inventories of Seller, including finished goods,
work-in-process and raw materials comprising the Business' current
product line and/or used in the production thereof (excluding
obsolete or unusable items) (the "Inventory");
(b) all of Seller's products, ideas, concepts, inventions
and all rights thereto for current products of the Business and
products in the process of development by Seller for use solely in
connection with the Business, including but not limited to the
MedEx products and those other products described on attached
Schedule 1.1(b) (the "Products");
(c) all of Seller's executory contracts, whether oral or
written, related solely to the Business, including, without
limitation, distributor agreements, consulting agreements, open
purchase and sale orders, personal property leases (including
machinery and equipment leases), agreements with sales
representatives, license agreements, and all guarantees or
indemnities which Seller may have from any customers or suppliers
and listed on Schedule 1.1(c) (hereinafter collectively referred
to as the "Contracts");
(d) all LAP receivables and trade accounts receivable
related to the Business (collectively, the "Receivables");
(e) all prepaid assets and expenses of Seller related to
the Business and as to which Buyer will receive the benefits of
after Closing (the "Prepaid Assets");
(f) all of Seller's intellectual property related solely
to the Business, including, without limitation, all patents,
patent applications, trademarks (including trade dress), trademark
applications and registrations, trade names, all variants thereof,
trade styles, service marks, service names, and all goodwill
associated therewith, copyrights, copyright applications and
registrations (including, but not limited to, all such items more
particularly described in Schedule 1.1(f)), together with all
patentable and unpatentable inventions, whether or not now reduced
to practice, ideas, improvements, design rights, semiconductor
mask works, printed circuit boards, works of authorship,
commercial and technical trade secrets, engineering, production
and other designs, drawings, specifications, formula, technology,
computer and electronic data processing programs, software, logic
and methodology, processes, know-how, confidential information,
advertising materials, designs, sketches and art work, and other
proprietary property, rights and interests of Seller used, useful
or usable solely in the Business (hereinafter collectively
referred to as the "Intellectual Property");
(g) all of Seller's licenses, product registrations,
permits, variances, franchises, notices, authorizations and
approvals which relate solely to the Business including, without
limitation, those for all equipment and Intellectual Property,
from all Federal, state, local and foreign authorities and all
other third parties, including, but not limited to, those
described in Schedule 1.1(g) hereto (hereinafter collectively
referred to as the "Permits");
(h) all machinery, equipment, furniture and fixtures,
improvements, computer hardware, tools, molds, printing plates,
parts, accessories, supplies and plant and office equipment owned
by Seller and used, useful or usable solely in the conduct of the
Business, including, without limitation, those items described
more fully in Schedule 1.1(h) hereto (the "Equipment"), together
with any rights or claims of Seller arising out of any express or
implied warranty by the manufacturers or sellers of any such
assets or any component part thereof, including any claims for
past breaches thereof;
(i) the lease for the premises on which the Business is
currently conducted (the "Premises"), as more particularly
described in Schedule 1.1(i) hereto (the "Real Estate Lease");
(j) all existing financial, accounting, Tax and operating
data and records relating solely to the Business, including,
without limitation, all books, records, notes, sales and sales
promotional data, credit information, cost and pricing
information, advertising data, blueprints, customer and supplier
lists, business plans, reference catalogs, payroll and personnel
records and other similar property, rights, and information
(provided that Seller may retain the original copies of its tax
returns and attachments thereto, and records related to the
Excluded Assets and the Retained Liabilities (as each such term is
hereinafter defined), and shall provide Buyer with copies of all
such materials), and copies of all other data and records of
Seller to the extent such data and records relate to the Business;
and
(k) any and all goodwill and going concern value of the
Business.
The assets to be sold, conveyed, assigned, transferred and
delivered to Buyer by Seller pursuant to this Agreement are
hereinafter collectively referred to as the "Assets".
1.2 Excluded Assets. Notwithstanding anything contained in
Section 1.1 to the contrary, the Assets shall not include the
following specific properties, assets, and rights of Seller, which
are sometimes referred to collectively herein as the "Excluded
Assets":
(a) cash;
(b) all marketable and other investment securities;
(c) all items of obsolete or unusable inventory, including
raw material and component parts;
(d) the assets set forth in Schedule 1.2;
(e) the Sales Representative and Distributorship Agreement,
dated December 17, 1992, between Seller and TimeMed Labeling; and
(f) the Operating Agreement, dated July 10, 1997 (the "ILC
Agreement), between Seller and Information Leasing Corp. ("ILC").
1.3 Instruments of Assignment. At the Closing, Seller
shall deliver or cause to be delivered to Buyer such deeds, bills
of sale, endorsements, assignments and other good and sufficient
instruments of transfer, conveyance and assignment in such form as
Buyer shall reasonably request to effect or evidence the sale,
conveyance, assignment, transfer and delivery of the Assets to
Buyer.
1.4 Restrictions on Assignment. Seller shall use its best
efforts, and Buyer shall cooperate in all reasonable respects with
Seller, to obtain all consents and waivers and to resolve all
impracticalities of assignments or transfers necessary to convey
to Buyer the Assets. If such consent is not obtained or if an
attempted assignment would be ineffective, or would be a breach of
or would impair Buyer's rights under any Contract, Permit or any
right to be assigned to Buyer pursuant to the provisions hereof so
that Buyer would not receive all such rights, and Buyer waives its
condition to Closing contained in Section 10(f) hereof insofar as
such consent has not been obtained prior to Closing, Seller shall
use its best efforts to provide or cause to be provided to Buyer
the full benefits of any such Contract, Permit or any right to be
assigned to Buyer pursuant to the provisions hereof. Seller shall
promptly pay or cause to be paid to Buyer when received all monies
received by Seller with respect to any such Contract, Permit or
any right to be assigned to Buyer pursuant to the provisions
hereof. In consideration of Seller providing or causing to be
provided to Buyer the full benefits of any such Contract, Permit
or any right to be assigned to Buyer pursuant to the provisions
hereof, Buyer shall perform and discharge on behalf of Seller all
of Seller's debts, liabilities, obligations or commitments
thereunder arising from and after the Closing in accordance with
the provisions thereof. The terms of any consents or waivers
obtained or executed in connection with the transactions
contemplated hereby shall not limit in any way Seller's
obligations with respect to the Retained Liabilities hereunder.
SECTION 2. Liabilities to be Assumed.
2.1 Assumption.
(a) Subject to the terms and conditions set forth herein,
and in reliance upon the representations, warranties and covenants
contained herein, and in consideration for the sale, conveyance,
assignment, transfer, and delivery of the Assets to Buyer, on the
Closing Date Buyer shall assume and undertake to pay, perform and
discharge when due all of the liabilities, obligations or
commitments of Seller arising under the Contracts and Permits and
Real Estate Lease from and after the Closing Date (the "Assumed
Liabilities"). In no event shall the Assumed Liabilities include
any liabilities for defaults (or events which constitute breaches
and, upon notice and/or the passage of time, or both, would become
defaults) under the Contracts or Permits existing as of the
Closing Date or any liabilities thereunder accrued as of the
Closing Date.
(b) Except for the Assumed Liabilities, and except to the
extent otherwise provided in Section 8.11 with respect to certain
post-Closing liabilities, all obligations, debts, commitments or
liabilities relating to, arising out of or in connection with the
ownership of the Assets and the operation of the Business and/or
of Seller on or prior to the Closing Date, whether known or
unknown, fixed, contingent or otherwise, whenever arising,
including, but not limited to, product liability claims relating
to Products manufactured by Seller on or prior to the Closing
Date, any claims relating to infringement of third party
intellectual property rights by Seller on or prior to the Closing
Date, any Taxes (as defined in Section 5.9) of the Seller relating
to the Assets or the operation of the Business on or prior to the
Closing Date and any Taxes of any person as transferee or
successor, by contract, under Treasury Regulation 1.1502-6 (or any
similar provisions of state, local or foreign law) or otherwise,
liabilities relating to any environmental condition or under
environmental Law (as defined in Section 5.8) existing or
occurring on or prior to the Closing Date, any pending or
threatened Litigation (as defined in Section 5.10), the payment of
all employee wages and fringe benefits and contributions to
Seller's profit sharing, bonus or similar plans for periods and
occurrences up to and including the Closing Date, any and all
retrospective adjustments to premiums for worker's compensation
insurance for premium periods up to and including the Closing
Date, and such other liabilities identified herein (collectively,
the "Retained Liabilities"), shall be retained by Seller and shall
not be assumed by Buyer.
2.2 Instruments of Assumption. At the Closing, Buyer shall
execute and deliver to Seller such written instruments of
assumption to effect or evidence its assumption of the Assumed
Liabilities in such form as Seller shall reasonably request.
SECTION 3. Purchase Price.
3.1 Purchase Price. In consideration for the sale,
conveyance, assignment, transfer and delivery of the Assets and
the covenants set forth in Section 8.12, Buyer shall:
(a) pay to Seller the Initial Payment (as defined below) for
the Assets, payable as set forth below in Section 3.2;
(b) assume the Assumed Liabilities; and
(c) pay to Seller any Royalties (as defined below) which may
become payable pursuant to Section 3.5 hereof.
The consideration to be provided by Buyer to Seller pursuant
to this Section 3.1 is referred to herein as the "Purchase Price."
3.2 Payment of Initial Payment.
(a) At the Closing, Buyer shall pay to Seller an amount
(such amount being referred to herein as the "Initial Payment")
equal to Eighteen Million Dollars ($18,000,000.00) less the
aggregate amount of any deferred revenues which are recorded or
should be recorded on the books and records of the Seller as of
the Closing Date in connection with any service, loan, warranty or
other agreement or arrangement of Seller relating to the Business
(which deferred revenues are more specifically described in the
Financial Statements (as defined in Section 5.5) as "Deferred
revenue," "Deferred loaner revenue" and "LAP deferred service
revenue"), the performance of which agreements and arrangements
will be assumed by Buyer pursuant to Section 2.1 hereof (such
deferred revenues being referred to herein collectively as the
"Deferred Revenues"); and
(b) Unless otherwise specified herein, all payments to be
made by Buyer pursuant to Section 3 of this Agreement shall be
made by wire transfer of next day funds to an account designated
in writing by Seller.
3.3 Deferred Revenues. At the Closing, Seller shall
deliver to Buyer a true, correct and complete schedule listing by
customer and agreement the amount of Deferred Revenues as of the
Closing Date.
3.4 Post-Closing Adjustment.
(a) Within thirty (30) days following the Closing Date,
Seller shall prepare a statement (the "Closing Statement")
reflecting the net book value of the Inventory and Receivables as
of the Closing Date. The Initial Payment shall be reduced, on a
dollar-for-dollar basis, by the amount, if any, by which the total
aggregate amount of Inventory and Receivables (collectively, the
"Working Capital") reflected on the Closing Statement shall be
less than $1,950,000.00. The Initial Payment shall be increased,
on a dollar-for-dollar basis, by the amount, if any, by which the
total aggregate amount of Working Capital reflected on the Closing
Statement shall be more than $2,150,000.00.
(b) Buyer shall have fifteen (15) days following receipt of
the Closing Statement to review the same and notify Seller in
writing of any objections Buyer may have to the content of the
Closing Statement. In addition, Buyer shall be entitled to
conduct a physical inventory on the Premises on or prior to the
Closing Date, and Seller shall provide such assistance in
connection therewith as Buyer may reasonably request.
(c) If Buyer shall agree with the content of the Closing
Statement and the Initial Payment is reduced pursuant to Section
3.4(a) above, then Seller shall promptly pay to Buyer the amount
by which the Initial Payment has been reduced.
(d) If Buyer shall agree with the content of the Closing
Statement and the Initial Payment is increased pursuant to Section
3.4(a) above, Buyer shall promptly pay to Seller the amount by
which the Initial Payment has been increased.
(e) If Buyer shall object to the content of the Closing
Statement and such dispute has not been resolved within thirty
(30) days of Seller's receipt of Buyer's objection, then the
determination of the Closing Statement shall be submitted to an
independent public accountant mutually agreed upon by the parties,
whose determination shall be binding and conclusive upon the
parties. The fees and expenses of such independent public
accountant shall be shared equally by Buyer and Seller.
3.5 Royalty Payments. For a period of five (5) years
immediately following the Closing (the "Royalty Term"), Buyer
shall pay royalties (the "Royalties") to Seller in accordance
with, and subject to, the terms and conditions set forth on
Exhibit 3.5 attached hereto. During the Royalty Term, Seller
shall have the right to audit, at Seller's cost and during regular
business hours and upon reasonable advance notice, the books and
records of Buyer relating to the calculation of the Royalties;
provided, that Seller shall only be entitled to audit such books
and records once during any twelve month period; and provided,
further, that in the event Seller shall fail to audit the books
and records of Buyer with respect to any year of the Royalty Term
(a "Royalty Year") within two (2) years following the end of such
Royalty Year, Seller shall thereafter have no right to audit
Buyer's books and records with respect to such Royalty Year unless
a court shall have determined the existence of fraud on Buyer's
part with respect to the calculation of Royalties in any
subsequent Royalty Year. Any audit conducted pursuant to this
Section 3.5 shall be performed by (i) an independent public
accountant mutually agreed upon by the parties, or (ii)
representatives of Seller, with the consent of Buyer, which
consent shall not be unreasonably withheld. Any information
provided to Buyer pursuant to this Section 3.5 shall be maintained
in confidence by Buyer in accordance with Section 8.12.
SECTION 4. Closing.
The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Buyer at 1 Becton
Drive, Franklin Lakes, New Jersey, on the tenth calendar day
following the satisfaction of all conditions for the consummation
of the transactions contemplated hereby, including, without
limitation, the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), or such other date as may be mutually agreed upon
by the parties hereto, but in no event later than February 27,
1998, unless otherwise agreed to in writing by the parties hereto
(such time and date of the Closing being herein referred to as the
"Closing Date"). Each of the parties agrees to use their
reasonable efforts to assure that the Closing will occur on or
before January 30, 1998, or as soon thereafter as practicable. In
the event the Closing shall not occur on or before February 27,
1998, either party may terminate this Agreement, in which event
this Agreement shall become void and there shall be no further
liability on the part of any of the parties hereto; provided, that
the right to terminate this Agreement pursuant to this Section 4
shall not be available to any party whose breach of this Agreement
has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date. The Closing shall be effective
immediately upon its occurrence. Notwithstanding the foregoing,
any provision of this Agreement which provides for an accounting
with respect to the assets and/or liabilities of the Business at
Closing or on the Closing Date shall be measured as of 5:00 p.m.
New York time on the Closing Date (the "close of business").
SECTION 5. Representations and Warranties of Seller.
Seller hereby represents and warrants to Buyer as follows:
5.1 Corporate Organization and Authority. Seller is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Ohio. Seller has full
corporate power and authority to carry on the Business as it is
currently conducted and to own, lease and operate the Assets where
and in the manner in which such Assets are now owned, leased or
operated. Seller does not currently operate the Business in any
state in such a manner as would require Buyer, solely as a result
of Buyer's operation of the Business following the Closing in the
same manner as presently conducted by Seller, to qualify to do
business as a foreign corporation in any state other than the
State of Ohio. The Business has not been conducted through any
direct or indirectly owned subsidiary or any affiliate of Seller.
5.2 Corporate Authorization. Seller has full corporate
power and authority to execute, deliver and perform this Agreement
and all other agreements, instruments and documents to be executed
and delivered by Seller in connection herewith (collectively, the
"Ancillary Seller Documents") and to consummate the transactions
contemplated hereby and thereby. This Agreement has been and all
Ancillary Seller Documents have been or will be, on or prior to
the Closing Date, duly authorized, executed and approved by all
necessary and proper corporate action of Seller. No approval of
the transactions contemplated hereby, or by the Stock Purchase
Agreement or other Ancillary Seller Documents, by the
shareholders of Seller is required under the Articles of
Incorporation or Code of Regulations of Seller or under any
applicable Law or the rules of any self-regulatory organization
(including without limitation, the National Association of
Securities Dealers, Inc.). This Agreement constitutes a legal,
valid and binding obligation of Seller, and each Ancillary Seller
Document to be delivered in connection herewith, when executed and
delivered, will constitute, a legal, valid and binding obligation
of Seller, enforceable against it in accordance with their
respective terms.
5.3 No Violation or Conflict. Neither the execution and
delivery of this Agreement or any Ancillary Seller Document by
Seller nor the consummation of the transactions contemplated
hereby or thereby will violate, conflict with, result in the
breach or modification of, or default under, or accelerate the
performance required by (a) any of the terms, conditions or
provisions of the Certificate or Articles of Incorporation or
other charter document or Code of Regulations or By-Laws of
Seller, or (b) any term, provision, covenant or condition of any
agreement or understanding to which Seller is a party or to which
Seller's assets are subject, or (c) any order, ruling, injunction,
decree, judgment, arbitration award or stipulation or any Law (as
defined in Section 5.8 hereof) to which Seller or any of its
assets are subject, or result in the creation or imposition of any
lien, mortgage, security interest, pledge, charge, easement, right
of avoidance, imperfection of title, claim or other restriction or
encumbrance (other than UCC-1 informational filings on leased
personal property) (each an "Encumbrance") thereunder upon any of
the Assets or give to any person or entity any interest or right,
including any right of acceleration, termination or cancellation,
in or with respect to, or otherwise materially affect, any of the
Assets (including, without limitation, the Contracts and Permits)
or the Business. Seller is not a party to any contract,
understanding or ongoing negotiation or discussion with any person
or entity other than Buyer concerning any Transaction (as
hereinafter defined) involving Seller.
5.4 Consents, Approvals, Permits and Authorizations.
Except as set forth on Schedule 5.4 hereto, and except as may be
required under the HSR Act, no consent, approval or authorization
of, filing or registration with, or notification to, any judicial,
governmental, public or regulatory body or authority is required
in connection with the execution and delivery of this Agreement or
any Ancillary Seller Document by Seller or the consummation by
Seller of the transactions contemplated hereby and by the
Ancillary Seller Documents (including, without limitation, the
assignment by Seller, and assumption by Buyer, of the Permits), or
for the continuation by Buyer of the Business after the Closing in
the same manner as presently conducted. Except as set forth in
Schedule 5.4 hereto, no consent, approval or authorization of any
person, partnership, corporation or other entity is required in
connection with the execution or delivery of this Agreement or any
Ancillary Seller Document by Seller or the consummation by Seller
of any of the transactions contemplated hereby, including, without
limitation, the assignment by Seller, and assumption by Buyer, of
the Contracts, or for the continuation by Buyer of the Business
after the Closing in the same manner as presently conducted.
Except as set forth on Schedule 5.4 hereto, Seller has no, nor is
Seller required by applicable Law to have any, licenses, permits,
product approvals or registrations, authorizations, franchises or
other approvals from any domestic (federal, state or local) or
foreign governmental, public or regulatory body or authority which
relate specifically to the Assets or the Business and not
generally to Seller.
5.5 Financial Statements. The statements of net assets
of the Division as of December 31, 1996, September 30, 1997,
October 31, 1997 and December 31, 1997, respectively, and the
related year-to-date statements of income for the periods then
ended, are attached hereto as Schedule 5.5(a). The statements of
net assets and related statements of income attached hereto as
Schedule 5.5(a) are collectively referred to herein as the
"Financial Statements." Each of such statements of net assets
fairly presents the Assets and Deferred Revenues of the Division
as of the date thereof, and the related statements of income
fairly present the revenues and direct expenses of the Division
for the periods referred to therein, in all material respects.
Schedule 5.5 (c) sets forth the Division's allocated share of
expenses of the Seller which are not reflected on the foregoing
statements of income. The Financial Statements have been prepared
consistently and have been prepared from the books of account of
Seller from which the consolidated financial statements of Seller
have been prepared. Such consolidated financial statements have
been audited by KPMG Peat Marwick LLP as of December 31, 1996 and
for the year then ended, and are in accordance with generally
accepted accounting principles consistently applied.
5.6 Property; Inventory; Receivables.
(a) Except as set forth in Schedule 5.6 hereto, and except
in regard to any Excluded Asset, Seller owns in fee and has and
will convey to Buyer good and marketable title to the Assets, free
and clear of all Encumbrances.
(b) The Inventory is of a quality usable and saleable in the
ordinary course of Seller's Business as presently conducted and
conducted immediately prior to the Closing Date. All items of
Inventory have been, and as of the Closing, will have been,
acquired in the ordinary course of business from unaffiliated
third parties in customary quantities and at prevailing prices or
manufactured in the ordinary course of business by Seller.
(c) All of the Receivables have arisen from bona fide
transactions actually made in the ordinary course of business. To
Seller's knowledge, all of the Receivables are fully collectible
by Buyer in the ordinary course of business without the retaining
of any collection agency or resort to litigation or other
extraordinary methods of collection. None of the Receivables
reflect any conditional sale, consignment or other contingent
sale, is in dispute or, to Seller's knowledge, subject to any
defense, counterclaim or set-off.
(d) Seller does not own any real property used in the
conduct of the Business.
5.7 Contracts. Schedule 1.1(c) sets forth a true,
complete and accurate list of the Contracts (other than Excluded
Assets) to which Seller is a party and which relate solely to the
Business, and Seller has delivered to Buyer a true and complete
copy of each written Contract and a true and complete description
of each oral Contract. All the Contracts were entered into in the
ordinary course of business. Seller is not in default nor does
any breach by Seller exist under any Contract, nor has any event
occurred which, with the giving of notice or the lapse of time or
both, would constitute a default by Seller under any Contract, nor
has Seller received any notices concerning any of the foregoing.
To Seller's knowledge, no other party to any Contract has
committed any event of default thereunder, and no event has
occurred which, with the passage of time or the giving of notice
or both, would result in the occurrence of such an event of
default. Except as set forth on Schedule 1.1(c), Seller has
complied in all material respects with the provisions of each
Contract. Neither Seller nor, to the knowledge of Seller, any
other party, is in arrears in respect of the performance or
satisfaction of the terms or conditions on its part to be
performed or satisfied under any of such Contracts and no waiver
or indulgence has been granted by any of the parties thereto. Each
Contract is valid, in full force and effect and enforceable in
accordance with its terms. Except as set forth on Schedule
1.1(c), each of the Contracts is assignable by Seller to Buyer
without the consent of the other party or parties thereto. None
of the Contracts have been assigned to ILC pursuant to the ILC
Agreement. Except as set forth in Schedule 1.1(c), and other than
the Preferred Vendor Agreement, dated September 2, 1997, between
Seller and Magnet, Inc., Seller is not party to any group buying
contract relating to the Business.
5.8 Compliance With Applicable Laws and Regulations;
Environmental Matters. (a) Seller has complied in all material
respects with all laws, regulations, rules, orders, judgments,
decrees and other requirements imposed by Federal, state, local
and foreign governmental authorities applicable to it in the
operation or ownership of the Business and the Assets, including
without limitation, all such laws, regulations, rules, orders,
judgments, decrees and other requirements (i) of the United States
Food and Drug Administration, and (ii) relating to matters of
environmental protection, pollution, sanitation, conservation,
hazardous substances, pollutants or contaminants and to matters of
antitrust, trade, employment, labor, non-discrimination, safety
and health, zoning and building codes and the labeling of any
Product (collectively, "Laws"). The Permits set forth on Schedule
1.1(g) include all the licenses, permits, variances, franchises,
notices, authorizations and approvals from any Federal, state,
local and foreign authority required for the conduct of the
Business as presently conducted or as may be conducted on the
Closing Date. Seller is not in violation of any Permit, all such
Permits are in full force and effect and, to the knowledge of
Seller, no suspension or cancellation of any Permit has been
threatened.
(b)(i) Seller has received no notices of environmental violations
or environmental claims relating to the Business and all reports
made by Seller relating to the Business to federal, state and
local environmental agencies since January 1, 1993 and Seller has
delivered to Buyer true and correct copies of all such notices,
claims and reports.
(ii) Seller has not conducted or operated and currently
does not conduct or operate on any real property, wherever
located, and there is not currently conducted or operated by
Seller and there has never been conducted or operated by Seller on
any real property, in connection with the operation of any Assets
or the conduct of the Business, any storage areas, drum storage
areas, surface impoundments, incinerators, land fills, tanks,
lagoons, ponds, waste piles, or deep well injection systems for
the purpose of treatment, storage or disposal of (A) hazardous
waste as defined by the Federal Resource Conservation and Recovery
Act, as amended ("RCRA"), or (B) solid waste, as defined by
Section 3734.01(E) of the Ohio Revised Code;
(iii) Seller has not, in connection with the operation of
any Assets or the conduct of the Business, transported for off-
site disposal any hazardous waste or substance as defined in
either RCRA or the Federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), or entered
into any contract or agreement, or otherwise arranged, for the
transportation, storage, or disposal of any such hazardous
substance or waste at any off-site treatment, storage or disposal
facility;
(iv) There has been no spill, release or discharge by
Seller of any hazardous substance, as the term is defined in
CERCLA or in the Federal Superfund Amendment and Reauthorizations
Act of 1986 ("SARA"), or of a hazardous waste, as the term is
defined in RCRA, resulting from Seller's operation of any of the
Assets or conduct of the Business which would constitute or have
constituted a violation of Law, or give rise to an obligation by
Seller, its assigns or its successors in interest to provide
notification or disclose such spill, release or discharge to the
U.S. Department of Environmental Protection or the Ohio Department
of Environmental Protection to effect any environmental cleanup or
remediation; and
(v) No federal, state or local government or agency has
asserted or created an Encumbrance upon any or all of the Assets
or, to Seller's knowledge, the Premises as a result of any use,
spill, release, discharge or cleanup of any hazardous substance or
waste, as those terms are defined in CERCLA, SARA or RCRA, nor has
any such use, spill, release, discharge or cleanup occurred which
could result in the assertion or creation of such an Encumbrance.
5.9 Taxes. Except as provided in Section 8.2, there are,
and by reason of the consummation of the transactions contemplated
hereby there will be, no Tax (as defined below) liabilities of
Seller which could result in any transferee liability to Buyer or
could attach to the Assets. Seller has paid or will pay when due
all Taxes relating to Seller or to the Business or the Assets
which are payable for or attributable to the periods (or the
portion thereof) up to and including the Closing Date. Seller has
filed, or will file when due, all Federal, state, local and
provincial and other foreign income, franchise and other Tax
reports and Tax returns required to be filed by Seller relating to
Seller or the Business or the Assets for the periods (or the
portion thereof) up to and including the Closing Date. There is
no unpaid assessment or proposed assessment by any taxing
authority for additional Taxes. There are no Encumbrances for
Taxes upon the Assets. Except as set forth on Schedule 5.9, there
have been no audits of any of Seller's Tax returns for the past
five (5) years. There have been no extensions of the statutes of
limitations applicable to the assessment of additional Taxes
granted by Seller during the past five (5) years. As used in this
Agreement, "Tax" or "Taxes" shall mean taxes of any kind to the
extent properly due and payable to any taxing authority of the
United States (federal, state or local) or any other country or
jurisdiction including, without limitation, (a) income, gross
receipts, ad valorem, value added, sales, use, service, franchise,
profits, real or personal property, capital stock, license,
payroll, withholding, employment, social security, workers
compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits,
transfer and gains taxes, (b) customs duties, imposts, charges,
levies, or other assessments of any kind, (c) interest, penalties,
and additions to tax imposed with respect to the above taxes, and
(d) any damages, costs, expenses, fees or other liability arising
from such Tax or Taxes.
5.10 Litigation. Except as set forth on Schedule 5.10,
Seller is not engaged in or a party to, any legal or
administrative action, suit, investigation or other proceeding by
or before any court, arbitrator or administrative agency
("Litigation") against, relating to or affecting Seller, the
Business, the Assets or the transactions contemplated hereby, and,
to the knowledge of the Seller, no such Litigation has been
threatened. To the knowledge of Seller, there is no basis for any
such Litigation. Except as set forth on Schedule 5.10, there are
no outstanding orders, injunctions, awards, rulings, decrees,
judgments or stipulations to which Seller is a party or by which
Seller, the Business or the Assets are bound, or which challenge
or otherwise relate to the transactions contemplated by this
Agreement. Schedule 5.10 sets forth a true, complete and accurate
list of all Litigation since January 1, 1993 involving the
Business and/or Assets (including, but not limited to, the
Products and the Intellectual Property). Except as set forth on
Schedule 5.10, since January 1, 1993 no product liability claims
with respect to the Seller's products have been filed under the
Seller's insurance policies and the Seller is not and has not been
a party to any Litigation relating to any product liability claims
and, to Seller's knowledge, no such Litigation is threatened.
Except as set forth on Schedule 5.10, there have been no voluntary
recalls for safety, labeling, health or any other reasons, or any
required product recalls or notifications with respect to the
products of Seller made by any governmental, administrative or
regulatory instrumentality, body or agency.
5.11 Intellectual Property. Except as set forth on
Schedule 5.11, Seller owns the Intellectual Property free and
clear of any payment or Encumbrance, and no event has occurred
which, with notice or the passage of time, or both, would allow
any party to exercise any right of reversion with respect to any
Intellectual Property. A complete and correct listing of all
patents, patent applications, trademarks, trademark applications
and registrations, trade names, trade styles, service marks,
service mark applications, service names, copyrights and copyright
applications and registrations included in the Intellectual
Property is set forth in Schedule 1.1(f). Except as set forth on
Schedule 5.11, all filings necessary prior to the date hereof to
make or continue to make all trademarks and trademark
registrations valid have been properly made. Except as set forth
in Schedule 5.11, there is no claim or demand of any person, firm
or corporation pertaining to, or any pending or, to Seller's
knowledge, threatened proceedings which challenge the right of
Seller in respect of any of the Intellectual Property, and no such
claims or demands have been made and no such proceedings have been
pending since January 1, 1993. Except as set forth on Schedule
5.11, Seller's activities regarding the Business, as presently
conducted, including, without limitation, the use of any of the
Intellectual Property, does not infringe or has not infringed the
intellectual property rights of others, and, to Seller's
knowledge, no activity which is contemplated by Seller in the
conduct of the Business, including, without limitation, the use of
any of the Intellectual Property relating to the Products under
development by the Seller as of the Closing, will infringe the
intellectual property rights of others. Seller has received no
notice from any other party suggesting any conflict with the
Business as presently conducted, or as contemplated to be
conducted, and any intellectual property rights of others. Except
as set forth on Schedule 5.11, none of the Intellectual Property
is subject to any outstanding order, ruling, decree, injunction,
restriction, judgment or stipulation, and there is no pending, or
to the knowledge of Seller, threatened proceeding to subject any
Intellectual Property thereto. All of the Intellectual Property
is subsisting, valid and enforceable. To Seller's knowledge, no
person is currently infringing upon or misappropriating the
Intellectual Property. Except as set forth on Schedule 5.11, the
Seller has paid and/or filed, as the case may be, all of its
patent maintenance fees and all trademark declarations, renewals
and fees which were due and/or payable prior to the date hereof.
Except for Seller's "MedPlus" trademark and the Intellectual
Property set forth on Schedule 1.1(f), Seller does not own or
license any trademark, trade name, trade style, service mark,
service name, copyright, patent, trade secret or other
intellectual property in connection with the manufacture,
assembly, sale, promotion or marketing of the Products.
5.12 Conduct of Business. Since December 31, 1997, there
has not been any material adverse change in the operations or
condition of the Business or the Assets. Without limiting the
generality of the foregoing, since December 31, 1997, Seller has
caused the Business to be conducted only in the ordinary course
and has not (with respect to the Business):
(i) incurred or entered into any agreement or commitment
which resulted or will result in an expenditure exceeding
$100,000, other than in the ordinary course of business;
(ii) except as previously provided to Buyer in writing,
made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable or to become payable
to any director, officer, employee, distributor, sales
representative or agent of Seller, or agreed or orally promised to
pay, conditionally or otherwise, any bonus, extra compensation,
pension, retirement, allowance, severance or vacation pay or other
employee benefit, to any such director, officer, employee,
distributor, sales representative or agent of Seller, except for
changes in the ordinary course of business consistent with past
practices;
(iii) sold, transferred, leased or otherwise disposed of
any of its assets, other than Inventory in the ordinary course of
business, or waived or released any rights with respect to the
Business or the Assets, or disclosed any confidential business
information to any prospective buyer other than Buyer;
(iv) amended in any material respect, transferred or
granted any rights under, or terminated, as applicable, any
Contract, Permit, or Intellectual Property;
(v) subjected any of the Assets to any Encumbrance or
created or consented to any Encumbrance;
(vi) suffered any damage, destruction or casualty loss
(whether or not covered by insurance), or suffered the occurrence
of any events which, individually or in the aggregate, have had,
or might reasonably be expected to have, a material adverse effect
on the financial condition, results of operations, assets,
properties, business or prospects of the Business;
(vii) changed any accounting practices or policies or
restated any historical financial information; or
(viii) entered into any agreement or commitment (other
than this Agreement or any arrangement provided for or
contemplated in this Agreement) to take any of the types of action
described in subclauses (i) through (viii) of this Section 5.12.
5.13 Employees. There is no labor strike, lockout or
work stoppage pending or, to the knowledge of Seller, threatened
against or involving Seller and relating to the Business. Except
as set forth on Schedule 5.13, and except for oral arrangements
with its employees at-will, who may be terminated by Seller with
or without cause, Seller is not a party to any contract for the
employment of any employee employed by Seller in connection with
the Business or collective bargaining agreement relating to any
employee with respect to Seller. There is no pending or, to the
knowledge of Seller, threatened representation question respecting
any employees. Except as listed on Schedule 5.13, there are no
disputes presently subject to any grievance procedure, arbitration
or litigation under such agreements, nor is there any default, or
any event which by notice and/or passage of time or both, will
become a default, under any such agreements, by Seller or any
other party thereto. No person employed by Seller in connection
with the Business has delivered notice of his or her intention to
resign or retire. Schedule 5.13 hereto sets forth the name and
position, title or function with respect to each person employed
by Seller in connection solely with the Business. Seller has
previously provided to Buyer in writing true, correct and complete
information regarding the salary or wages, accrued severance and
vacation pay with respect to such employees as of the date hereof
and all severance pay and vacation which will accrue as a result
of the transactions contemplated hereby. Seller has withheld all
amounts required by Law or contract to be withheld from the wages
or salaries of such employees and is not liable for any arrears of
wages or any taxes or penalties for failure to comply with any of
the foregoing or for payment to any trust or other fund or to any
authority with respect to unemployment compensation, Social
Security or other benefits for such employees. Seller has not
engaged in any unfair labor practice or discriminated on the basis
of race, age, sex or otherwise in its employment conditions or
practices with respect to the Business and its employees or
employee benefits.
5.14 Insurance. Schedule 5.14 sets forth a true and
complete list of all policies of insurance in force relating to
the Business or the Assets setting forth the applicable
underwriter, type of coverage, policy number and policy periods.
All such policies set forth in Schedule 5.14 attached hereto are
in full force and effect; all premiums with respect thereto have
been paid; and no notice of cancellation or termination has been
received with respect to any such policy. All such insurance
policies will be maintained by Seller and shall continue in full
force and effect up to and including the Closing Date. Seller has
not failed to give any notice or present any claim under any
insurance policy in due and timely fashion, and there are no
claims by Seller against any of such policies as to which any
insurance company is denying liability or defending under a
reservation of rights clause. Seller has not received notice of,
and there are no outstanding, requirements or recommendations by
any insurance company that issued a policy, or by any Board of
Fire Underwriters or other body exercising similar functions or by
any governmental authority, requiring or recommending any repairs
or other work to be done or requiring or recommending any
equipment or facilities to be installed.
5.15 Employee Benefit Plans. Schedule 5.15 sets forth
each pension, retirement, profit-sharing, deferred compensation,
employee reimbursement, stock bonus, phantom stock or other
similar plan; each medical, vision, dental or other health plan;
each life insurance plan; each employment agreement; each
severance agreement or arrangement; each salary continuation
program; and any other employee benefit plan, including, without
limitation, any "employee benefit plan" ("ERISA Benefit Plan") as
defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which constitutes an obligation
or liability of Seller and/or which Seller sponsors for the
benefit of any current or former employees (or their
beneficiaries) of Seller, or under which current or former
employees (or their beneficiaries) of Seller are eligible to
receive benefits (collectively, the "Plans"). Seller has made
available to Buyer complete and correct copies of all Plans
together with the most recent report on Form 5500 including
schedules thereto for each Plan required to file such report. All
ERISA Benefit Plans have been operated and maintained in
compliance in all respects with the provisions of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and the
rules and regulations promulgated thereunder. There is no pending
or, to the Seller's knowledge, threatened litigation relating to
the Plans. All contributions required to be made on or prior to
the Closing Date under the terms of any Plan have or will be made.
There is not, and as of the Closing Date there will not be any,
accumulated funding deficiency within the meaning of Section 412
of the Code, whether or not waived with respect to any ERISA
Benefit Plan. No plan has engaged in a "prohibited transaction"
(as defined in Section 406 of ERISA and Section 4975 of the Code)
with respect to which Seller could incur any tax or liability for
which an exemption has not been received from the Department of
Labor and/or the Internal Revenue Service, as applicable. No
"reportable event" (as that term is defined in Section 4043 of
ERISA) for which the 30 day reporting requirement has not been
waived has occurred with respect to any Employee Pension Benefit
Plan subject to Title IV of ERISA which would subject Seller or
any of the Assets to any liability. Seller does not currently
participate in, has not incurred, does not expect to, and will
not, as a result of the transactions contemplated herein, incur
any unpaid withdrawal liability under any "multiemployer" plan as
described under Section 4001(a)(3) of ERISA. Seller has not in the
past and does not presently discriminate with respect to any Plan
in violation of applicable Law (including, without limitation,
ERISA).
5.16 Worker's Compensation; Unemployment Insurance.
Seller is an employer in good standing under Ohio and other
applicable unemployment insurance and worker's compensation laws.
The worker's compensation and unemployment insurance ratings and
contributions of Seller are set forth in Schedule 5.16 hereto.
Seller has no knowledge of any proposed increase therein and knows
of no conditions or circumstances which might result in such
increase.
5.17 Condition of Assets. The Equipment to be
transferred to Buyer, and to Seller's knowledge, the Premises are,
and will on the Closing Date be, well maintained and in good
working order. Seller has not within the past three years made
any, and there are no pending, claims against suppliers or
manufacturers of any of the Assets with respect to breach of
warranty or quality or condition of the Assets.
5.18 Included Assets. The Assets to be transferred to
Buyer on the Closing Date (i) together with the services and
arrangements to be provided by Seller pursuant to the Transition
Services Agreement (as herein defined) and the assets set forth in
Schedule 1.2 comprise all the assets and services necessary to
enable Buyer to operate the Business in the same manner as the
Business is presently operated by Seller, and (ii) include all of
the assets used, useful, usable, acquired for use, or arising or
existing solely in connection with the Business (other than, with
respect to clause (ii), the Excluded Assets). The Assets are not
used in connection with any operations of the Seller other than
the Business.
5.19 Undisclosed Liabilities. There are no liabilities
or obligations whether accrued, absolute, contingent or otherwise
that may be asserted against Seller with respect to the Assets or
the Business except (i) Retained Liabilities and (ii) liabilities
and obligations which are disclosed in this Agreement and the
Schedules hereto.
5.20 COBRA. Seller has complied in all respects with the
provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985.
5.21 Disclosure. No representation or warranty of Seller
contained in this Agreement and no Schedules attached hereto and
no Ancillary Seller Document to be delivered at the Closing by
Seller contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not
misleading.
5.22 Brokers or Finders. No broker or finder has been
involved in this transaction on behalf of Seller and Seller will
not be obligated to pay any brokers' or finders' fees in
connection with this transaction as a consequence of any action or
inaction on Seller's part.
5.23 Books and Records. The books of account and other
financial and corporate records of Seller relating to the Business
which are included in the Assets are in all material respects
complete and correct, are maintained in accordance with Seller's
past business practices, and are accurately reflected in the
Financial Statements.
SECTION 6. Representations and Warranties of Buyer.
Buyer hereby represents and warrants to Seller as follows:
6.1 Corporate Organization and Authorization. Buyer is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of New Jersey. Buyer has
full corporate power and authority to execute, deliver and perform
this Agreement and all other instruments and documents to be
executed and delivered by Buyer in connection herewith
(collectively, the "Ancillary Buyer Documents") and to consummate
the transactions contemplated hereby and thereby. This Agreement
has been, and all Ancillary Buyer Documents have been or will be,
duly authorized, executed and approved by all necessary and proper
corporate action of Buyer. This Agreement constitutes a legal,
valid and binding obligation of Buyer, and all Ancillary Buyer
Documents, when executed and delivered, will constitute, legal,
valid and binding obligations of Buyer enforceable against Buyer
in accordance with their respective terms.
6.2 No Violation or Conflict. Neither the execution and
delivery of this Agreement or any Ancillary Buyer Document by
Buyer nor the consummation of the transactions contemplated hereby
will violate, conflict with, result in the breach of or
modification of or default under, or accelerate the performance
required by any of the terms, conditions or provisions of the
Certificate of Incorporation, as amended and restated, or By-Laws
of Buyer or any covenant, agreement or understanding to which
Buyer is a party or any order, ruling, decree, judgment,
arbitration award, stipulation or any Law to which Buyer is
subject, or constitute a default thereunder, or result in the
creation or imposition of any Encumbrance thereunder upon any of
the properties or assets of Buyer, other than those which would
not materially and adversely affect Buyer's ability to consummate
the transactions contemplated hereby.
6.3 Consents, Approvals or Authorizations. Except as may
be required under the HSR Act, no consent, approval or
authorization of, filing or registration with, or notification to,
any judicial, governmental, public or regulatory body or authority
is required in connection with the execution and delivery of this
Agreement or any Ancillary Buyer Document by Buyer or the
consummation by Buyer of the transactions contemplated hereby and
thereby. No consent, approval or authorization of any person,
partnership, corporation or other entity is required in connection
with the execution or delivery of this Agreement or any Ancillary
Buyer Document by Buyer or the consummation by Buyer of any of the
transactions contemplated hereby and thereby.
6.4 Brokers or Finders. No broker or finder has been
involved in this transaction on behalf of Buyer and Buyer will not
be obligated to pay any brokers' or finders' fees in connection
with this transaction as a consequence of any action or inaction
on Buyer's part.
SECTION 7. Investigation by Buyer.
Until the Closing Date and subject to the terms of that
certain letter agreement between Buyer and Seller, dated November
21, 1997, Buyer, through its agents and employees, may conduct
such investigation of the Business as Buyer may determine. During
the course of such investigation, Seller agrees to cause the
facilities, books, records, personnel, accountants, distributors,
sales representatives and agents of Seller to be made available
for review or interview by such agents and employees of Buyer
during normal business hours on reasonable notice and to provide
or cause to be provided to Buyer such other information with
respect to Seller as Buyer shall reasonably request. No
investigation of the Business by Buyer either prior to, on, or
after the date hereof shall affect Buyer's right to rely upon, or
Seller's responsibility for the accuracy of, the representations
and warranties of Seller contained herein.
SECTION 8. Covenants.
8.1 Preservation of the Business. Between the date
hereof and the close of business on the Closing Date, Seller will
(i) cause the Business to be conducted only in the ordinary
course, (ii) preserve the Business, Assets and properties of the
Business intact, (iii) consistent with efficient and economical
management, retain the services of the present employees,
distributors, sales representatives and agents of Seller and
preserve Seller's business relationships with customers, suppliers
and others, and (iv) not take, or permit or suffer to be taken,
any action that would cause or tend to cause the conditions upon
the obligations of the parties hereto to effect the transactions
contemplated hereby not to be fulfilled; including, without
limitation, taking, causing to be taken, or permitting or
suffering to be taken or to exist any action, condition or thing
that would cause the representations and warranties made by it
herein not to be true, correct and accurate as of the Closing.
8.2 Sales and Transfer Taxes. All transfer, sales, use,
documentary or other taxes, penalties and interest imposed upon
the transfer of the Assets and any fees payable in connection with
such transfer shall be paid by the Seller. Seller's liability for
such taxes, penalties, interest and fees shall be considered a
Retained Liability for purposes of this Agreement. At Seller's
request, Buyer shall provide to Seller a Reseller's Certificate
and/or other documentation reasonably requested by Seller to
assist Seller in reducing and/or eliminating any such tax
liability.
8.3 Further Assurances. From time to time after the
Closing, at Buyer's request and without further consideration,
Seller shall execute and deliver or cause to be executed and
delivered such other and further instruments of conveyance,
assignment and transfer, and take or cause to be taken such other
action, as Buyer may reasonably require for the more effective
conveyance and transfer of the Assets to Buyer and the fulfillment
of Seller's obligations hereunder. From time to time after the
Closing, at Seller's request and without further consideration,
Buyer will execute and deliver or cause to be executed and
delivered such other and further instruments of assumption and
take such other action as Seller may reasonably require for the
more effective assumption by Buyer of the Assumed Liabilities and
the fulfillment of Buyer's obligations hereunder.
8.4 Post Closing Access; Preservation of Records. From
and after the Closing Date, Buyer and Seller shall make available
to each other and each other's agents, as the case may be, all
books, records and documents relating to the Business as carried
on prior to the Closing Date (and, to the extent relevant to any
amounts payable following the Closing pursuant to Sections 3, 8 or
9, after the Closing Date) during regular business hours as may be
reasonably requested by Buyer or Seller; provided, however, that
such access to such books, records and documents shall not
unreasonably interfere with the normal operation of Buyer or
Seller. Both parties shall preserve all records and documents
relating to the Business as carried on prior to the Closing Date
for the period required by applicable Law with respect to such
records.
8.5 Notification of Certain Matters. Seller and Buyer
each agree to give prompt notice to each other of (a) the
occurrence, or failure to occur, of any event the occurrence or
failure of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in
any material respect at any time from the date hereof to the
Closing, and (b) any failure on its part to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it hereunder prior to the Closing Date. In
particular, between the date of this Agreement and the Closing,
each party shall give notice to the other promptly upon becoming
aware of (a) any material inaccuracy in a representation or
warranty made by the party providing notice and set forth in
Section 5 or Section 6, as the case may be, or in any Schedule or
(b) any event or state of facts which, if it had occurred or
existed on or prior to the date of this Agreement, would have
caused any such representation, warranty and/or Schedule to be
materially inaccurate. Any such notice shall describe such
inaccuracy, event or state of facts in reasonable detail. Any
information included in any such notice shall constitute a
representation or warranty as though made in Section 5 or Section
6 hereof, as the case may be, but shall not affect the conditions
to Buyer's and Seller's obligations contained in subsection 10(b)
or 11(b), as the case may be, that the representations and
warranties of the other party shall be true in all material
respects on and as of the date of this Agreement and as of the
Closing as though made at such time (without modification by any
notice provided pursuant to this Section).
8.6 Creditors. Seller shall pay in full when they become
due (either prior to or after the Closing) all amounts owed to any
creditor of the Business to the extent such debt, liability or
other obligation was incurred by Seller prior to the Closing, and
shall at or prior to the Closing pay in full any creditors holding
Encumbrances on the Assets or otherwise cause such creditors to
release such Encumbrances on the Assets and shall provide to Buyer
evidence of such releases including, where applicable, any UCC-3
termination statements.
8.7 Retained Liabilities. Following the Closing, Seller
shall perform in a timely manner all of its obligations, as and
when required, in connection with the Retained Liabilities.
8.8 Removal of Obsolete and Unusable Inventories. Seller
shall remove from the Premises, at its sole cost and expense, all
obsolete and unusable inventory not included in the Inventory not
later than ten (10) days after the Closing Date.
8.9 Provision of Financial Information. Upon a
determination by Buyer, in its sole discretion, that the rules and
regulations of the Securities and Exchange Commission require
Buyer to file or publish audited or unaudited financial statements
of Seller, Seller shall take all necessary action to provide Buyer
with such audited or unaudited financial statements as Buyer shall
request. The cost of obtaining such audited and unaudited
financial statements shall be paid by Buyer. The obligation of
Seller to provide such financial information shall survive the
Closing for a period of two years.
8.10 No Shopping. Between the date hereof and the
Closing Date, Seller shall not, directly or indirectly, through
any subsidiary, director, officer, employee, advisor, agent or
otherwise, (i) solicit, initiate or encourage the submission of
proposals or offers from any person relating to any acquisition or
purchase of all or (other than in the ordinary course of business)
any portion of the Assets or the Business (a "Transaction"), or
participate in any negotiation regarding, or otherwise cooperate
in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek
a Transaction, and (ii) except in the ordinary course of business,
in connection with the transactions contemplated hereby, or with
the prior written consent of Buyer, disclose, directly or
indirectly, to any person any information concerning the Business
or afford to any person access to the properties, books or records
of Seller relating to the Business. Seller shall immediately
cease and cause to be terminated any existing discussions or
negotiations with any parties other than Buyer conducted
heretofore with respect to any Transaction.
8.11 Post-Closing Allocation of Liability for Certain
Items. Any returns of products sold by Seller prior to the
Closing which are received by Buyer from any customer of the
Business within one hundred fifty (150) days following the Closing
and which are in excess of the historical level of product returns
of the Business shall be for the account of Seller and shall
create a liability from Seller to Buyer, which shall be paid
promptly by Seller. Such liability shall be equal to the amount
returned and/or credited to such customer by Buyer with respect to
such returned product. In the event Buyer shall subsequently
resell any product which is physically returned by a customer,
Buyer shall remit to the Seller an amount equal to the lesser of
the price at which such product was resold (less any amounts
incurred by Buyer to repair such product) or the amount remitted
to Buyer with respect to such returned product pursuant to this
Section 8.11.
8.12 Covenant Not To Compete; Business Information;
Employees. As an inducement and necessary incident to Buyer's
acquisition of the Assets, Seller agrees that:
(a) For a period of five (5) years following the Closing
Date, Seller shall not, and shall not cause or permit any
subsidiary of Seller to, without the express prior written consent
of the Buyer, directly or indirectly, anywhere in the world,
whether for itself or for any other person or entity, and whether
as a proprietor, principal, shareholder (other than as holder of
less than five percent (5%) of the stock of a corporation whose
shares are publicly traded), lender, partner, agent, director,
officer, employee, consultant, independent contractor, joint
venturer or in any other capacity whatsoever, at any time during
the period of time described above, enter into or engage in any
business, enterprise or activity which competes with the Business
as presently conducted or as may be conducted on the Closing Date.
Notwithstanding anything contained herein to the contrary, Buyer
acknowledges that Seller's subsidiary, FutureCORE, Inc., may
compete with any consulting service business provided by Buyer in
connection with Buyer's operation of the Business following the
Closing.
(b) Seller agrees from and after the Closing Date to
preserve the confidentiality of all confidential information
related to the Business, including, without limitation, all trade
secrets, customer lists, identity of suppliers and distributors,
methods of production and all confidential Intellectual Property.
Seller agrees that, for a period of five (5) years from the
Closing Date, it shall not, directly or indirectly, induce or
attempt to induce, or assist others in inducing or attempting to
induce any person who was employed by Seller in connection with
the Business and is employed by Buyer on or after the Closing Date
to terminate his or its relationship with Buyer or in any other
manner to interfere with the relationship between Buyer and any
such person.
(c) Seller acknowledges that the restrictions set forth in
this Section 8.12 are reasonable in light of the scope of the
operations conducted by the Division. Buyer shall be entitled to
specific performance, injunctive, and other equitable relief for
the enforcement of the provisions of this Section 8.12 by a court
of competent jurisdiction, it being acknowledged and agreed by
Seller that any breach or threatened breach hereof will cause
irreparable injury to Buyer for which money damages alone will not
provide an adequate remedy. The rights and remedies set forth in
this Section 8.12 shall be in addition to, and not in lieu of, any
other rights and remedies available to Buyer at law or in equity.
If any provisions of this Section 8.12 should be adjudicated to
be invalid or unenforceable, such provision shall be deemed
deleted herefrom with respect, and only with respect, to the
operation of such provision in the particular jurisdiction in
which such adjudication was made; provided, however, that to the
extent any such provision may be made valid and enforceable in
such jurisdiction by limitations on the scope of the activities,
geographical area or time period covered, such provision shall
instead be deemed limited to the extent, and only to the extent,
necessary to make such provision enforceable to the fullest extent
permissible under the laws and public policies applied in such
jurisdiction.
8.13 Use of Common Space. Following the Closing, Buyer
and Seller shall share space and certain services in accordance
with the Transition Services Agreement.
8.14 Collection of Receivables. Buyer shall use
reasonable commercial efforts to collect the Receivables in full;
provided, that Buyer shall not be required to retain any
collection agency or resort to litigation or other extraordinary
methods of collection. At the option of Buyer, Seller agrees to
repurchase from Buyer, for an amount equal to the unpaid balance
thereof (the "Repurchase Amount"), such Receivables which were
included in the Assets and have not been collected by Buyer within
one hundred fifty (150) days after the Closing Date. Buyer shall
exercise its option hereunder by delivering written notice to
Seller identifying those Receivables which have not been collected
and which Buyer desires to have repurchased. Seller shall pay to
Buyer the Repurchase Amount within thirty (30) days after its
receipt of Buyer's notice. Any Receivables repurchased by Seller
shall be transferred to Seller by Buyer free and clear of any
liens, claims, charges or encumbrances, together with copies of
any credit files or related information which Buyer may have
pertaining thereto, and Seller may, at its option, pursue
collection of such Receivable for its own account. Buyer shall
promptly remit to Seller any amounts it receives in payment of a
Receivable which has been repurchased by Seller. Seller shall
promptly remit to Buyer any amounts received by it following the
Closing in payment of any Receivable (other than repurchased
Receivables).
8.15 Assignments of Intellectual Property. Following the
Closing, Seller shall use its best efforts to have an Assignment
of Intellectual Property, in form satisfactory to Buyer, executed
by Razvan Herdea and each of the employees set forth on Schedule
5.13, and shall thereafter assign all rights of Seller under such
assignments to Buyer.
8.16 Sublease of Premises. In the event that following
the Closing, Buyer shall determine to sublease the Premises or
assign or terminate the Real Estate Lease, Buyer shall first offer
the opportunity to sublease the Premises or take an assignment of
the Real Estate Lease to Seller at the monthly rent then paid by
Buyer. In such event, Buyer shall notify Seller of its intention,
and thereafter, the parties shall negotiate in good faith to reach
agreement on the terms of such sublease or assignment; provided,
that in the event the parties shall fail to agree upon such terms
within ten (10) days of notice to Seller, then Buyer shall be
entitled to sublease the Premises or assign the Real Estate Lease
to a third party or to terminate the Real Estate Lease, as the
case may be.
SECTION 9. Employee Matters.
9.1 Payments of Benefits by Seller. Except as otherwise
provided herein, Seller shall retain liability for and shall pay
or cause to be paid when due, whether before or after the Closing
Date, to or for the benefit of all employees employed by Seller
(and their eligible dependents) during all periods prior to and
including the Closing Date all employee benefits accruing on or
prior to the Closing Date, including without limitation, (i) all
sickness, accident, and hospital claims or services; and (ii) all
amounts in respect of service with Seller prior to and including
the Closing Date in accordance with the terms and conditions of
Seller's Plans.
9.2 Worker's Compensation. Seller shall be responsible
for payment of any premiums, premium deposits, interest, claims
losses, retrospective adjustments and other amounts required to be
paid to comply with the Ohio and other applicable worker's
compensation laws for periods of coverage prior to and including
the Closing Date, regardless of when the determination is made
that such payment is required.
9.3 Employee Claims. Seller agrees that it will remain
liable for and will assume the administration and defense of any
claims filed prior to or after the Closing Date by current or
former employees of Seller with respect to matters arising prior
to or on the Closing Date (including the claims of any employees
of Seller who are not employed by Buyer) and that Seller will be
responsible for payment of any sums due by Seller to the Ohio
Department of Labor as of the Closing Date.
9.4 Notices. Seller will timely give all notices
required by law to be given to employees in connection with the
sale of the Business and termination of employment of any
employees by Seller. These notices shall include, but shall not be
limited to, notices required, if any, under the Worker Adjustment
and Retraining Notification Act and other similar statutes and
regulations.
SECTION 10. Conditions Precedent to the Obligation of Buyer.
The obligation of Buyer to consummate the transactions
contemplated hereby shall be subject to the satisfaction, or
waiver in writing by Buyer, on or prior to the Closing Date, of
each of the following conditions:
(a) Corporate Authorization. All corporate and other actions
necessary to authorize and effectuate the consummation of the
transactions contemplated hereby by Seller shall have been duly
taken prior to the Closing, and Seller shall have delivered to
Buyer certified copies of resolutions of the Board of Directors of
Seller authorizing the execution and delivery of this Agreement,
the Ancillary Seller Documents and the consummation of the
transactions contemplated hereby and thereby.
(b) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and
correct in all material respects on and as of the Closing Date
with the same force and effect as though all such representations
and warranties had been made on and as of such date and there
shall have been delivered to Buyer a certificate to that effect,
dated the Closing Date, signed by the President of Seller.
(c) Covenants and Agreements. Each and all of the covenants
and agreements of Seller to be performed or complied with prior to
the Closing pursuant to this Agreement shall have been duly
performed and complied with in all material respects or duly
waived and there shall have been delivered to Buyer a certificate
to that effect, dated the Closing Date, signed by the President of
Seller.
(d) Instruments of Sale or Assignment. Seller shall have
delivered to Buyer such bills of sale, endorsements, assignments,
and instruments of transfer, assignment and conveyance as shall be
reasonably required by Buyer for the transfer to Buyer of all of
Seller's right, title and interest to and in the Assets, free and
clear of all Encumbrances. Seller shall have obtained releases of
any and all Encumbrances with respect to the Assets.
(e) No Adverse Order or Injunction. There shall not be in
effect on the Closing Date any judgment, decree or order issued by
any court of competent jurisdiction which prohibits the
consummation by Seller or Buyer of the transactions contemplated
hereby, or any pending or threatened proceeding in which any
person seeks such a remedy, or any governmental investigation,
inquiry, objection or challenge with respect to the transactions
contemplated hereby.
(f) Judicial, Governmental or Regulatory Approvals; Consents
to Assignment. All judicial, governmental or regulatory consents,
waiting periods, approvals or authorizations necessary to
consummate the transactions contemplated by this Agreement shall
have been obtained or expired prior to the Closing, including, but
not limited to, the expiration of any waiting periods pursuant to
the HSR Act. All consents required for the valid assignment of any
Asset to Buyer (including, without limitation, all Contracts and
Intellectual Properties) shall have been obtained by Seller for
Buyer's benefit on such terms as shall be acceptable to Buyer in
its reasonable discretion and shall be in full force and effect.
(g) Permits. Buyer shall have received all licenses and
permits necessary to operate the Business in accordance with all
applicable Federal, state, or local Laws, including those relating
to environmental matters.
(h) Opinion of Counsel. Buyer shall have received from
Dinsmore & Shohl and Moira J. Squier, Esq., counsel for Seller,
opinions dated the Closing Date, in form reasonably satisfactory
to Buyer.
(i) Employment Agreements. Gary Oppito, Dwayne Crawford,
Laura Bolt, Neil Moore, David Steen and Chris Riggs shall have
executed and delivered to Buyer the Employment Agreements,
substantially in the forms attached hereto as Exhibit 10(i)
hereto, and said Agreements shall not have been terminated.
(j) OptiMaxx Agreement. Seller shall have executed and
delivered to Buyer an OptiMaxx Reseller Agreement in substantially
the form attached hereto as Exhibit 10(j).
(k) FutureCORE Consulting Agreement. FutureCORE, Inc. shall
have executed and delivered to Buyer a Consulting Agreement in
substantially the form attached hereto as Exhibit 10(k).
(l) DiaLogos Letter of Intent. DiaLogos, Inc. shall have
executed and delivered to Buyer a letter of intent in
substantially the form attached hereto as Exhibit 10(l).
(m) UDMS License Agreement. Universal Document Management
Systems, Inc. shall have executed and delivered to Buyer a License
Agreement in substantially the form attached hereto as Exhibit
10(m).
(n) Transition Services Agreement. Seller shall have executed
and delivered to Buyer a Transition Services Agreement in
substantially the form attached hereto as Exhibit 10(n).
(o) Assignments. Each of Gary Oppito, Dwayne Crawford, Laura
Bolt, Neil Moore, David Steen and Chris Riggs shall have executed
and delivered to Buyer assignments of copyrights and other
intellectual property relating to the Business created or
developed by such person while in the employ of Seller, in
substantially the form attached hereto as Exhibit 10(o).
(p) All Documents and Proceedings Satisfactory to Buyer
and its Counsel. All certificates and other documents to be
delivered by Seller and all other matters to be accomplished prior
to or at the Closing shall be satisfactory in the reasonable
judgment of Buyer and its counsel.
SECTION 11. Conditions Precedent to the Obligation of Seller.
The obligation of Seller to consummate the transactions
contemplated hereby shall be subject to the satisfaction, or
waiver in writing by Seller, on or prior to the Closing Date, of
each of the following conditions:
(a) Corporate Authorization. All corporate and other actions
necessary to authorize and effectuate the consummation of the
transactions contemplated hereby by Buyer shall have been duly
taken prior to the Closing, and Buyer shall have delivered to
Seller a certified copy of resolutions of the Board of Directors
of Buyer authorizing the execution and delivery of this Agreement
and the Ancillary Buyer Documents and the consummation of the
transactions contemplated hereby and thereby.
(b) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and
correct in all material respects on and as of the Closing Date
with the same effect as though all such representations and
warranties had been made on and as of such date and there shall
have been delivered to Seller a certificate to that effect, dated
the Closing Date, signed by an appropriate officer of Buyer.
(c) Covenants and Agreements. Each and all of the covenants
and agreements of Buyer to be performed or complied with prior to
the Closing pursuant to this Agreement shall have been duly
performed and complied with in all material respects or duly
waived and there shall have been delivered to Seller a certificate
to that effect, dated the Closing Date, signed by an appropriate
officer of Buyer.
(d) Instruments of Assumption. Buyer shall have delivered to
Seller such instruments of assumption as shall be reasonably
required by Seller for the assumption by Buyer of the Assumed
Liabilities.
(e) No Adverse Order or Injunction. There shall not be in
effect on the Closing Date any judgment, decree or order issued by
an court of competent jurisdiction which prohibits the
consummation by Seller or Buyer of the transactions contemplated
hereby, or any pending or threatened proceeding in which any
person seeks such a remedy, or any governmental investigation,
inquiry, objection or challenge with respect to the transactions
contemplated hereby.
(f) Judicial Governmental or Regulatory Approvals. All
judicial, governmental or regulatory consents, waiting periods,
approvals or authorizations necessary to consummate the
transactions contemplated by this Agreement shall have expired or
been obtained prior to the Closing, including, but not limited to,
the expiration of any waiting periods pursuant to the HSR Act.
(g) Stock Purchase Agreement. The transactions contemplated
by the Stock Purchase Agreement shall have been consummated.
(h) Opinion of Counsel. Seller shall have received from
Raymond P. Ohlmuller, Vice President - Law and Assistant General
Counsel of the Buyer, an opinion dated the Closing Date,
substantially in the form of Exhibit 11(h) attached hereto.
(i) All Documents and Proceedings Satisfactory to Seller and
its Counsel. All certificates and other documents to be delivered
by Buyer and all other matters to be accomplished prior to or at
the Closing shall be satisfactory in the reasonable judgment of
Seller and its counsel.
SECTION 12. [Intentionally left blank]
SECTION 13. Survival of Representations, Warranties and
Covenants.
Each and every representation, warranty and covenant of
Seller or Buyer contained in this Agreement, in any Schedule or in
any certificate or instrument delivered pursuant hereto or in
connection herewith shall survive the Closing until two (2) years
after the Closing Date; provided, that notwithstanding the
foregoing, (i) the covenants set forth in Section 14 and the first
sentence of Section 8.13(b) shall survive the Closing
indefinitely, (ii) any covenant for which a longer period is
expressly provided for herein (including without limitation the
covenants set forth in Section 8.13(a)) shall survive for the
period so stated; (iii) and the representations and warranties set
forth in Section 5.6(a) shall survive the Closing indefinitely;
and (iv) the representations and warranties set forth in Section
5.9 shall survive until the termination (including waivers and
extensions) of the applicable statute of limitations.
SECTION 14. Indemnification.
14.1 Indemnification by Seller. Except as limited
herein, Seller agrees to indemnify, defend and hold Buyer harmless
from and against any and all losses, expenses, claims, charges,
liabilities, damages or deficiencies, including, without
limitation, interest, penalties, reasonable attorneys' fees and
disbursements and any losses that may result from the granting of
injunctive relief in any suit, action or proceeding (hereinafter
collectively referred to as "Damages"), actually incurred by Buyer
based upon, arising out of or otherwise in respect of (A) any
breach of any covenant or agreement of Seller contained in this
Agreement or any Ancillary Seller Document, (B) the breach of any
of Seller's representations and warranties contained in this
Agreement, in any Exhibit or Schedule hereto, or in any Ancillary
Seller Document delivered in connection herewith, or (C) the
Retained Liabilities.
14.2 Indemnification by Buyer. Buyer agrees to
indemnify, defend and hold Seller harmless from and against any
and all Damages actually incurred by Seller which are based upon,
or arise out of or otherwise in respect of (i) any breach of any
covenant or agreement of Buyer contained in this Agreement, (ii)
the Assumed Liabilities, (iii) the breach of Buyer's
representations and warranties contained in this Agreement, in any
Exhibit or Schedule hereto, or in any Ancillary Buyer Document
delivered in connection herewith, (iv) claims, actions or other
litigation involving Buyer (other than those for which Seller is
obligated to indemnify Buyer), and (v) the operation of the
Business by Buyer from and after the Closing Date, including
without limitation, products produced or sold by Buyer (other than
to the extent Seller is obligated to indemnify Buyer).
14.3 Notice of Circumstances. Promptly after receipt by
Seller or Buyer of notice of any action, proceeding, claim or
potential claim (any of which is hereinafter individually referred
to as a "Circumstance"), which could give rise to a right to
indemnification pursuant to any provisions of this Agreement, such
party shall give the party who may become obligated to provide
indemnification hereunder (the "Indemnifying Party") written
notice describing the Circumstance in reasonable detail. If
notice of a Circumstance is not given to the Indemnifying Party
within a sufficient period of time or in sufficient detail to
apprise the Indemnifying Party of the nature of the Circumstance
(in each instance taking into account the facts and circumstance
known by the indemnified party with respect to such Circumstance),
the Indemnifying Party shall not be liable to the party seeking
indemnification to the extent that the Indemnifying Party's
position is actually prejudiced as a result thereof. The
Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and by its own counsel,
any Circumstance involving the asserted liability of the party
seeking indemnification. If any Indemnifying Party shall
undertake to compromise or defend any such asserted liability, it
shall promptly notify the party seeking indemnification of its
intention to do so, and the party seeking indemnification agrees
to cooperate fully with the Indemnifying Party and its counsel in
the compromise of, or defense against, any such asserted
liability. All costs and expenses incurred in connection with such
cooperation shall be borne by the Indemnifying Party. In any
event, the indemnified party shall have the right at its own
expense to participate in the defense of such asserted liability.
Under no circumstances shall the party seeking indemnification
compromise any such asserted liability without the written consent
of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed.
14.4 Survival of Indemnification Obligations. The
indemnification obligations for all claims relating to breaches of
representations, warranties and covenants shall survive the
Closing and shall be enforceable with respect to Damages for which
a notice of Circumstance has been delivered prior to the
expiration, if any, of the representation, warranty or covenant on
which the indemnified party's claim is based.
SECTION 15. Prorations.
All rental charges, utility charges, water and sewer charges
or similar regular periodic charges (the "Pro-Rated Liabilities")
with respect to the Premises (other than any such charges included
in the Prepaid Assets) shall be prorated between the parties on
the basis of the actual number of days elapsed from the first day
of such period to the Closing Date. All ad valorem real estate
taxes, if any (other than any such taxes included in the Prepaid
Assets), shall be prorated between the parties on a calendar year
basis to the Closing Date. Seller will present to Buyer an
invoice setting forth the appropriate proration of the described
charges within thirty (30) days of the Closing Date.
SECTION 16. Costs Incident to Preparation of Agreement.
Each of the parties hereto shall pay, without right of
reimbursement from the other, all costs incurred by it incident to
the preparation, execution and delivery of this Agreement and the
performance of its obligations hereunder, whether or not the
transactions contemplated by this Agreement are consummated,
including, without limitation, fees and disbursements of legal
counsel, accountants and consultants employed by the respective
parties hereto in connection with the transactions contemplated by
this Agreement.
SECTION 17. Parties in Interest.
This Agreement is binding upon and is for the benefit of the
parties hereto and their respective successors and permitted
assigns. This Agreement is not made for the benefit of any
person, firm, corporation or other entity not a party hereto, and
no person, firm, corporation or other entity other than the
parties hereto or their respective successors and permitted
assigns shall acquire or have any right, remedy or claim under or
by virtue of this Agreement.
SECTION 18. Miscellaneous.
18.1 Assignment; Successors and Assigns. No party to
this Agreement shall convey, assign or otherwise transfer any of
its rights or obligations under this Agreement without the express
written consent of the other party hereto in its sole and absolute
discretion. No assignment of this Agreement shall relieve the
assigning party of its obligations hereunder. This Agreement shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
Notwithstanding the foregoing, Buyer may assign, in whole or in
part, its rights and obligations hereunder to an affiliated
company.
18.2 Notices. All notices or other communications
required or permitted to be given hereunder shall be in writing
and shall be delivered by hand, sent by telecopy, or sent, postage
prepaid, by registered, certified or express mail, or overnight
courier service and shall be deemed given when so delivered by
hand or telecopied, or if mailed, four days after mailing (one
business day in the case of express mail or overnight courier
service) as follows:
If to Buyer:
Becton, Dickinson and Company
1 Becton Drive
Franklin Lakes, New Jersey 07417
Attention: General Counsel
Telecopy Number: (201) 847-5361
If to Seller:
MedPlus, Inc.
8805 Governor's Hill Drive, Suite 100
Cincinnati, OH 45209
Attention: Moira J. Squier, Esq.
Telecopy Number: (513) 583-8884
with a copy to:
Charles F. Hertlein, Jr., Esq.
Dinsmore & Shohl
255 E. 5th Street
Cincinnati, OH 45202
Telecopy Number: (513) 977-8327
or in any case to such other address or addresses as hereafter
shall be furnished as provided in this Section 18.2 by any party
hereto to the other party hereto.
18.3 Waiver; Remedies. No delay on the part of any party
hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of
any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege
hereunder, nor shall any single or partial exercise of any right,
power of privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which
the parties hereto may otherwise have at law or in equity.
18.4 Entire Agreement. This Agreement and all agreements
executed and delivered in connection herewith shall constitute the
entire agreement among the parties with respect to the subject
matter hereof and this Agreement supersedes all prior agreements
or understandings of the parties relating thereto. Except as
expressly stated herein, no party has made or is making any
representations or warranties in connection with the transactions
contemplated herein.
18.5 Amendment. This Agreement may be modified or
amended only by written agreement of the parties hereto.
18.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of
which together shall constitute a single instrument.
18.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New Jersey
applicable to contracts made and to the performed entirely within
such state.
18.8 Exhibits and Schedules. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein.
18.9 Captions. All section titles or captions contained
in this Agreement or in any Exhibit or Schedule referred to herein
are for convenience only, shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of
this Agreement. All references herein to numbered sections are to
sections of this Agreement.
18.10 Publicity. No press release or announcement
concerning the existence of this Agreement or the transactions
contemplated hereby shall be issued by any party without the prior
consent of the other party, except as such release or announcement
may be required by Law (including applicable federal and state
securities laws, rules and regulations), provided that in each
case the party making the release or announcement shall allow the
other party reasonable time to comment on such release or
announcement in advance of such issuance.
18.11 Severability. Any provision of this Agreement
which is invalid or unenforceable shall be ineffective to the
extent of such invalidity or unenforceability, without affecting
in any way the remaining provisions hereof.
18.12 Allocation of Purchase Price. The allocation of
the Purchase Price among the Assets and the covenant not to
compete in Section 8.13 for purposes of Section 1060 of the Code
shall be determined by the parties after the Closing in accordance
with the methods of allocation set forth in Schedule 18.12 hereof,
and each party agrees to file all Tax returns and Tax reports in a
manner consistent with such allocation.
18.13 Knowledge. As used herein, "knowledge" of Seller
shall mean its actual knowledge after diligent inquiry.
18.14 No Set-Off. Neither party hereto may apply and/or
set-off against amounts due it or owed by it hereunder any
payments due or made by either party under any other agreement of
even date herewith between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
BECTON, DICKINSON AND COMPANY
By:___________________________
Name:
Title:
MEDPLUS, INC.
By:_____________________
Name:
Title:
Index to All Exhibits and Schedules to Asset Purchase Agreement
Exhibit 3.5 Royalty Calculation
Schedule 1.1(b), Products
Schedule 1.1(c), Executory Contracts
Schedule 1.1(f), Intellectual Property
Schedule 1.1(g), Licenses, Product Registrations, Permits
Schedule 1.1(h), Machinery, Equipment, Furniture, Fixtures
Schedule 5.4, Consents Required
Schedule 5.5, Financial Statements
Schedule 5.9, Tax Audits
Schedule 5.10, Litigation since 1993
Schedule 5.11, Encumbrances on Intellectual Property
Schedule 5.13, Employees
Schedule 5.14, Insurance Policies
Schedule 5.15, Employee Benefit Plans
Schedule 5.16, Worker's Compensation/Unemployment
Exhibit 99.1
News Update
FOR IMMEDIATE RELEASE CONTACT: Philip S. Present II
Chief Operating Officer
MedPlus, Inc.
BECTON DICKINSON ACQUIRES MEDPLUS' INTELLICODE DIVISION FOR $17.4
MILLION AND MAKES INVESTMENT OF $2 MILLION IN COMMON STOCK
CINCINNATI, OH, JANUARY 30, 1997 * MedPlus, Inc. (NASDAQ: MEDP)
today announced that Becton, Dickinson and Company acquired
IntelliCode Intelligent Bar Coding Systems, a division of MedPlus,
for an initial payment of $17.4 million in cash. The divestiture
of IntelliCode also provides MedPlus with a five-year royalty
arrangement based on future defined net revenues of that entity.
Concurrent with the acquisition of IntelliCode, Becton Dickinson
also purchased $2 million worth of shares of MedPlus common stock.
In addition, Becton Dickinson signed an agreement pursuant to
which it may resell MedPlus' OptiMaxx Document Archival and
Retrieval Systems and it also contracted with MedPlus for
specified laboratory consulting services from FutureCORE, Inc., a
wholly-owned subsidiary of MedPlus.
The funds received from Becton Dickinson, which will generate a
net pre-tax gain of approximately $14.8 million, will allow the
Company to enhance its focus on delivering data management
solutions for health care organizations. These include ChartMaxx
Electronic Patient Record System, OptiMaxx and services delivered
by FutureCORE, Inc., the consulting subsidiary of MedPlus with
expertise in health care process improvement,
consulting/implementation, automation and systems integration. In
addition, the funds will be used to continue the Company's
development of Web access to legacy systems capabilities.
Founded in 1991, MedPlus was the first company to introduce
intelligent bar coding technology to the health care industry.
With more than 700 health care customers worldwide, MedPlus has
maintained a market leadership position for bar coding in health
care. Becton Dickinson's acquisition will allow IntelliCode to
continue expansion of its core technologies to include
complementary applications and services for automated specimen and
medication management.
Becton Dickinson (NYSE:BDX), headquartered in Franklin Lakes, New
Jersey, manufactures and sells a broad range of medical supplies
and devices and diagnostic systems for use by health care
professionals, medical research institutions and the general
public. For the fiscal year ended September 30, 1997, Becton
Dickinson had total revenues of $2.8 billion and net income of
$300 million. A world leading supplier of sample collection
products, the company was the first in the industry to make
evacuated blood collection devices to improve the quality and
safety of the pre-analytical diagnostic process.
MedPlus is a Cincinnati-based company that develops, sells and
supports hardware and software solutions to address the needs of
health care organizations. Offerings include electronic patient
record systems, document archival and retrieval systems, object
oriented workflow and document management systems and hospital,
regional reference laboratory and physician office productivity
consulting.
MedPlus notes that some of the statements made herein are forward-
looking statements. As such, factors may occur which could cause
actual events to differ materially from those anticipated in these
statements. For example, while MedPlus believes the acquisition
will allow it to enhance its focus on delivering data management
solutions for health care organizations and to continue the
Company's development of Web access to legacy systems
capabilities, other uses may arise for the resources made
available to MedPlus as a result of this acquisition which the
Company may deem to be more appropriate than those mentioned
herein.
###
Exhibit 99.2
FOR IMMEDIATE RELEASE Contact: Philip S. Present, II
Chief Operating Officer
513-583-0500
MEDPLUS SUBSIDIARY DELAYS INITIAL PUBLIC OFFERING
CINCINNATI, January 30, 1998 -- MedPlus, Inc. announced today that
its wholly owned subsidiary, Universal Document Management
Systems, Inc. (UDMS), is withdrawing its proposed initial public
offering of 2,600,000 shares of common stock as a result of the
existing market for initial public offerings. UDMS had planned to
acquire nine companies in the design automation software and
services business, with acquisition costs to be funded by the
proceeds of the offering, and to change its name to Synergis
Technologies, Inc. UDMS is currently planning to delay the
offering until market conditions improve and may restructure the
offering at that time. In the event the offering is not completed
prior to the release of MedPlus' fourth quarter earnings results,
which release is expected to occur in late March or early April,
MedPlus would record a pretax charge to earnings of approximately
$3.3 million for the fourth quarter of 1997 relating to the write
off of costs associated with the acquisitions and the offering.
"Our underwriters have informed us that the current market
conditions for initial public offerings are extremely
unfavorable," stated MedPlus President Richard A. Mahoney.
"Rather than proceed with the offering under less than optimum
circumstances, we felt it would be in the best interests of our
shareholders to delay the offering at this time until more
favorable market conditions prevail.
UDMS develops integrated workflow, document management and
application development software that offers IT departments rapid
design, prototyping and deployment of workflow and document
management applications. Its products are used in companies such
as PPG Industries, GE Plastics and Abbott Laboratories.
MedPlus is a publicly traded (NASDAQ:MEDP), Cincinnati-based
company that develops, sells and supports hardware and software
solutions to address the needs of health care organizations.
Product offerings include electronic patient records systems,
optical document archival and retrieval systems, object-oriented
workflow and document management systems and hospital, reference
laboratory and physician office productivity consulting.
MedPlus notes that some of the statements made herein are forward-
looking statements. As such, factors may occur which could cause
actual events to differ materially from those anticipated in these
statements. For example, although MedPlus intends to go forward
with the IPO when market conditions improve, because MedPlus has
no means of knowing when market conditions may improve to its
satisfaction, there is no guarantee that, at such time, each of
the companies to be acquired by UDMS and/or the current
underwriters will desire to remain involved in the transaction.
In addition, although it is not MedPlus' intention at this time,
MedPlus could determine that it is in the best interests of its
shareholders to abandon the IPO in light of factors beyond the
control of MedPlus, such as market conditions over the next few
months and/or and increase in competition in the design automation
software and services business.
###
