ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

BY AND BETWEEN

KENSEY NASH CORPORATION,

A DELAWARE CORPORATION,

SOLELY FOR PURPOSES OF SECTION 7.17 HEREOF,

AND

THM ACQUISITION SUB, INC.,

A DELAWARE CORPORATION,

AND

THM BIOMEDICAL, INC., A MINNESOTA CORPORATION,

AND

THE STOCKHOLDERS OF THM BIOMEDICAL, INC.,

SOLELY FOR PURPOSES OF SECTIONS 6.4 AND 7.16 HEREOF

SEPTEMBER 1, 2000

 

TABLE OF CONTENTS

 

 

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GLOSSARY OF TERMS

 

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “AGREEMENT”) is made on this 1st day of September, 2000, by and among THM Biomedical, Inc., a Minnesota corporation (the “COMPANY”), and Kensey Nash Corporation, a Delaware corporation, solely for purposes of SECTION 7.17 hereof (“KNSY”), and THM Acquisition Sub, Inc. (“BUYER”), a Delaware corporation and wholly-owned subsidiary KNSY, and the stockholders of the Company whose names are set forth on the signature pages hereto (the “STOCKHOLDERS”), solely for purposes of SECTIONS 6.4 and 7.16 hereof.

WHEREAS, the Company is engaged in the business of developing and commercializing technology and products based on synthetic polymer porous materials (the “BUSINESS”);

WHEREAS, the Company desires to sell to Buyer, and Buyer desires to purchase from the Company, all of the assets used in the Business and assume substantially all of the liabilities of the Business, upon the terms and conditions set forth below; and

WHEREAS, certain capitalized terms have the meanings respectively indicated in SECTION 7.10 herein.

NOW THEREFORE, in consideration of the mutual covenants of the parties set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

1.1 ASSETS.

(a) On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Company shall sell, transfer and deliver to Buyer, free and clear of all liens, hypothecations, mortgages, charges, security interests, pledges or other encumbrances or adverse claims or interests of any nature (“LIENS”) other than Permitted Liens and those liabilities being assumed by Buyer pursuant to this Agreement, and Buyer shall purchase from the Company, the Business and all the Company’s right, title and interest in and to all of its assets (other than the Excluded Assets), wherever located and whether or not all or any of said assets appear on or are reflected upon the Company’s books, records or financial statements (collectively, the “ASSETS”), including, but not limited to, the following (to the extent such categories of assets or properties are owned by the Company):

 

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(i) Movable/Tangible Personal Property. All molds, fixtures, tooling, equipment and machinery, tools, vehicles (whether or not registered under motor vehicle registration laws), furniture, computer hardware and software, office furniture and equipment and other similar personal or movable property of the Company;

(ii) Inventories and Supplies. All inventory of the Company used in connection with the Business, including, without limitation, raw materials, work-in-process, finished goods, merchandise for resale, spare parts, packaging and shipping materials and office, operating and other supplies, whether or not located at the Company’s principal place of business;

(iii) Receivables. All notes and accounts receivable of the Company and all notes, bonds and other evidences of indebtedness of any entity or person held by any of the Company, including, without limitation, all trade, employee, officer and other accounts and monies receivable;

(iv) Contracts. All rights and benefits that the Company may have in connection with the Business under the Material Contracts (as defined in SECTION 3.13) and any and all other agreements, contracts, purchase orders, forward commitments for works-in- progress, licenses and leases, whether written or oral, pertaining to the Business, to the extent assignable;

(v) Intellectual Property. All intellectual property, confidential information, and proprietary information in the world owned or used by the Company in connection with the Business including, without limitation, (a) the Company’s registered corporate names and assumed names wherever used, including, without limitation, the name “THM Biomedical”; (b) all patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (c) all trademarks, service marks, trade dress, trade names and corporate names presently or previously used by the Company in connection with the Business, whether or not registered by the Company; (d) all registered and unregistered statutory and common law copyrights; (e) all registrations, applications, extensions and renewals for any of the foregoing; (f) all trade secrets, confidential information, ideas, formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, improvements, proposals, technical and computer data, databases, internet domain names, documentation and software, financial, business and marketing plans, and customer and supplier lists and related information; (g) all agreements, commitments, contracts, understandings, licenses, assignments or indemnities relating or pertaining to an asset, property or right of the character described in the preceding clauses to which the Company is a party; (h) all licenses or agreements pertaining to mailing lists, know-how, trade secrets, inventions, disclosures or uses of ideas used in or relating to the Business to which the Company is a

 

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party; (i) all correspondence and memoranda between the Company and its intellectual property counsel relating to Proprietary Rights; and (j) all other intellectual property, confidential information and proprietary rights (collectively, “PROPRIETARY RIGHTS”);

(vi) Records. Subject to the Company’s right to review such items in accordance with SECTION 6.1 hereof, all records, files, and papers of the Company (other than those records described in SECTION 1.1(B)), including, but not limited to, sales and purchase correspondence, past and current insurance policies, customer and supplier lists, books of account and employment records;

(vii) Licenses, Permits and Approvals. All rights of the Company in and to permits, licenses, approvals and authorizations by or of governmental authorities or third parties issued or granted or otherwise received in connection with the Business, including, without limitation, FDA approvals, if any (“PERMITS”), to the extent assignable;

(viii) Claims. All causes of actions, claims, warranties, guarantees, refunds (other than federal tax refunds) covenants, indemnities and the like, rights of recovery and set-off of every kind and character of the Company related to the Business, including, without limitation, rights and claims against suppliers of inventory and other Assets transferred hereunder;

(ix) Customer Property. The right to custody of all assets owned by a customer of the Business or other person and held by the Company on behalf of such customer or other person, subject to the rights of such third party with respect to such assets;

(x) Prepaids. All advances, deposits, credits, transferable insurance policies, prepaid royalties and other prepaid assets and expenses of the Company in connection with the Business;

(xi) Goodwill. All goodwill associated with the Business, along with the right of Buyer to hold itself out as the successor of the Company in the conduct of the Business;

(xiii) Securities. All securities that the Company may have an interest in, including, without limitation, the capital stock of any subsidiary of the Company;

(xiv) Cash. All cash and cash equivalents of the Company, including, but not limited to, lockbox receipts; and

(xvi) Other Assets. All other properties and assets owned or held by the Company and used in connection with the Business, whether or not of a type falling within any of the categories of assets or properties described above, unless specifically forming part of the Excluded Assets.

 

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(b) Notwithstanding the foregoing, the following assets of the Company shall be retained by the Company and are expressly excluded from the purchase and sale contemplated by this Agreement (collectively, the “EXCLUDED ASSETS”):

(i) Records. The Company’s formal records, including its governing documents, minute books, stock books and other records having exclusively to do with the corporate organization of the Company and all of the Company’s Tax Returns and financial records;

(ii) This Agreement. The Company’s rights, and the rights of the Stockholders, pursuant to this Agreement and the Transaction Documents;

(iii) Nonassignable Permits. Any Permits which may not be transferred without the consent, novation, waiver or approval of a third person or entity and for which such consent, novation, waiver or approval has not been obtained; and

(iv) Employee Benefit Plans. All monies, rights and other assets (including any insurance policy, annuity contract or trust) maintained under, pursuant to or in direct connection with any Employee Benefit Plan.

1.2 ASSUMPTION OF LIABILITIES.

(a) On the terms and subject to the conditions set forth in this Agreement, at the Closing the Buyer shall assume and agree to perform, pay and discharge all of the liabilities of the Company as of the Closing Date including liabilities and claims of which the Company does not have knowledge prior to the Closing Date but which are asserted as liabilities of the Company after the Closing Date (the “ASSUMED LIABILITIES”), subject to Buyer’s right to seek indemnification in accordance with SECTION 6.4 for alleged breaches of the Company’s representations and warranties set forth in ARTICLE III pertaining to such liabilities.

(b) Notwithstanding SECTION 1.2(A) hereof, and notwithstanding any disclosures made to Buyer or its agents in the conduct of their due diligence investigations of the Company and its business and further notwithstanding any matters disclosed on any Schedules hereto, Buyer shall not assume any of the liabilities of the Company, and the Company shall remain unconditionally liable for those liabilities of the Company set forth on Schedule 1.2(b) of this Agreement (the “EXCLUDED LIABILITIES”).

1.3 CONVEYANCE. At the Closing, the Company and Buyer shall execute and deliver a Bill of Sale, Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit 1.3 (the “BILL OF SALE”), pursuant to which the Company shall convey to the Buyer the Assets and the Buyer shall assume the Assumed Liabilities.

 

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ARTICLE II

CONSIDERATION AND MANNER OF PAYMENT

2.1 PURCHASE PRICE. The aggregate purchase price (the “PURCHASE PRICE”) to be paid by Buyer for the Assets, and the rights and benefits conferred hereunder, is payable as follows:

(a) The Company hereby assigns its right to receive the Purchase Price to the Stockholders pro-rata based upon their percentage ownership of common stock of the Company (as set forth on Schedule 3.3). Buyer shall pay to the Stockholders at Closing, by wire transfer of immediately available funds to the bank accounts of the Stockholders as designated on Schedule 2.1 attached hereto, an aggregate of $6,600,000 (the “INITIAL CASH PAYMENT”).

(b) Buyer shall pay to the Stockholders an aggregate of $4,500,000, payable in equal quarterly installments of $281,250 on the last business day of each of the first sixteen (16) calendar quarters following the Closing Date, with the first payment being made on December 31, 2000, by wire transfer of immediately available funds to the Payees’ designated bank accounts (the “QUARTERLY PAYMENTS”). At Closing, Buyer shall evidence its obligation to pay the Quarterly Payments by issuing to each of the Payees a promissory note, substantially in the form attached hereto as Exhibit 2.1(b) (the “NOTES”), in the amount set forth on Schedule 2.1 for each such Payee, payable in sixteen (16) equal quarterly installments. The Notes may be prepaid by Buyer, in whole or part, without penalty. In the event of a Change of Control (as defined in SECTION 7.10) of Buyer prior to September 30, 2004, the outstanding principal balance under the Notes shall immediately accelerate, and such outstanding amounts shall be payable concurrently with the closing of such Change of Control transaction.

2.2 OTHER AGREEMENTS. At the Closing, KNSY shall enter into the following agreements:

(a) Non-competition agreements, to be executed by each of Thomas Maas and William Maas, substantially in the forms of Exhibit 2.2(a)(i) and Exhibit 2.2(a)(ii) attached hereto (the “NON-COMPETITION AGREEMENTS”); and

(b) Employment agreement, to be executed by John Brekke, having a three (3) year term, substantially in the form of Exhibit 2.2(b) attached hereto (the “EMPLOYMENT AGREEMENT”).

2.3 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated for tax purposes amongst the Assets and the other consideration provided by the Company as set forth on Schedule 2.3. The parties shall file their respective tax returns in accordance with such allocation and shall not take any position or action inconsistent with such allocation.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As a material inducement to Buyer to enter into this Agreement, the Company makes to Buyer the representations and warranties set forth in this ARTICLE III, which representations and warranties are made and shall be true and correct as of the date hereof. On the date of this Agreement, the Company has delivered schedules to certain of the following representations and warranties listing any exceptions to the representations and warranties in this ARTICLE III in order to make the representations and warranties in this ARTICLE III accurate and complete. The schedules pertaining to this ARTICLE III describe any such required exceptions in reasonable detail and are arranged according to the sections contained in this ARTICLE III, provided that any exceptions described in response to any section of this Agreement shall be deemed to be exceptions to all relevant sections of this Agreement, to the extent a reasonable person could infer that such exception should be deemed to be an exception to the relevant section of this Agreement.

3.1 AUTHORITY. The Company has full power, right and authority to enter into and perform its obligations under this Agreement and each of the Company Transaction Documents. The execution, delivery and performance of this Agreement and each of the Company Transaction Documents and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite action, and no other proceedings are necessary to authorize the execution, delivery and performance of this Agreement and each of the Company Transaction Documents. This Agreement and each of the Company Transaction Documents have been duly executed and delivered by the Company and constitute the valid and binding obligations of the Company and are enforceable against the Company in accordance with their respective terms. Complete and correct copies of the Company’s charter documents and bylaws, and all amendments thereof to date, have previously been delivered to Buyer.

3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is duly organized, validly existing, and in good standing under the laws of the State of Minnesota. The Company has full power and authority to carry on its business as it is now being conducted and to own or hold under lease the properties and assets it now owns or holds under lease. The Company is not required to be qualified to do business as a foreign corporation in any other jurisdiction.

3.3 CAPITAL STOCK; TITLE TO SHARES. Schedule 3.3 sets forth the entire authorized capital stock and the total number of issued and outstanding shares of capital stock of the Company. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and non-assessable and owned, beneficially and of record, in the amounts listed on Schedule 3.3 and no shares of capital stock of the Company are subject to, nor have been issued in violation of preemptive or similar rights. Except as set forth on Schedule 3.3, the Company has no outstanding stock or other securities convertible into or exchangeable for shares of its capital stock or containing profit participation features, and the Company has no outstanding options, warrants

 

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or rights to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for capital stock. The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. All issuances, sales and repurchases by the Company of its capital stock have been effected in compliance with all applicable laws, including, without limitation, applicable federal and state securities laws.

3.4 SUBSIDIARY. The Company has no subsidiaries and the Company does not own, directly or indirectly, any stock, partnership interest, joint venture interest or other equity interest in any other corporation, trust, partnership, joint venture or other entity.

3.5 TRANSACTION NOT A BREACH. Neither the execution and delivery of this Agreement or any Company Transaction Document by the Company nor the performance by the Company of the transactions contemplated hereby or thereby will:

(a) violate or conflict with or result in a breach of any provision of any law, statute, rule, regulation, requirement, order, permit, judgment, injunction, decree or other decision (collectively, “RULES”) of any court or other tribunal or any governmental entity or agency binding on the Company or its properties, or conflict with or result in the breach of any of the terms, conditions or provisions thereof;

(b) constitute a default under the governing documents of the Company or of any Material Contract (as defined below) or any agreements in connection with the Leased Real Property;

(c) constitute an event which would permit any party to terminate, modify, or accelerate the maturity of any indebtedness or other obligation under, any Material Contract; or

(d) result in the creation or imposition of any Lien upon the Assets.

3.6 NO CONSENT REQUIRED. Except as set forth on Schedule 3.6, no consent, approval, order or authorization of, or declaration, filing or registration with, any person, entity or governmental authority is required to be made or obtained by the Company in connection with the authorization, execution, delivery, performance or lawful completion of this Agreement, the other Company Transaction Documents or the transaction contemplated hereby.

 

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3.7 FINANCIAL STATEMENTS. Schedule 3.7 contains the following consolidated financial statements of the Company (the “FINANCIAL STATEMENTS”):

(a) the audited balance sheets as of December 31, 1999 and December 31, 1998, and the related audited statements of income and cash flows for the twelve (12) month periods then ended;

(b) the unaudited balance sheet as of June 30, 2000, and the related unaudited statement of income and cash flows for the six (6) month period then ended; and

(c) the unaudited statement of income and cash flows for the twelve (12) month period ended June 30, 2000.

Schedule 3.7 includes an unaudited balance sheet as of August 31, 2000 (the “CLOSING DATE BALANCE SHEET”). Except as set forth on Schedule 3.7, each of the Financial Statements and the Closing Date Balance Sheet is complete and correct in all material respects, is consistent with the books and records of the Company and fairly and accurately presents the Company’s financial condition, assets and liabilities as of the respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP consistently applied throughout the periods covered thereby, except that the Financial Statements and the Closing Date Balance Sheet lack the footnote disclosure otherwise required by GAAP which, if provided, would not reflect a Material Adverse Effect on the Company.

3.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no debts, liabilities or obligations of any nature affecting the Business or the Assets (whether accrued, absolute, contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise and whether due or to become due) arising out of transactions entered into on or prior to the date hereof, or any transaction, series of transactions, action or inaction occurring on or prior to the date hereof, or any state of facts or condition existing on or prior to the date hereof (regardless of when such liability or obligation is asserted), including, but not limited to, liabilities or obligations on account of Taxes or governmental charges or penalties, interest or fines thereon or in respect thereof, except (a) as and to the extent clearly and accurately reflected and accrued for or reserved against in the Closing Date Balance Sheet of the Company, (b) for liabilities specifically delineated on Schedule 3.8, and (c)for liabilities and obligations which have arisen in connection with the Business after August 31, 2000 (the “CLOSING DATE BALANCE SHEET DATE”) in the ordinary course of business consistent with past custom and practice.

3.9 ASSETS.

(a) Title. The Company has the exclusive right to possess and convey, and upon the consummation of the transactions contemplated by this Agreement, the Company will have conveyed and Buyer will be vested with, good and marketable title and interest in and to the Assets, free and clear of all Liens (other than Permitted Liens). The Company owns all assets reflected as being owned by it on the Closing Date Balance Sheet or purchased by it after the Closing Date Balance Sheet Date except for those assets which were disposed of by the Company.

 

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after the Closing Date Balance Sheet Date in the ordinary course of business consistent with past custom and practice. The Assets constitute all of the assets and properties used in connection with the conduct of the Business and are sufficient to operate the Business as presently operated.

(b) Inventories. The inventories of the Company consist of items of a quality and quantity useable or saleable in the ordinary course of business, except for items of obsolete material or materials below standard quality, all of which have been determined and written down to net realizable value in the Financial Statements.

(c) Accounts Receivable. The Company’s accounts receivable have arisen in bona fide arm’s-length transactions in the ordinary course of business. Except to the extent of any reserves for bad debts set forth in the Financial Statements, all such receivables are valid and binding obligations of the account debtors without any counterclaims, set-offs or other defenses thereto and are collectible in the ordinary course of business.

(d) Condition and Location. Except as set forth on Schedule 3.9, all of the tangible assets of the Company which are part of the Assets have been properly maintained in accordance with industry standards, are in good operating condition and repair and are useable in the ordinary course of business. Except as set forth on Schedule 3.9, none of the tangible assets of the Company requires any material repair or replacement, except for maintenance in the ordinary course of business. Except as set forth on Schedule 3.9, none of the personal or movable property owned or leased by the Company is located other than at the Leased Real Property.

3.10 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of any material Rules applicable to it, its assets, any Employee Benefit Plans or the operation of the Business and the Company has received no written notice of any violation or alleged or potential violation; provided, that to the extent the representations contained in other sections of this Agreement address compliance with specific Rules (including without limitation, representations contained in SECTIONS 3.11, 3.16 and 3.26), any representations contained in this SECTION 3.10 are qualified to the extent set forth in such other sections of this Agreement. The Company holds and at all times has held all of the material Permits necessary, desirable or useful for the current use, occupancy or operation of the Business or ownership of the Assets, all of which are set forth on Schedule 3.10. The Company is and at all times has been in full compliance with each of such Permits, all of which are in full force and effect.

3.11 REAL PROPERTY.

(a) The Company does not own any real property. Schedule 3.11(a) contains a complete and correct list of all the real property that is leased by the Company or that the Company has agreed (or has an option) to lease, or may be obligated to lease in connection with the conduct of the Business, as well as a correct and complete description of each lease pursuant to which such real property is leased. Such real property is hereinafter referred to as “LEASED REAL PROPERTY,” and the improvements and fixtures thereon are hereinafter referred to as the “LEASED IMPROVEMENTS.”

 

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(b) Except as set forth on Schedule 3.11(a), the Company is the sole legal and equitable owner of the leasehold interests in the Leased Real Property and the Leased Improvements, free and clear of all Liens (other than Permitted Liens) that could impair the ability of the Company to realize the benefits of the rights provided to it under its lease of the Leased Real Property and the Leased Improvements. The lease applicable to the Leased Real Property is valid and in full force and effect and no event has occurred which with the giving of notice or the passage of time or both could constitute a default under such lease.

(c) There are no adverse or other parties in possession of the Leased Real Property, the Leased Improvements, or any portion or portions thereof, and the leasehold interests in the Leased Real Property and the Leased Improvements are free and clear of any and all lessees, licensees, occupants or tenants except as set forth on Schedule 3.11(a). To the knowledge of the Company, there are no pending or threatened condemnation, eminent domain or similar proceedings, or litigation or other proceedings affecting the Leased Real Property, the Leased Improvements or any portion or portions thereof. To the knowledge of the Company, there are no pending or threatened requests, applications or proceedings to alter or restrict any zoning or other use restrictions applicable to the Leased Real Property or the Leased Improvements that would interfere with the conduct of the Business, which interference would have a Material Adverse Effect. Except as set forth on Schedule 3.11(a), all water, sewer, gas, electric, telephone, drainage and other utility equipment, facilities and services required by law or necessary for the operation of the Leased Improvements are installed and connected, and no notice has been received by the Company regarding the termination or material impairment of any such service. All equipment and fixtures associated with the Leased Improvements have been properly maintained in accordance with industry standards and are in good operating condition and repair. To the knowledge of the Company, all necessary easements exist and are in full force and effect. The Leased Real Property has access, in accordance with past practice, to and from a public right of way or road dedicated for public use and no notice has been received by the Company relating to the termination or impairment of such access (including applicable parking requirements).

3.12 PERSONAL PROPERTY LEASES. The Company is not a party to any lease of personal or movable property.

3.13 CONTRACTS. Schedule 3.13 is a correct and complete list of every Material Contract, correct and complete copies of which previously have been furnished to Buyer (except for oral contracts, written descriptions in detail of which have been previously furnished to Buyer). Each Material Contract is enforceable against the Company and against any third parties in accordance with its terms. The Company is not in default, and no event has occurred which with the giving of notice or the passage of time or both would constitute a default by the Company, under any Material Contract. The Company has performed all obligations required to

 

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be performed by it under the Material Contracts and, to the knowledge of the Company, no other party to the Material Contracts is in default, and no event has occurred which with the giving of notice or the passage of time or both could constitute a default by any other party to any such Material Contract under any of such Material Contracts. The Company is not a party to any Material Contract containing late penalties or loss provisions. For purposes of this Agreement, the term “MATERIAL CONTRACTS” shall mean all contracts, agreements, instruments, purchase orders, relationships or commitments, written or oral, arising out of or related to the Business, to which the Company is a party or by which the Company or any of the Assets are bound, including, without limitation, those which (i) have or are reasonably expected to require aggregate payments to or by the Company in excess of $25,000, (ii) have a term or effective period longer than one (1) year in duration, (iii) incur or guaranty any obligation for borrowed money or otherwise (other than endorsements made for collection in the ordinary course of business), (iv) are license or royalty agreements, (v) are non- disclosure or confidentiality agreements, (vi) are agreements relating to the ownership of or investments in any business or enterprise, including investments in joint ventures and minority equity investments, (vii) are powers of attorney or other similar agreements or grant of agency or (viii) are contracts or agreements prohibiting the Company from freely engaging in any business or competing anywhere in the world.

3.14 PERSONAL PROPERTY. Schedule 3.14 is a true and complete list of all trucks, automobiles, machinery, equipment, furniture, supplies, tools, dies, fixtures, patterns, drawings, test equipment and all other tangible or intangible personal property, rights and assets owned or leased by, in the possession of, or used by the Company in connection with the Business (other than Excluded Assets) with a current fair market value in excess of $25,000 individually and, with respect to similar or related properties or assets, $25,000 in the aggregate, which list indicates the location of such items, and any Liens imposed thereon.

3.15 INTELLECTUAL PROPERTY.

(a) Schedule 3.15 sets forth a list and a description of all Proprietary Rights of the Company other than trade secrets and, in each instance, immaterial Proprietary Rights arising in the ordinary course of business. Except as set forth on Schedule 3.15, all of the Proprietary Rights are valid, in good standing and in full force and effect, and all applications for registrations or patents are pending and in good standing, and to the knowledge of the Company are all without challenge of any kind. The Company is not aware of any facts or circumstances adversely impacting the patentability, validity, registerability or enforceability of any of the Proprietary Rights. Except as set forth on Schedule 3.15, the Company owns the entire right, title and interest in and to the Proprietary Rights without qualification, limitation, burden or encumbrance of any kind.

(b) Complete and accurate copies of all Proprietary Rights other than trade secrets and, in each instance, immaterial Proprietary Rights arising in the ordinary course of

 

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business, including, but not limited to, patents, patent rights, trademarks, trade names, service marks and copyrights and registrations, applications or deposits therefor, registered assumed name filings and licenses set forth on Schedule 3.15 have been delivered to Buyer by the Company.

(c) Except as set forth on Schedule 3.15, the Company owns all of the Proprietary Rights or has under valid agreement, the royalty-free, perpetual right to make, use and sell, and to sublicense others to make, use and sell any items, products or processes covered by any of the Proprietary Rights without restriction. Except as set forth on Schedule 3.15: (i) the Company’s operation of the Business prior to the Closing (other than possibly in research and development activities) does not give rise to and has not given rise to any infringement of the intellectual property rights of any third party; (ii) no claim or, to the Company’s knowledge, threat of any infringement has been made or implied in respect of the representations set forth in subparagraph (i) above; (iii) no proceedings are pending or, to the Company’s knowledge, threatened against the Company which challenges the validity or ownership of any patent, patent right, trademark, trade name, service mark or copyright or the ownership of any of the Proprietary Rights; and (iv) there is no infringing commercial use of any Proprietary Rights by any third parties. Copies of all legal opinions, if any, (i) questioning the validity of any of the Company’s Proprietary Rights or commenting adversely upon the patentability, validity, registerability, or enforceability of any to the Proprietary Rights or (ii) commenting upon the infringement or possible infringement of any intellectual property rights of any third parties by the Company have been delivered to Buyer, along with written summaries of any oral opinions received by the Company relating to the Proprietary Rights. After the Closing, the Company shall make available to Buyer all other correspondence and memoranda between the Company and its intellectual property counsel relating to Proprietary Rights and any potential infringement of intellectual property rights of third parties after the Closing and shall not remove such materials from their current location at the Company’s offices. The Company has not licensed, attempted to license, collected royalties on or attempted to collect royalties on any patent beyond such patent’s expiration date.

3.16 EMPLOYEE BENEFIT PLANS.

(a) Except as set forth in Schedule 3.16, the Company has not maintained, sponsored, adopted, made contributions to or obligated itself to make contributions to or to pay any benefits or grant rights under or with respect to any “Employee Pension Benefit Plan” (as defined in Section 3(2) of ERISA), “Employee Welfare Benefit Plan” (as defined in Section 3(1) of ERISA), “Multi-Employer Plan” (as defined in Section 3(37) of ERISA), pension plan, plan of deferred compensation, medical plan, life insurance plan, long-term disability plan, dental plan or other plan providing for the welfare of any of the employees or former employees or beneficiaries thereof of the Company, personnel policy (including, but not limited to, vacation time, holiday pay, bonus programs, moving expense reimbursement programs and sick leave), excess benefit plan, bonus or incentive plan (including, but not limited to, stock options, restricted stock, stock bonus and deferred bonus plans), salary reduction agreement, change-of-control

 

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agreement, employment agreement, consulting agreement or any other benefit, program or contract (collectively, “EMPLOYEE BENEFIT PLANS”), whether or not written or pursuant to a collective bargaining agreement, which could give rise to or result in the Company having any material debt, liability, claim or obligation of any kind or nature, whether accrued, absolute, contingent, direct, indirect, known or unknown, perfected or inchoate or otherwise and whether or not due or to become due unless properly recorded on the Financial Statements or unless such obligation or liability arose after the Closing Date Balance Sheet Date in the ordinary course of business.

(b) There has been no waiver (or application for a waiver) of the minimum funding standards imposed by Section 412 of the Code with respect to any Employee Benefit Plan other than any multi-employer plans, and there are no facts or circumstances that would materially change the funded status of any such Employee Benefit Plan other than any multi-employer plans. No asset of the Company is subject to any lien under ERISA or the Code. The Company (i) has not incurred any liability on account of a “partial withdrawal” or a “complete withdrawal” (within the meaning of Sections 4205 and 4203, respectively, of ERISA) from any Employee Benefit Plan subject to Title IV of ERISA which is a “multi-employer plan” (as such term is defined in Section 3(37) of ERISA), and no such liability has been asserted; and (ii) is not bound by any contract or agreement or has any obligation or liability described in Section 4204 of ERISA.

(c) Each Employee Benefit Plan other than any multi-employer plan that is intended to be qualified under Section 401(a) of the Code has received a determination from the Internal Revenue Service that such Employee Benefit Plan is so qualified, and nothing has occurred since the date of such determination that could adversely affect the qualified status of such Employee Benefit Plan. No Employee Benefit Plan is a multi-employer plan or is subject to Title IV of ERISA.

(d) Each of the Employee Benefit Plans other than any multi-employer plan and all related trusts, insurance contracts and funds have been maintained, funded and administered in material compliance with their terms and the terms of any applicable collective bargaining agreement, and in compliance with the applicable provisions of ERISA, the Code, and any other applicable laws. With respect to each Employee Benefit Plan, all required payments, premiums, contributions, distributions, or reimbursements for all periods ending prior to or as of the date hereof have been made or properly accrued.

(e) Neither the Company nor any other “disqualified person” (within the meaning of Section 4975 of the Code) or any “party in interest” (within the meaning of Section 3(14) of ERISA) has engaged in any “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any of the Employee Benefit Plans other than any multi-employer plans which could subject any such Employee Benefit Plans, the Company or any officer, director or employee of the Company to a penalty or tax under Section 502(i) of ERISA or Section 4975 of the Code.

 

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(f) To the knowledge of the Company, other than any multi-employer plan, each Employee Benefit Plan which is subject to the health care continuation requirements of Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code (“COBRA”) has been administered in material compliance with such requirements. No Employee Benefit Plan provides medical or life or other welfare benefits to any current or future retired or terminated employee (or any dependent thereof) of the Company other than as required pursuant to COBRA or applicable state law.

(g) With respect to each Employee Benefit Plan other than any multi-employer plans, the Company has provided Buyer with true, complete and correct copies of (to the extent applicable): (i) all documents pursuant to which the Employee Benefit Plan is maintained, funded and administered (including the plan and trust documents, any amendments thereto, the summary plan descriptions, and any insurance contracts or service provider agreements); (ii) the three most recent annual reports (IRS Form 5500 series) filed with the Internal Revenue Service (with applicable attachments); and (iii) the most recent determination letter, if any, received from the Internal Revenue Service.

(h) The Company does not have any liability (or potential liability, including potential liability under, because of another entity’s participation in a defined benefit plan or multi- employer plan) with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) solely by reason of being treated as a single employer under Section 414 of the Code with any trade, business or entity other than the Company.

3.17 EMPLOYEES. Schedule 3.17 is a complete and correct list setting forth (i) the names and current compensation rate and compensation of all individuals presently employed by the Company on a salaried basis whose current annual compensation is in excess of $25,000 and (ii) the names and total annual compensation for all independent contractors who render services on a regular or seasonal basis to the Company whose current annual compensation is in excess of $25,000. Except as set forth on Schedule 3.17, no person listed thereon has received any bonus or increase in compensation since and there has been no “general increase” in the compensation or rate of compensation payable to any such employees since the Closing Date Balance Sheet Date nor since such date has there been any promise to the employees listed on Schedule 3.17, orally or in writing, of any bonus or increase in compensation, whether or not legally binding.

3.18 LABOR AND EMPLOYMENT MATTERS. Except as set forth on Schedule 3.18: (i) the Company is not party to or bound by any collective bargaining agreement; (ii) to the knowledge of the Company, no executive or manager of the Company is a party to any confidentiality, non- competition, proprietary rights or other such agreement between such employee and any other person other than the Company that would be material to the performance of such employee’s employment duties, or the ability of the Company to conduct its business in the ordinary course of business; (iii) no labor organization or group of employees has filed any representation petition

 

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or made any written demand for recognition; (iv) no organizing or decertification efforts are underway or, to the knowledge of the Company, threatened; (v) since January 1, 1994, no labor strike, work stoppage, slowdown, or other material labor dispute has occurred, and none is underway or, to the knowledge of the Company, threatened; (vi) there is no employment-related charge (including, but not limited to, an unfair labor practice charge), complaint, grievance, investigation, inquiry or obligation of any kind, pending or, to the knowledge of the Company, threatened, in any forum, relating to an alleged violation or breach by the Company (or its officers or directors) of any law, regulation or contract; (vii) all amounts due or accrued for all salary, wages, bonuses, commissions, vacation with pay, pension benefits or other employee benefits as of the Closing Date Balance Sheet Date are reflected in the Closing Date Balance Sheet; (viii) no employee of the Company has any agreement as to length of notice or severance payment required to terminate his or her employment, other than such as results by law from the employment of an employee without an agreement as to notice or severance; and (ix) the Company will not have any material liability under any benefit or severance policy, practice, agreement, plan, or program which exists or arises, or may be deemed to exist or arise, under any applicable law or otherwise, as a result of the transactions contemplated hereunder. With respect to the transactions contemplated herein, any notice required under any law or collective bargaining agreement has been, or prior to Closing will be, given, and all bargaining obligations with any employee representative have been, or prior to the Closing will be, satisfied. Within the past three (3) years, the Company has not implemented any plant closing or mass layoff of employees as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar foreign, state or local law, regulation or ordinance (“WARN ACT”).

3.19 WORKERS COMPENSATION. There have been no expenses, obligations, duties or liabilities relating to any claims by employees and former employees (including dependents and spouses) of the Company or any Person with whom the Company constitutes all or part of a controlled group (as defined in Section 4.14 of the Code) (“PLAN AFFILIATE”) (or predecessors) since the Closing Date Balance Sheet Date for (a) costs, expenses and other liabilities under any workers compensation laws in the United States, regulations, requirements or programs and (b) any other medical costs and expenses. Except as set forth on Schedule 3.19, to the Company’s knowledge no claims, injuries, fact, event or condition exists which would give rise to a material claim (individually or in the aggregate) by employees and former employees (including dependents and spouses) of the Company or Plan Affiliate under any United States workers compensation laws, regulations, requirements or programs.

3.20 SUPPLIERS. Schedule 3.20 is a complete and correct list of the ten (10) largest suppliers to the Company (in terms of the Company’s purchases from such suppliers during the two (2) most recently completed fiscal years) of key materials and services and commodities, exclusive of utility services. In the last twelve (12) months, no such supplier has canceled or otherwise terminated,