ASSET PURCHASE AGREEMENT

 

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                                                                   Exhibit 10.11

 

 

SYNTA PHARMACEUTICALS CORP. HAS REQUESTED THAT THE MARKED PORTIONS OF THIS

DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER THE

SECURITIES ACT OF 1933, AS AMENDED.

 

[*] DENOTES WHERE CONFIDENTIAL MATERIALS HAVE BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 

                            ASSET PURCHASE AGREEMENT

 

     Asset Purchase Agreement dated as of December 17, 2003, by and among SYNTA

PHARMACEUTICALS CORP., a Delaware corporation ("Buyer"), CANCER GENOMICS, INC.,

a Delaware corporation ("CG"), KAVA PHARMACEUTICALS, INC., a Delaware

corporation ("Kava"), SINGLEPIXEL BIOMEDICAL, INC., a Delaware corporation

("SinglePixel"; CG, Kava and SinglePixel shall singly and collectively be

referred to herein as a "Seller" or "Sellers") and CMAC, LLC, a Delaware limited

liability company ("Stockholder").

 

     This Agreement sets forth the terms and conditions upon which the Buyer

will purchase from the Sellers, and Sellers (each severally and not jointly)

will sell to the Buyer, all the assets of such Sellers (other than the Retained

Assets, as hereinafter defined) and the business and goodwill of the Sellers as

a going concern, subject to those liabilities of the Sellers which are

specifically hereinafter described, for the consideration provided herein.

 

     In all instances, except where otherwise provided, each Seller's rights and

obligations hereunder shall be deemed several and not joint among the Sellers.

 

     In consideration of the foregoing, the mutual representations, warranties

and covenants set forth herein, and for other good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the parties to

this Agreement hereby agree as follows:

 

                                    ARTICLE I

 

                                   DEFINITIONS

 

     1.1   DEFINITIONS. For the purposes of this Agreement, all capitalized words

or expressions used in this Agreement shall have the meanings specified in this

Article I (such meanings to be equally applicable to both the singular and

plural forms of the terms defined):

 

     "AFFILIATE" means when used with respect to any Person, if such Person is a

corporation, any officer or director thereof and any Person which is, directly

or indirectly, the beneficial owner (by itself or as part of any group) of more

than fifty percent (50%) of any class of any Equity Security thereof, and, if

such beneficial owner is a partnership, any general or limited partner thereof,

or if such beneficial owner is a corporation, any Person controlling, controlled

by or under common control with such beneficial owner, or any officer or

director of such beneficial owner or of any corporation occupying any such

control relationship.

 

     "AGREEMENT" means this Asset Purchase Agreement (together with all Exhibits

and Schedules hereto) as in effect from time to time.

 

     "BUSINESS DAY" means any day, excluding Saturday, Sunday and any other day

on which commercial banks in Boston, Massachusetts are authorized or required by

law to close.

 

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     "CHARTER" means the Certificate of Incorporation, Articles of Incorporation

or Organization or other organizational document of a corporation, as amended

and restated through the date hereof.

 

     "CLAIM" means an action, suit, proceeding, hearing, investigation,

litigation, charge, complaint, claim or demand.

 

     "CODE" means the Internal Revenue Code of 1986, and the regulations,

rulings, and court decisions in respect thereof, all as the same shall be in

effect at the time.

 

     "COMMISSION" means the Securities and Exchange Commission and any other

similar or successor agency of the federal government administering the

Securities Act or the Exchange Act.

 

     "ENVIRONMENTAL ACTION" means any administrative, regulatory or judicial

action, suit, demand, claim, notice of non-compliance or violation,

investigation, request for information, proceeding, consent order or consent

agreement relating in any way to any Environmental Law or any Environmental

Permit.

 

     "ENVIRONMENTAL LAW" means any applicable federal, state or local law,

statute, rule, regulation, or ordinance relating to the environment, human

health or safety from pollution or other environmental degradation or Hazardous

Materials.

 

     "EQUITY SECURITY" shall have the meaning given to such term in Section

3(a)(ii) of the Exchange Act.

 

     "ERISA" means the Employee Retirement Income Security Act of 1974, and any

similar or successor federal statute, and the rules, regulations and

interpretations thereunder, all as the same shall be in effect at the time.

 

     "EXCHANGE ACT" means the Securities Exchange Act of 1934, and the rules and

regulations and interpretations of the Commission thereunder, all as the same

shall be in effect at the time.

 

     "GAAP" means generally accepted accounting principles, consistently

applied.

 

     "LIEN" means, with respect to any asset, any mortgage, deed of trust,

pledge, hypothecation, assignment, security interest, lien, charge, restriction,

adverse claim by a third party, title defect or encumbrance of any kind.

 

     "MATERIAL ADVERSE EFFECT" means a material adverse impact or effect on the

assets of a Seller or of the Buyer, as the case may be.

 

     "OFFICER'S CERTIFICATE" means a certificate signed in the name of a

corporation by its President, Chief Executive Officer, Treasurer, Chief

Financial Officer, or, if so specified, the Secretary, acting in his or her

official capacity.

 

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     "PERSON" means any individual, firm, partnership, association, trust,

corporation, limited liability company, governmental body or other entity.

 

     "PURCHASE DOCUMENTS" means this Agreement, the Non-Competition Agreements,

the Bills of Sale, the Instruments of Assumption, the Patent Assignments, the

Kava Pharmaceutical License Agreement and any other certificate, document,

instrument, stock power, or agreement executed in connection therewith.

 

     "SECURITIES ACT" means the Securities Act of 1933 and the rules,

regulations and interpretations of the Commission thereunder, all as the same

shall be in effect at the time.

 

     "SUBSIDIARY" means, with respect to any Person, any corporation,

association or other entity of which such Person owns at least a majority in

interest of the outstanding capital stock or other Equity Securities having by

the terms thereof voting power under ordinary circumstances to elect a majority

of the directors, managers or trustees thereof.

 

     "TAX" means any federal, state, local or foreign tax of any kind

whatsoever, including any interest, penalty, or addition thereto, whether

disputed or not.

 

     "TAX RETURN" means any return, declaration, report, claim for refund, or

information return or statement relating to Taxes, including any schedule or

attachment thereto, and including any amendment thereof.

 

     "TO STOCKHOLDER'S KNOWLEDGE", "KNOWN TO STOCKHOLDER", "TO THE KNOWLEDGE OF

THE STOCKHOLDER" and words of similar import means the actual knowledge of any

of Michael R.L. Astor, Joel W. McCleary, Nicholas N. Noon and Todd A. Klibansky

as of the date hereof.

 

     "VALID CLAIM" shall mean a claim in an issued, unexpired patent or in a

pending patent application within the Kava Patents, Single Pixel Patents or CG

Patents that (a) has not been finally cancelled, withdrawn, abandoned or

rejected by any administrative agency or other body of competent jurisdiction,

(b) has not been revoked, held invalid, or declared unpatentable or

unenforceable in a decision of a court or other body of competent jurisdiction

that is unappealable or uappealed within the time allowed for appeal, (c) has

not been rendered unenforceable through disclaimer or otherwise, (d) is not lost

through an interference proceeding or (e) to the extent pending, has not been

pending for longer than five (5) years from the filing date of the earliest

patent application from which the pending application claims priority, provided

that subsequent to such five (5) year period, if the pending claim is issued as

a claim of an issued and unexpired patent within the Kava Patents, Single Pixel

Patents or CG Patents, such claim shall be considered thereafter as a Valid

Claim hereunder.

 

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     The following terms are defined in the following Sections of this

Agreement:

 

<Table>

<Caption>

   Term                                               Section

   ----                                                -------

   <S>                                                <C>

   Agreement                                          Recitals

   Assumed Liabilities                                2.1

   Bills of Sale                                       2.8

   Business                                           2.1

   Buyer                                              Recitals

   Closing                                            2.7

   Closing Date                                       2.7

   Seller Financial Statements                        3.4

   Gross Revenues                                     2.5(b)

   Indemnifying Party                                 8.5

   Instruments of Assumption                          2.9

   Losses                                              8.2

   Necessary Permits                                  3.13

   Non-Competition Agreements                         6.1

   Patent Assignment                                  6.1

   Plan                                               3.15(a)

   Purchased Assets                                   2.1

   Purchase Price                                     2.2

   Retained Assets                                    2.2

   Retained Liabilities                               2.4

   Stockholder                                         Recitals

</Table>

 

                                   ARTICLE II

 

                           PURCHASE AND SALE OF ASSETS

 

     2.1   PURCHASE OF ASSETS. Upon the terms and subject to the conditions

contained in this Agreement, at the Closing (as defined in Section 2.7 below),

each Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall

purchase, acquire and accept from each Seller, the business of the respective

Sellers as a going concern (the "Business"), including all of the Sellers'

assets of every kind and description as set forth on SCHEDULE 2.1 hereto (the

"Purchased Assets") (other than those assets included in the Retained Assets as

defined in Section 2.2 below), and subject only to the liabilities and

obligations of the Sellers which are defined in Section 2.3 (the "Assumed

Liabilities"). The Purchased Assets include, without limitation, all assets,

rights, interests and properties of the Sellers (other than those assets

included in the Retained Assets as defined in Section 2.2).

 

     2.2   RETAINED ASSETS. The Sellers will each retain ownership only of such

Seller's cash and cash equivalents on hand and in banks, minute and stock record

books, journals, ledgers and books of original entry and such Seller's rights

under the Purchase Documents (collectively, the "Retained Assets").

 

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     2.3   ASSUMED LIABILITIES. The Buyer shall assume and agree to pay, perform

and discharge the Assumed Liabilities, and will pay, perform and discharge the

Assumed Liabilities as they become due. The Assumed Liabilities shall consist of

the liabilities of the Sellers listed on SCHEDULE 2.3 attached hereto.

 

     2.4   RETAINED LIABILITIES. The liabilities and obligations which shall be

retained by each of the Sellers (the "Retained Liabilities") shall consist of

all liabilities of such Seller other than Assumed Liabilities, including,

without limitation, the following:

 

          (a)   all liabilities of each Seller relating to indebtedness for

borrowed money whether or not such liabilities are reflected on the Seller

Financial Statements;

 

          (b)   all liabilities of each Seller or the Stockholder resulting from,

constituting or relating to a breach of any of the representations, warranties,

covenants or agreements of the such Seller or the Stockholder under this

Agreement;

 

          (c)   all liabilities of each Seller for Taxes, including any gain and

income from the sale of the Assets and other transactions contemplated herein;

 

           (d)   all liabilities for all environmental, ecological, health,

safety, products liability (except as specifically referred to herein) or other

claims pertaining to the Business or the Purchased Assets which relate to time

periods or events occurring on or prior to the Closing Date;

 

          (e)   all liabilities of each Seller arising in connection with its

operations unrelated to the Business and all liabilities (including any

liability pursuant to any claim, litigation or proceeding) in connection with

the operation of the Business prior to the Closing except as otherwise

specifically provided herein and any liability of such Seller based on its

tortuous or illegal conduct;

 

          (f)   any liability or obligation incurred by each Seller in connection

with the negotiation, execution or performance of this Agreement, including,

without limitation, all legal, accounting, brokers', finders' and other

professional fees and expenses;

 

          (g)   all liabilities incurred by each Seller after the Closing Date;

 

          (h)   all liabilities or obligations associated with a Seller's

employees, including but not limited to any liability or obligation under or

with respect to any collective bargaining agreement, employment agreement,

unemployment or workers' compensation laws, or any liability or obligation

arising from the decision of Buyer not to offer employment to any such

employees; and

 

          (i)   all liabilities and obligations arising out of, resulting from,

or relating to any employee benefit plan, program, or arrangement maintained or

contributed to by each Seller,

 

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or any entity which is or has been aggregated with such Seller for purposes of

section 414 of the Code or section 4001 of ERISA.

 

     2.5   PURCHASE PRICE. Upon the terms and subject to the conditions contained

in this Agreement, and in consideration of the sale, assignment, transfer and

delivery of the Purchased Assets and covenants not to compete received from the

Sellers and the Stockholder, Buyer will issue to the Sellers an aggregate of

553,344 shares of the Buyer's common stock, par value $0.0001 per share ("Common

Stock" and the "Consideration Shares", and together with the adjustments set

forth below, the "Purchase Price"). The Consideration Shares shall be

apportioned among the Sellers as follows: 25% to CG, 50% to Kava and 25% to

SinglePixel. Delivery of stock certificates representing the Consideration

Shares shall be made to each of the Sellers at the Closing. The parties agree

that the Purchase Price represents fair consideration and reasonably equivalent

value for the Purchased Assets.

 

          (a)   ADJUSTMENTS FOR MILESTONES. Buyer shall make a one-time only

payment:

 

               (i)   to Kava, or any of its assignees, of [*] payable in either

     cash or shares of the Buyer's Common Stock (at the discretion of the Buyer

     and, if such payment is in Common Stock, valued at the then current fair

     market value of the Common Stock) in a single payment by wire transfer or

     delivery of shares of Common Stock to an account designated in writing by

     Kava, or any of its assignees, to Buyer within sixty (60) days of the

     commencement by Buyer of a Phase III (or other pivotal) clinical trial for

     any drug candidate, the manufacture, use or sale of which infringes one or

     more Valid Claims of the Kava Patents (a "Kava Drug Candidate"). For

     purposes of this Agreement, "Kava Patents" shall mean any and all patent

     filings assigned to Kava or to which Kava has or will have any right,

     title or interest, including the issued patents and pending patent

     applications under the Kava IP (as defined in SCHEDULE 2.1), and all

     non-provisionals, divisionals, continuations, continuations-in-part and

     all patents issuing on any of the foregoing, and all foreign counterparts

     thereof; together with all registrations, reissues, re-examinations,

     supplemental protection certificates and extensions thereof and all

     foreign counterparts thereof. In the event that Buyer commences a Phase

     III (or other pivotal) clinical trial for a drug candidate, the

     manufacture, use of sale of which does not infringe one or more Valid

     Claims of the Kava Patents at the time of the commencement of such

     clinical trial but the manufacture, use or sale of which later infringes

     one or more Valid Claims of the Kava Patents, then Buyer shall make such

     one-time only payment under this subsection (i) of Section 2.5(a) within

     sixty (60) days of the drug candidate becoming a Kava Drug Candidate under

     this Agreement; and

 

               (ii) to SinglePixel, or any of its assignees, [*] payable in

     either cash or shares of the Buyer's Common Stock (at the discretion of

     the Buyer and, if such payment is in Common Stock, valued at the then

     current fair market value of the Common Stock) in a single payment by wire

     transfer or delivery of shares of Common Stock to an account designated in

     writing by SinglePixel, or any of its assignees, to Buyer within sixty

     (60) days of the receipt by Buyer of approval by the Federal Drug

     Administration of any SinglePixel diagnostic product, the

 

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     manufacture, use or sale of which infringes one or more Valid Claims of the

     SinglePixel Patents (a "SinglePixel Product"). For purposes of this

     Agreement, "SinglePixel Patents" shall mean any and all patent filings

     assigned to SinglePixel or to which SinglePixel has or will have any right,

     title or interest, including the issued patents and pending patent

     applications identified under the SinglePixel IP (as defined in SCHEDULE

     2.1), and all non-provisionals, divisionals, continuations,

     continuations-in-part and all patents issuing on any of the foregoing, and

     all foreign counterparts thereof; together with all registrations,

     reissues, re-examinations, supplemental protection certificates and

     extensions thereof. In the event that Buyer receives approval by the

     Federal Drug Administration of any SinglePixel diagnostic product, the

     manufacture, use or sale of which does not infringes one or more Valid

     Claims of the SinglePixel Patents at the time of receipt of such approval

     but the manufacture, use or sale of which later infringes one or more Valid

     Claims of the SinglePixel Patents, then Buyer shall make such one-time only

     payment under this subsection (ii) of Section 2.5(a) within sixty (60) days

     of the SinglePixel diagnostic product becoming a SinglePixel Product under

     this Agreement. For purposes of this Section 2.5, the term "diagnostic

     product" means any product which is intended to predict, detect or identify

     a disease, determine the presence of a pathologic condition or monitor the

     course of disease or therapy in humans or other animals.

 

               (b)   ROYALTIES FOR CERTAIN PATENTS. In the event that Buyer

obtains revenue or other measurable economic benefit ("Gross Revenues") from

products or services covered by a Valid Claim in any Kava Patent or CG Patent

(the "Kava Products", and the "CG Products", respectively), Buyer shall pay

to Kava or CG, or any of their assignees, as the case may be, a percentage of

the Gross Revenues received by Buyer or such licensee from sales of such Kava

Product or CG Product as follows: (i) [*]% of Gross Revenues of the Kava

Product, and (ii) [*]% of Gross Revenues of the CG Product. The amount of

such Gross Revenues shall be proportionately adjusted to reflect the

exclusion of the contribution of ingredients or components not directly

related to the Kava Product and/or CG Product, but in no case less than [*]%

of the rates specified above. Any payments by Buyer pursuant to this

subsection shall be made by cash or check within ninety (90) days of the end

of each fiscal year of Buyer in which any applicable sale is made. The

obligations under this section shall continue on a country-by-country basis

until the later of (1) the expiration date, as such date may be modified or

extended, of the last-to-expire patent of the relevant Kava IP or CG IP (as

the case may be) in such country, or (2) ten (10) years from first commercial

sale of the Kava Product or CG Product. For purposes of this Section 2.5, "CG

Patents" shall mean any and all patent filings assigned to CG or to which CG

has or will have any right, title or interest, including the issued patents

and pending patent applications identified under the CG IP (as defined in

SCHEDULE 2.1), and all non-provisionals, divisionals, continuations,

continuations-in-part; and all patents issuing on any of the foregoing, and

all foreign counterparts thereof; together with all registrations, reissues,

re-examinations, supplemental protection certificates and extensions thereof.

 

          (c)   THIRD PARTY ROYALTY OFFSET. In the event that in any royalty

period, Buyer, in order to sell any Kava Product or CG Product in any country,

makes royalty payments to one or more third parties ("Third Party Payments") as

consideration for a license to an issued patent or patents owned by such third

party(ies), in the absence of which the Kava Product or CG Product could not

legally be made, used or sold in such country, then Buyer shall have the right

 

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to reduce the royalties otherwise due pursuant to Section 2.5(b) above for

such Kava Product or CG Product by [*]% of such Third Party Payments.

Notwithstanding the foregoing, such reductions under this subsection (c)

shall in no event reduce such royalty for such Kava Product or CG Product in

any such country to less than [*]% of the rates otherwise specified above.

 

     2.6   ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated

among the Purchased Assets and the covenants not to compete received from the

Sellers and the Stockholder as set forth in SCHEDULE 2.6 attached hereto. The

Sellers and Buyer shall be bound by such allocation for all purposes and to

account for and report the purchase and sale contemplated hereby for all

financial, accounting and Tax purposes in accordance with such allocation.

 

     2.7   TIME AND PLACE OF CLOSING. The closing of the transactions described

in Sections 2.1 through 2.6 above (the "Closing") shall take place at the

offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., at 11:00 a.m. on

January 9, 2004, or at such other place or time as the parties hereto may agree.

The date and time at which the Closing actually occurs is hereinafter referred

to as the "Closing Date."

 

     2.8   EXECUTION AND DELIVERY OF DOCUMENTS OF TITLE BY THE SELLERS. At the

Closing, each Seller shall execute and deliver to Buyer the form of Bill of Sale

attached hereto as EXHIBIT A and such deeds, conveyances, bills of sale,

certificates of title, assignments, assurances and other instruments and

documents as Buyer may reasonably request in order to effect the sale,

conveyance, and transfer of the Purchased Assets from the Sellers to the Buyer.

Such instruments and documents shall be sufficient to convey to Buyer good and

merchantable title in all of the Purchased Assets. Each Seller will, from time

to time after the Closing Date, take such additional actions and execute and

deliver such further documents as Buyer may reasonably request in order more

effectively to sell, transfer and convey the Purchased Assets to Buyer and to

place Buyer in position to operate and control all of the Purchased Assets.

 

     2.9   EXECUTION AND DELIVERY OF DOCUMENTS BY BUYER. At the Closing, Buyer

shall execute and deliver to each Seller an Instrument of Assumption in the form

attached hereto as EXHIBIT B, and such other documents as the Sellers may

reasonably request in order to evidence Buyer's assumption of the Assumed

Liabilities. Buyer will, from time to time after the Closing Date, take such

additional action and deliver such further documents as the Sellers may

reasonably request in order effectively to assume the Assumed Liabilities.

 

     2.10 CONSENT TO ASSIGNMENT. Upon the terms, and subject to the conditions

set forth in this Agreement, each Seller hereby assigns to the Buyer all of the

Purchased Assets which are capable of assignment without the consent of other

parties.

 

     Insofar as any Purchased Asset is not assignable to the Buyer without the

agreement of or novation by or consent to the assignment from another party and

no such agreement, novation or consent has been obtained by such Seller on or

prior to Closing Date, this Agreement shall not constitute an assignment or

attempted assignment if such assignment or attempted assignment would constitute

a breach of Seller's obligations related to such Purchased Asset. In the event

that consent or novation is required to such assignment:

 

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          (a)   the Seller shall use all reasonable endeavors to cooperate with

the Buyer in its efforts to procure such novation or assignment as aforesaid.

The reasonable costs of any such novation or assignment shall be paid by the

Buyer;

 

          (b)   unless and until any such Purchased Asset shall be novated or

assigned as aforesaid the Seller shall hold such Purchased Asset and any moneys,

goods or other benefits received thereunder as agent of the Buyer and the Buyer

shall (if such sub-contracting is permissible and lawful under such Purchased

Asset in question) as the Seller's sub-contractor perform all the obligations of

the Seller under such Purchased Asset;

 

          (c)   unless and until any such Purchased Asset shall be novated or

assigned, the Seller will (so far as it lawfully may) give such assistance to

the Buyer (and at the Buyer's cost) as the Buyer may reasonably require to

enable the Buyer to enforce its rights under such Purchased Asset and (without

limitation) will provide access to all relevant books, documents and other

information in relation to such Purchased Asset as the Buyer may reasonably

require from time to time.

 

                                   ARTICLE III

 

                         REPRESENTATIONS AND WARRANTIES

                       OF THE SELLERS AND THE STOCKHOLDER

 

     Each Seller and the Stockholder each hereby represents and warrants to

Buyer as follows:

 

     3.1   ORGANIZATION AND QUALIFICATION. Each Seller is a corporation duly

organized, validly existing and in good standing under the laws of the State of

Delaware. The Stockholder is a limited liability company duly organized, validly

existing and in good standing under the laws of the State of Delaware. The

Stockholder and each Seller have full power and authority to own, use and lease

their properties and to conduct their business as currently conducted and as

proposed to be conducted. The copies of the Stockholder's operating agreement,

as amended to date and certified by an officer of the Stockholder and delivered

to Buyer's counsel prior to the Closing, is true, complete and correct. The

copies of each Seller's Charter and By-Laws, as amended to date, in each case

certified by their respective Secretaries and delivered to Buyer's counsel prior

to the Closing, are true, complete and correct.

 

     3.2   AUTHORITY; NO VIOLATION. Each Seller and the Stockholder has all

requisite corporate power and authority to enter into this Agreement and to

carry out the transactions contemplated hereby. The execution, delivery and

performance of this Agreement by each Seller and the Stockholder have been duly

and validly authorized and approved by all necessary corporate action. This

Agreement constitutes the legal and binding obligation of each Seller and the

Stockholder, enforceable against each of them in accordance with its terms. The

entering into of this Agreement by the Stockholder and each Seller does not, and

the consummation by such Seller and the Stockholder of the transactions

contemplated hereby, including specifically the transfer of the Purchased Assets

to Buyer by such Seller, will not violate the provisions of (a) to the knowledge

of the Stockholder, any applicable federal, state, local or foreign laws, (b)

such

 

                                         9

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Seller's or Stockholder's respective Charter, By-Laws or operating agreement, as

the case may be, or (c) any provision of, or result in a default or acceleration

of any obligation under, or result in any change in the rights or obligations of

such Seller or the Stockholder under, any Lien, contract, agreement, license,

lease, instrument, indenture, order, arbitration award, judgment, or decree to

which such Seller or the Stockholder is a party or by which any of them is

bound, or to which any property of such Seller or the Stockholder is subject.

 

     3.3   SUBSIDIARIES. Each Seller represents and warrants that it has no

Subsidiaries.

 

     3.4   SELLER FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.4 are

unaudited consolidating balance sheets as of June 30, 2003 (collectively, the

"Seller Financial Statements") for each Seller. The Seller Financial Statements

have been prepared in accordance with GAAP applied on a consistent basis

throughout the periods covered thereby. The Stockholder represents and warrants

that the Seller Financial Statements fairly present the financial condition and

the results of operation of each Seller and that there are no assets of the

Sellers that are not included in the Seller Financial Statements, except for

assets of any Seller that are not required by GAAP to be included in the Seller

Financial Statements.

 

     3.5   ABSENCE OF CERTAIN CHANGES. Except as otherwise disclosed in SCHEDULE

3.5 attached hereto, since June 30, 2003, there has not been:

 

          (a)   any material change in the business, operations, assets,

liabilities, prospects or condition (financial or otherwise) of any Seller;

 

          (b)   any obligation or liability incurred by a Seller other than

obligations and liabilities incurred in the ordinary course of business for an

amount not more than $5,000 in each case or $15,000 in the aggregate;

 

          (c)   any Lien placed on any of the Sellers' properties or assets which

remains in existence on the date hereof or any payment or discharge of a

material Lien or liability of the Sellers not disclosed on the Seller Financial

Statements or incurred in the ordinary course of business;

 

          (d)   any purchase, sale, lease, assignment, transfer or other

disposition, or any agreement or other arrangement for the purchase, sale,

lease, assignment, transfer or other disposition, of any part of the Sellers'

properties or assets, other than purchases for and sales from inventory in the

ordinary course of business, except for fixed assets purchased or other capital

expenditures made in amounts not exceeding $5,000 for any single item and

$25,000 in the aggregate for all such items;

 

          (e)   any damage, destruction or loss, whether or not covered by

insurance, adversely affecting a Seller's properties, assets or business;

 

          (f)   any declaration, setting aside or payment of any dividend on, or

the making of any other distribution in respect of, any Equity Security of a

Seller, or any direct or

 

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indirect redemption, purchase or other acquisition by a Seller of any of its own

Equity Securities, or any issuance by a Seller of any Equity Security;

 

          (g)   any labor trouble or claim of unfair labor practices involving a

Seller; any change in the employment contracts of or compensation payable or to

become payable by a Seller to any of its current or former officers, directors,

employees, consultants, or agents, or any bonus payment, loan or arrangement

made to or with respect to any of such officers, directors, employees,

consultants, or agents; or any change in coverage vesting, or benefits available

under any Plan;

 

          (h)   any change with respect to a Seller's management or supervisory

personnel;

 

          (i)   any contracts, licenses, leases or agreements entered into by a

Seller which are outside the ordinary course of business or which obligate such

Seller for more than $5,000 in any one case or more than $25,000 in the

aggregate or any cancellation, termination, modification, or acceleration by any

party to any contract, license, lease or agreement involving more than $10,000

to which any such Seller is a party or by which any of them is bound;

 

          (j)   any amendment or other change (or any authorization to make such

an amendment or change) to such Seller's Charter or By-Laws, except as required

in connection with the consummation of the transactions contemplated hereby;

 

          (k)   any postponement or delay in payment of any accounts payable or

other liability of such Seller except in the ordinary course of business

consistent with prior practices;

 

          (l)   any cancellation, waiver, compromise or release of any right or

claim either involving more than $10,000 or outside the ordinary course of

business consistent with prior practices;

 

          (m)   any other occurrence, action, failure to act or transaction

involving a Seller other than transactions in the ordinary course of business

consistent with prior practices.

 

     3.6   TITLE, SUFFICIENCY AND CONDITION OF ASSETS. Except as disclosed in

SCHEDULE 3.6 hereto, each Seller has good and marketable title to, or a valid

leasehold interest in, all of the Purchased Assets, free and clear of all Liens,

and free of any material infractions or non-compliance with applicable laws and

regulations (collectively, "Defects") and the sale and delivery of the Purchased

Assets to Buyer pursuant hereto shall vest in Buyer good and marketable title

thereto, free and clear of any and all Liens or Defects, other than as disclosed

in SCHEDULE 3.6 hereto or as may be created by Buyer. The Stockholder and each

Seller shall each, prior to the Closing, use their best efforts to cure at their

expense any Defect identified by Buyer. Each Seller owns or leases all property

and assets necessary for the conduct of their respective businesses as such

businesses are presently conducted and are proposed to be conducted, and all

such property and assets are included in the Purchased Assets. To the knowledge

of the Stockholder and except as disclosed in SCHEDULE 3.6 hereto, all tangible

properties and assets owned or leased by such Seller and contained in the

Purchased Assets are in good operating

 

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condition and repair, ordinary wear and tear excepted, have been well

maintained, and conform with all applicable laws, statutes, ordinances, rules

and regulations.

 

     3.7   INTELLECTUAL PROPERTY. All patents, patent applications, proprietary

designs, copyrights, trade names, servicemarks, trademarks and trademark

applications and proprietary know how which are currently owned by or licensed

to each Seller are listed in SCHEDULE 3.7 attached hereto ("Intellectual

Property"). Except as set forth in SCHEDULE 3.7, the Intellectual Property is

all of the intellectual property necessary for the operation of the Business as

it is currently conducted. All of each Seller's patents, patent applications and

trademarks have been registered in, filed in or issued by the United States

Patent Office or the corresponding offices of other countries identified in

SCHEDULE 3.7, and have been properly maintained and renewed in accordance with

all applicable laws and re