ASSET PURCHASE AGREEMENT
AGREEMENT made as of the 8th day of May, 1995, by and among
AEQUITRON MEDICAL, INC., Minnesota corporation (the "Buyer"), and CNS, INC., a
Delaware corporation (the "Seller").
WHEREAS, the Seller owns and desires to sell and transfer to the
Buyer, and the Buyer desires to purchase and acquire from the Seller, the assets
of the Seller used by the Seller in the business ("Purchased Business") of
manufacturing, marketing, distributing and selling equipment for diagnosis of
sleep disorders (the "Equipment") upon the terms, conditions and provisions
hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 ASSET PURCHASE. Subject to the terms and conditions set forth
herein, the Buyer agrees to purchase from the Seller, and the Seller agrees to
sell, transfer, assign, convey and deliver to the Buyer, on the Closing Date (as
defined below), all of Seller's right, title and interest in and to the
following assets of the Seller which are used solely in the operation of the
Purchased Business ("Purchased Assets"):
(a) Material items of inventory of all kinds, including
raw materials, work-in-process, if any, finished goods, packaging
and supplies, including the inventories listed on Schedule 1.1(a).
(b) The machinery, tools, dies, molds, and other equipment
listed on Schedule 1.1(b) hereto.
(c) All registered and unregistered domestic and foreign
patents, all trademarks, tradenames, copyrights, service marks and
applications therefor and 510(k)s, issued or pending, (to the
extent transferable) which are listed on Schedule 1.1(c) together
with all related rights and associated goodwill ("Proprietary
Rights").
(d) All rights of the Seller under the unfilled sales
orders and any other contracts and commitments listed on Schedule
1.1(d) (the "Assumed Contracts").
(e) All books, records and correspondence pertaining to
inventories, accounts receivable, equipment, intangible property,
regulatory matters, manufacturing, quality control and quality
assurance documentation, all forms and correspondence with the FDA
on marketing authority and inspection issues, customers, sales
prospects and suppliers (including all customer, sales prospect and
supplier lists) used in connection with the Purchased Business (the
"Records").
(f) All technology, know-how and other intangible property
related to the Purchased Assets or the Purchased Business,
including, without limitation, tooling design, blue prints, repair
history, specifications, drawings, bills of material and
engineering documentation.
(g) All advertising and promotional literature and
materials, including catalogs, brochures, pamphlets and art work.
(h) Net receivables as described in 1.2 below.
The Seller hereby agrees to deliver to the Buyer possession of the Purchased
Assets on the Closing Date.
1.2 CONSIDERATION FOR ASSETS. In consideration of, and in exchange
for, the sale of the assets and property described in Section 1.1 above, Buyer
shall assume certain liabilities as set forth in Section 1.3, below, and, in
addition, shall pay the "Purchase Price" to Seller at Closing: (1) the sum of
Five Million Dollars ($5,000,000) cash; and (2) the remainder by delivery to
Seller of Buyer's promissory note in the form and on the terms attached as
Exhibit A in a face amount equal to 85% of the net receivables of the Purchased
Business (net of $105,274 of excluded receivables identified on Schedule 1.2) as
valued at the Closing Date ("Promissory Note"). If receivables in excess of 15%
of the net receivables of the Purchased Business remain uncollected 151 days
after the date of the Promissory Note, Seller will reimburse Buyer in cash in an
amount equal to 50% of such uncollected net receivables up to a maximum of
$50,000.
The Purchase Price shall be allocated among the Purchased Assets in
the manner determined by Buyer. Seller and Purchaser shall each file Form 8594
(Asset Acquisition Statement under Section 1060) on a timely basis reporting the
allocation of the Purchase Price. Seller and Purchaser shall not take any
position on their respective income tax returns that is inconsistent with the
allocation of the Purchase Price as determined by Buyer.
1.3 LIABILITIES OF SELLER.
Buyer shall assume no liabilities of Seller, fixed or contingent,
known or unknown, determined or undetermined, due or not yet due except as
specifically set forth on Schedule 1.3 hereto.
On the Closing Date, Buyer agrees to assume and to perform in
accordance with their respective terms the obligations of the Purchased Business
listed below ("Assumed Liabilities").
(a) "Assumed Contracts" described herein or listed on
Schedule 1.1(d) hereof.
(b) Any warranty obligations for Equipment sold prior to
Closing Date. At Closing, Seller shall pay cash to Buyer in the
amount of Seller's accrual for warranty obligations determined as
of the Closing Date, the amount of which shall be determined
consistent with past accounting practices of Seller.
(c) Maintenance contract obligations of Seller on the
Purchased Assets, but at Closing Seller shall reimburse Buyer for
one-half the amount of the maintenance contract obligations thus
assumed by Buyer.
(d) Products liability claims arising from Equipment sold
by Seller prior to the Closing Date, if and to the extent that
Buyer has modified, upgraded or updated such Equipment, or serviced
such Equipment in a way found to have caused injury to a third
party or to the extent Buyer failed to service, update, upgrade or
properly modify such equipment pursuant to order of a court or
governmental agency or pursuant to a maintenance or service
obligation.
(e) Any recall or modification obligations imposed by a
governmental agency or by maintenance or service obligations.
(f) Post-closing training obligations in connection with
Equipment sold before Closing, for which Seller will reimburse
Buyer for its expenses when and as accrued.
1.4 CLOSING; DELIVERY OF DOCUMENTS.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on June 1,1995 at a
mutually agreeable place (the "Closing Date"), or such other date
as agreed by the parties.
(b) On the Closing Date, Seller shall deliver to Buyer the
following:
(i) Patent Assignments in recordable form
transferring the patents and patent applications listed on
Schedule 1.1(c);
(ii) Trademark Assignments in recordable form
transferring the trademarks listed on Schedule 1.1(c);
(iii) an opinion of Lindquist & Vennum P.L.L.P.,
Seller's counsel, in form and substance satisfactory to
Buyer; and
(iv) a Bill of Sale transferring the Purchased
Assets to Buyer free and clear of all encumbrances.
(v) the cash amounts referenced in Section 1.3(b)
and (c) above.
(c) On the Closing Date, Buyer shall deliver to Seller the
following:
(i) the cash portion of the Purchase Price; and
(ii) the Promissory Note; and
(iii) an opinion of Best & Flanagan, P.L.L.P.,
Buyer's counsel, in form and substance satisfactory to
Seller.
1.5 CONDITIONS TO CLOSING. The obligation of each party to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction by the other party of the following conditions:
(a) The representations and warranties of the other party
shall be true and correct in all material respects at the Closing
as though then made;
(b) The other party shall have performed and complied in
all material respects with all covenants and agreements required to
be performed and complied with by it under this Agreement prior to
the Closing;
(c) No action or proceeding before any court or agency
will be pending or threatened wherein an unfavorable judgment,
decree or order could prevent the carrying out of this Agreement or
any of the transactions contemplated hereby or have an adverse
effect on the Purchased Assets or the Purchased Business; and
(d) The other party shall have delivered all documents
required to be delivered by it under Section 1.4;
(e) The form and substance of all certificates,
instruments, opinions and other documents delivered on or before
the Closing pursuant to this Agreement shall be reasonably
satisfactory to each party and its counsel; and
(f) During the period from the date of this Agreement to
the Closing (i) there shall not have been any material adverse
change in the condition or the results of operation of the Purchase
Assets or the Purchased Business (ii) nor shall Seller have
sustained any material loss or damage to the Purchased Assets,
whether or not insured, either of which would have a material
adverse effect on the ability of Buyer to operate the Purchased
Business.
Either party may waive any condition to its obligation to consummate the
transactions contemplated by this Agreement and agree to proceed with Closing.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF THE SELLER
As an inducement to the Buyer to enter into this Agreement, the
Seller hereby represents and warrants to, and agrees with, the Buyer as follows:
2.1 ORGANIZATION AND CORPORATE POWER. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full power and authority to enter into this Agreement
and perform its obligations hereunder.
2.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action and will
not create a lien or encumbrance on the Purchased Assets or conflict with or
result in a default under any material commitment, agreement or law applicable
to Seller. Approval of Seller's shareholders of the transactions contemplated
hereby is not required. Other than possible consents required under the Assumed
Contracts, no material consent or approval of or filing or registration with any
third party is required in connection with the execution, delivery or
performance of this Agreement by Seller. This Agreement constitutes a valid and
binding obligation of the Seller, enforceable in accordance with its terms.
2.3 TITLE AND CONDITION OF PROPERTIES. At the Closing Date the
Seller will own the Purchased Assets good and marketable title, free and clear
of all liens, charges, purchase rights, claims, pledges, mortgages, security
interests, encumbrances, or other limitations or restrictions whatsoever. The
Seller's machinery and equipment, and other tangible personal property included
in the Purchased Assets are in reasonable operating condition and repair, normal
wear and tear excepted (except for inventory, the condition of which shall be
governed by Section 2.5).
2.4 TANGIBLE PERSONAL PROPERTY. Schedule 1.1(b) lists all material
manufacturing machinery and equipment used to manufacture the Equipment, except
for Seller's manufacturing space at 1250 Park Road, Chanhassen, Minnesota 55317
and fixtures related thereto.
2.5 INVENTORY. The inventory shall on the Closing Date be in the
condition as inspected by Buyer.
2.6 PROPRIETARY RIGHTS.
2.6.1 The Seller's use of the Proprietary Rights does not,
to Seller's knowledge, violate or constitute the misappropriation
or the misuse of any intellectual property rights of any third
party. Schedule 1.1(c) attached hereto sets forth a list of all
Proprietary Rights, other than trade secrets and know-how. The
Seller has not granted, conveyed, licensed or assigned any rights
under the Proprietary Rights and to Seller's knowledge there are no
other parties using the Proprietary Rights.
2.6.2 To the best knowledge of Seller, all Proprietary
Rights are valid and enforceable, and, as to patents, there exist
no facts or prior art which would render any of those patents
invalid or unenforceable.
2.6.3 Seller has received no notice that any of the
features, components or configurations (whether developed or under
development) of the products included in the Purchased Assets
infringe, nor has any claim been made that they may infringe, the
intellectual property rights of any other party. Further, the
Seller has not been sued or charged orally or in writing with, or
been a defendant in any claim, suit, action or proceeding relating
to the Purchased Business which involves a claim of infringement of
any patents, trademarks, service marks or copyrights, or a claim of
unfair competition or misappropriation of trade secrets or
confidential information.
2.6.4 None of the Proprietary Rights is subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by the Seller or restricting the
licensing thereby by the Seller to any person.
2.6.5 Apnea Screener. The FDA has not granted the
authority sought by Seller in the 510(k) application filed by it
with the FDA for the apnea screener ("Sleep Test") owned by Seller
and made part of the Purchased Assets. Prior to and following the
Closing Date, Seller agrees to cooperate with Buyer in seeking to
cause the FDA to grant such 510(k) application with respect to the
Sleep Test.
2.7 LITIGATION. Except as set forth on Schedule 2.7, there are no
actions, suits or proceedings, pending or, to the best knowledge of Seller,
threatened or claimed against or affecting the Seller which relate in any manner
to the Purchased Business at law or in equity, or before or by any federal,
state, municipal or other governmental agency. The Seller is not presently a
party to or subject to or bound by any agreement or any judgment, order, writ,
injunction or decree of any court or any governmental body that contains any
provision that would or could operate to prevent the carrying out of this
Agreement or the transactions contemplated hereby.
2.8 CONTRACTS. Other than the Assumed Contracts, Seller is not a
party to or otherwise bound by any material agreement, contract, indenture,
instrument or lease with respect to the Purchased Business, except as set forth
on Schedule 2.8.
2.9 INSURANCE. Seller maintains products' liability and other
insurance as described in Schedule 2.9. Following the Closing Date, Buyer will
provide its own insurance and shall, consistent with the indemnification
provisions in 4.2 and 4.3 below, hold Buyer harmless from any products liability
or other claim in connection with the Equipment, the Purchased Business or the
Purchased Assets, arising from Equipment sold before the Closing Date, except as
provided in Section 1.3(d) above.
2.10 MEDICAL DEVICE REGULATION. The Seller has applied for or
obtained all applicable material licenses, registrations, approvals, clearances
and authorizations required by local, state and Federal agencies, foreign or
domestic, regulating the safety, effectiveness and market clearance of the
Equipment. The Seller has had no recalls or FDA product actions, and has no
ongoing clinical studies. Seller has received no notice, oral or written, of any
adverse findings of the FDA in its inspections, except for certain non-material
facility-related items.
2.11 PRODUCT PERFORMANCE. The Seller has made available to Buyer
all supportive materials and data substantiating representations made to the FDA
in its Section 510(k) pre-market notifications, including any and all testing
data in the possession or under the control of the Seller, whether or not
submitted to the FDA. The Seller further represents and warrants that to the
best of Seller's knowledge the Seller's products perform in compliance with the
representations and performance specifications as contained in said
notifications and the Seller's product literature, and that sales thereof, if
any, have been made in compliance with the rules and regulations of the FDA, and
in compliance with labeling approved by the FDA and/or submitted with the
products. The FDA authorizations and notifications described in Schedule 2.11
attached hereto represent to the best of Seller's knowledge the only FDA
authorizations and notifications necessary to permit the sale and use by Seller
in the United States of the Devices. Each 510(k) listed in Schedule 2.11 lists
the corresponding part or product covered by such 510(k).
2.12 EMPLOYEE PLANS. A complete list of all employee benefit plans
covering employees of the Purchased Business is set forth on Schedule 2.12.
2.13 DEFAULTS. There has not to Seller's knowledge occurred any
default by Seller or, assuming all required consents to assignment are obtained,
any event which will become a default, nor, to Seller's knowledge, has there
occurred any default by any third party which will become a default under any
Assumed Contract or any judgment, order or commitment related to the Purchased
Assets.
2.14 FINANCIAL STATEMENTS. Seller's financial statements for the
fiscal years ending December 31, 1993 and 1994 and its interim statements for
the period ending March 31, 1995 (and its 1994 monthly financial statements,
which portray the fact that the majority of revenues of the Purchased Business
have historically occurred in the last months of the Company's fiscal quarters)
are attached as Schedule 2.14 hereto (the "Financial Statements"). The 1993 and
1994 year-end statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
covered thereby, and the Financial Statements fairly present the financial
position of Seller as of the respective dates of the balance sheets included
therein, and the results of operations for the respective periods indicated.
2.15 ABSENCE OF UNDISCLOSED LIABILITIES. To the best knowledge and
belief of Seller after due diligence, except to the extent reflected or reserved
against in Seller's balance sheet or as otherwise noted on Schedule 2.15 hereto,
Seller as of March 31, 1995, and as of the Closing Date, had or will have no
liabilities which would prevent title to the Purchased Assets from transferring
to Buyer.
2.16 NO VIOLATION. Seller is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement.
2.17 TAXES. All tax returns required by law to be filed, and all
taxes required to be paid or withheld and paid over by Seller which relate to
the Purchased Assets, the non-filing or non-payment of which could result in a
lien on or encumbrance against the Purchased Assets, have been fully paid,
withheld and paid over, and filed, as appropriate. Seller does not have any
reason to believe that a claim for such taxes for prior years in any material
amount may be asserted by any taxing body. Specifically, but not by way of
limitation, there are no tax liens filed or outstanding for unpaid sales or
payroll withholding taxes at the office of the Minnesota Secretary of State or
any Minnesota County Recorder's office. The federal and state TIN of Seller is
41-1580270 and 394063, respectively, and Seller's Minnesota sales tax permit
number is 394063.
2.18 CONDUCT OF BUSINESS. Prior the Closing, Seller shall operate
the Purchased Business in a prudent manner and only in the ordinary course of
business consistent with past practices. Seller shall use all reasonable efforts
to preserve the Purchased Business organization intact and to preserve its
present relationship with employees, suppliers, customers and others having
business relationships with Seller.
2.19 FULL DISCLOSURE. To Seller's knowledge, no representation,
covenant or warranty of Seller in this Agreement or any Schedule or Exhibit
hereto contains or will contain any untrue statement of a material fact or omit
or will fail to state any material fact necessary to make any statement made not
misleading. Buyer acknowledges that it has had full access to relevant records
and to officers of Seller.
2.20 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer or any of its shareholders, other than consideration paid to
Piper Jaffray for financial advice to Seller, which Seller will pay.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE BUYER
3.1 CORPORATE ORGANIZATION AND POWER. Buyer is a corporation duly
organized and validly existing under the laws of the State of Minnesota, with
full corporate power and authority to enter into this Agreement and perform its
obligations hereunder.
3.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Promissory Note by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement
and the Promissory Note. This Agreement and the Promissory Note constitutes a
valid and binding obligation of Buyer, enforceable in accordance with its terms.
3.3 NO VIOLATION. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement. Buyer will comply with all applicable laws, and
with all applicable rules and regulations of all governmental authorities in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
3.4 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer or any of its shareholders, other than consideration paid to
Dain, Bosworth for financial advice to Buyer, which Buyer will pay.
3.5 LITIGATION. There are no actions, suits, proceedings or orders
pending or, to the best of Buyer's knowledge, threatened against or affecting
Buyer at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect Buyer's
performance under this Agreement or the consummation of the transactions
contemplated hereby.
3.6 INSURANCE. Following the Closing Date, Buyer will provide its
own insurance and shall, consistent with the indemnification provisions in
Sections 4.2 and 4.3 below, hold Seller harmless from any products liability or
other claim in connection with the Equipment, the Purchased Business or the
Purchased Assets, arising from Equipment sold after the Closing Date.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 SURVIVAL. All representations, warranties, agreements,
covenants and obligations herein shall survive the execution and delivery of
this Agreement and the Closing until December 31, 1996 except for matters
relating to products liability claims, which shall survive until June 1, 2000.
4.2 INDEMNIFICATION. Except to the extent indemnified by
insurance proceeds:
4.2.1 The Seller will indemnify the Buyer, and hold it
harmless against any loss, liability, damage, deficiency or expense
(including reasonable legal expenses and costs) which it may
suffer, sustain or become subject to as a result of a
misrepresentation or breach by Seller of any representation,
warranty, covenant or agreement of Seller set forth in this
Agreement, or resulting from liabilities or obligations of Seller
not assumed by Buyer, and any costs and expenses associated with
defending against such claims, liabilities, obligations, costs,
damages, losses and expenses.
4.2.2 The Buyer agrees to indemnify the Seller and hold it
harmless against any loss, liability, damage or expense, including
reasonable legal expenses and costs, which the Seller may suffer,
sustain or become subject to, as a result of (i) a
misrepresentation or breach by the Buyer of any representation,
warranty, covenant or agreement of the Buyer contained in this
Agreement, (ii) the operation of the Purchased Business or any of
the Purchased Assets by Buyer after the Closing (iii) Assumed
Liabilities and (iv) any costs and expenses associated with
defending against such claims, liabilities, obligations, costs,
damages, losses and expenses.
4.2.3 The parties will be liable to each other for any
loss or liability arising under this Section 4 only ifthe aggregate
amount of all such losses and liabilities related to such claims
exceeds $150,000, in which case the Indemnifier, as defined below,
will be liable for all such amounts in excess of $150,000. In no
event shall either party's aggregate liability under this Section 4
exceed the sum of $3,000,000, except, for products liabilities, for
which in no event shall either party's liability under this Section
4 exceed the sum of $5,000,000.
4.2.4 The parties' indemnification provided for in this
Section 4 shall be the parties' sole and exclusive remedy with
regard to the subject matter of this Agreement, except for claims
as a result of fraudulent misrepresentation by the parties and
except with respect to any claim alleging violation of Sections
4.12 or 4.13 of this Agreement.
4.3 INDEMNIFICATION PROCEDURE.
(a) A party or parties entitled to indemnification
hereunder with respect to a third party claim (the "Indemnified
Party") will give the party or parties required to provide such
indemnification (the "Indemnifier") prompt written notice of any
legal proceeding, claim or demand instituted by any third party (in
each case, a "Claim") in respect of which the Indemnified Party is
entitled to indemnification hereunder.
(b) The Indemnifier shall have the right, at its option
and expense, to defend against, negotiate, settle or otherwise deal
with any Claim with respect to which it is the Indemnifier and to
select counsel, acceptable to the Indemnified Party, to defend the
Indemnified Party against such Claim; provided, that the
Indemnified Party may participate in any proceeding with counsel of
its choice and at its expense; and provided further that the
Indemnifier may not enter into a settlement of any such Claim
without the consent of the Indemnified Party unless such settlement
requires no monetary payment for which the Indemnified Party is not
fully indemnified and does not involve any other matters binding
upon the Indemnified Party.
(c) The Indemnified Party will not settle any Claim
without the prior written consent of the Indemnifier, which shall
not be unreasonably withheld.
(d) The parties will cooperate fully with each other in
connection with the defense, negotiation or settlement of any
Claim.
4.4 EXPENSES. All fees, expenses, including attorneys' and
accountants' fees incurred by Seller in connection with the negotiation of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated by this Agreement shall be borne by the Seller.
All such fees and expenses incurred by Buyer shall be borne by Buyer.
4.5 FURTHER TRANSFERS. The Seller will, and will cause its
subsidiaries and affiliates, if any, to, execute and deliver such further
instruments of conveyance and transfer and take such additional action as the
Buyer may reasonably request to effect, consummate, confirm or evidence the
transfer to the Buyer (or its designees) of the Purchased Assets. The Seller
will execute such documents as may be necessary to assist the Buyer in
preserving or perfecting its rights in the Purchased Assets.
4.6 TRANSITION ASSISTANCE. Seller will at no cost to Buyer provide
reasonable transition assistance to Buyer's employees with respect to the
manufacture and marketing of the Devices. Buyer will, at no cost to Seller,
provide to Seller reasonable transitional assistance with respect to Seller's
remaining operations by making available those individuals hired by Buyer.
4.7 SALES TAX. Any and all sales tax liability arising
as a result of the sale and purchase of the Purchased Assets shall be the sole
responsibility of, and shall be paid by, the Buyer.
4.8 REGULATORY TRANSFERS. If necessary, the Seller shall file a
letter with the FDA or any successor agency notifying the FDA of any
registration change required of the Seller to transfer all rights and pre-market
notification clearances to the Buyer. In regard to any other applicable
licenses, registrations, approvals, clearances and authorizations required by
local, state and federal agencies, foreign or domestic, regulating the safety,
effectiveness and market clearance of the Devices which constitute a portion of
the Purchased Assets, the Seller shall file a letter with each applicable
regulatory authority notifying the authority of any registration change required
of the Seller to transfer all rights hereunder to the Buyer.
4.9 CONDUCT OF BUSINESS. Prior to the Closing, Seller will conduct
the Purchased Business only in the ordinary course of business consistent with
past practices; take no steps to damage customer, employee or vendor
relationships; maintain the Purchased Assets in good repair, order and
condition; not sell, lease, encumber, transfer or otherwise dispose of any
Purchased Assets; permit Buyer and its employees and agents reasonable access to
Seller's contracts, personnel, facilities, equipment, records and other things
reasonably related to the Purchased Business.
4.10 EMPLOYEE MATTERS. Buyer may offer employment to those
individuals listed on Schedule 4.10 and will provide such individuals who accept
such employment employee benefits consistent with those offered to other
employees of Buyer generally. Seller shall use its best efforts to encourage
such individuals to accept employment with Buyer on the Closing Date; provided
Seller makes no guarantee that such individuals will accept employment with
Buyer. Buyer shall provide Seller with the names of all Seller's employees to
whom Buyer extends offers of employment, within 48 hours of extending said
offers. Buyer shall also provide Seller with notices of acceptances and
rejections of these offers by Seller's employees, within 48 hours of receipt of
said notifications. Buyer shall not be bound by any CNS agreements or conditions
of employment, including any liability for accrued vacation pay, qualified
retirement plans, fringe benefits, salaries, severance pay or other benefits, or
by the terms and conditions of any collective bargaining agreement which gave or
established rights to any CNS employees prior to the Closing Date.
4.11 CUSTOMERS. Buyer and Seller shall each use its best efforts to
obtain any consents required under the Assumed Contracts in order to provide
Buyer with the benefits under such Assumed Contracts, but Seller makes no
guarantees that such third parties will accept the assignment of its contracts.
4.12 NON-COMPETE AGREEMENT. From the Closing Date until the end of
the period ending seven years after the end of the Relevant Period, or until
Buyer discontinues engaging in the manufacture and sale of sleep disorders
diagnostic equipment, Seller and Dan Cohen shall not (i) contact, deal with, or
in any way solicit any entity or individual that, at any time, was a customer of
the Seller or becomes a customer of the Buyer (after the Closing) to purchase
any products or services in competition with the Purchased Business anywhere in
the world, including any products or services developed by Buyer after the
Closing provided such products or services were developed from trade secrets,
know-how or other intellectual property included in the Purchased Assets; (ii)
engage in, own, manage, operate, control or participate in the ownership,
management, operations or control of, or have any financial interest in, any
entity or individual engaged in a business competitive with the Purchased
Business anywhere in the world; provided nothing herein shall prohibit Seller
from engaging in any business other than the sleep disorders diagnostic
business; or (iii) seek to persuade, directly or indirectly, any employees of
Buyer, including former employees of Seller, to discontinue that individual's
employment with the Buyer nor to become employed in any activity competitive
with the Purchased Business. A person or entity that acquires an interest in the
Seller or the entity that results from acquisition of control of or combination
with Seller shall not be prevented by this Section 4.12 from competing with the
Purchased Business in the sleep disorders diagnostic business. A violation by
Seller or Dan Cohen of the foregoing covenants may cause irreparable injury to
Buyer, and Buyer shall be entitled, in addition to any other rights and remedies
that it may have at law or in equity, to temporary or permanent injunctive
relief enjoining Seller and/or Dan Cohen from doing or continuing to do any such
act and any other violation or threatened violation of the foregoing covenants.
4.13 CONFIDENTIALITY. Seller and Dan Cohen agree from and after the
Closing Date that they shall not, at any time, without the prior written consent
of Buyer, disclose or use any "Confidential Information" obtained in the course
of Seller's ownership of the Purchased Business prior to the Closing Date or in
the course of Seller's review of sale records or access to Buyer's Confidential
Information after the Closing Date, except as required in Seller's continuing
business or businesses. "Confidential Information" shall include, without
limitation, information relating to customers, products, machines, processes,
methods, know-how, trade secrets, inventions, developments, equipment or
supplies, made, sold, licensed, used, developed or practiced by Seller, its
customers or suppliers prior to the Closing Date or by Buyer, its customers or
suppliers after the Closing Date; provided, however, that Confidential
Information shall not include information which Seller is under a duty by its
customers not to use or to disclose to any third party or that relates to
publicly disclosed facts. Buyer shall have the same remedies in the event of a
violation or threatened violation of the foregoing covenants as are enumerated
in Section 4.12.
4.14 PRODUCTS, SUPPLIES AND DOCUMENTS. Buyer shall have the right
to use existing products, supplies and documents (including, but not limited to,
inventory, labels, shipping materials, catalogues and similar materials, and
advertising material) being transferred to it pursuant to this Agreement until
such products and supplies are depleted, but shall not have the right to use
Seller's name in connection therewith.
4.15 PRESS RELEASE AND ANNOUNCEMENTS. No general press releases
related to this Agreement and the transactions contemplated herein, or other
announcements to Seller's employees, customers and suppliers will be issued
without the joint approval of Buyer and Seller. Buyer and Seller will cooperate
to prepare a joint press release to be issued on the Closing Date or, upon the
request of Seller or Buyer, at the time of the signing of this Agreement.
4.16 BRAIN WAVE MONITORING AND ANALYSIS. Seller owns technology
which is not part of the Purchased Assets related to brain wave monitors.
However, there is software that is part of the Proprietary Rights transferred
hereunder as part of the Purchased Assets which is used and involves
intellectual property used in the brain wave monitoring technology. Such
software may be used by Seller in its brain wave monitoring business and brain
wave analysis, and Buyer hereby grants Seller a perpetual license to use any
such Proprietary Rights for this purpose. The perpetual license granted to CNS
under this Paragraph 4.16 shall not permit CNS to use the software or the
Proprietary Rights to engage in the sleep monitoring or diagnosis of sleep
disorder business and use of the software or the Proprietary Rights for such
purposes is expressly excluded from the perpetual license.
ARTICLE V
MISCELLANEOUS
5.1 AMENDMENT AND WAIVER. This Agreement may be amended, and any
provision of this Agreement may be waived, provided that any such amendment or
waiver will be binding on the Seller only if such amendment or waiver is set
forth in a writing executed by the Seller and that any such amendment or waiver
will be binding upon the Buyer only if such amendment or waiver is set forth in
a writing executed by the Buyer. Waiver by the Seller or the Buyer of any breach
of or failure to comply with any provision of this Agreement by the other party
shall not be construed as, or constitute a continuing waiver of, or a waiver of
any other breach of, or failure to comply with, any other provision of this
Agreement.
5.2 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
mailed by first class mail, return receipt requested. Notices, demands and
communications to the Seller and the Buyer will, unless another address is
specified in writing, be sent to the addresses indicated below:
Notices to the Seller:
CNS, Inc.
1250 Park Road
Chanhassen, MN 55317
Attention: Chief Executive Officer
Chief Operating Officer
with a copy to:
Lindquist & Vennum
4200 IDS Center
Minneapolis, MN 55402
Attn: Patrick Delaney
Notices to the Buyer:
Aequitron Medical, Inc.
14800 28th Avenue North
Plymouth, MN 55447
Attn: Chief Executive Officer
Chief Financial Officer
with a copy to:
Best & Flanagan,
Professional Limited Liability Partnership
4000 First Bank Place
Minneapolis, MN 55402
Attn: David Morse
5.3 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and no other person shall acquire
or have any right under or by virtue of this Agreement. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other parties, which
shall not be unreasonably withheld.
5.4 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
5.5 CAPTIONS. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
will not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement will be enforced and
construed as if no caption had been used in this Agreement.
5.6 COMPLETE AGREEMENT. This document and the documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
There are no restrictions, promises, warranties, covenants, or undertakings,
other than those expressly provided for herein.
5.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts all of which taken together will constitute one and the same
instrument.
5.8 GOVERNING LAW. The law of the State of Minnesota will govern
all questions concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this Agreement.
5.9 ARBITRATION.
(a) Except with respect to matters involving Sections
4.12, 4.13 and 4.15 hereof, if a dispute arises between Buyer and
Seller as to the interpretation of this Agreement or any other
agreement entered into pursuant hereto, including, without
limitations, any matter involving indemnification, Buyer and Seller
agree to use the following procedures, in lieu of either party
pursuing other available remedies and as the sole remedy, to
resolve the dispute.
(b) A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of
the dispute. A meeting shall be held between the parties within 10
days of the receipt of such notice, attended by individuals with
decision-making authority regarding the dispute, to attempt in good
faith to negotiate a resolution of the dispute.
(c) If, within 30 days after such meeting, the parties
have not succeeded in negotiating a resolution of the dispute, the
parties agree to submit the matter to binding arbitration in
Minneapolis, Minnesota, by one arbitrator appointed by Buyer and
Seller. If Buyer and Seller fail to appoint an arbitrator within 10
days from the conclusions of the negotiation period, then upon
petition of either party, such arbitrator shall be appointed by the
Chief Judge of the United States District Court for the District of
Minnesota or by the American Arbitration Association so as to
enable the arbitrator to render an award within 90 days after the
arbitrator has been appointed. Following the selection of the
arbitrator as set forth above, the arbitration shall be conducted
promptly and expeditiously and in accordance with the rules of the
American Arbitration Association. Such award shall be final and
binding and judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction therefor.
(d) Each party shall bear one-half of the expenses of the
arbitrator excluding, however, legal, expert, accountant and other
professional fees of the other side.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
AEQUITRON, INC.
By /s/ James Hickey
Its President and CEO
CNS, INC.
By /s/ Richard E. Jahnke
Its President and CEO
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Promissory Note
Schedule 1.1(a) Inventory
Schedule 1.1(b) Machinery and Equipment
Schedule 1.1(c) Proprietary Rights
Schedule 1.1(d) Assumed Contracts
Schedule 1.2 Excluded Receivables
Schedule 2.7 Litigation
Schedule 2.8 Other Contracts
Schedule 2.9 Insurance
Schedule 2.11 510(k)s
Schedule 2.12 Employee Plans
Schedule 2.14 Financial Statements
Schedule 4.10 Employee Matters