ASSET PURCHASE AGREEMENT

Exhibit 10.1

CONFIDENTIAL

 

 

 

ASSET PURCHASE AGREEMENT

BY AND AMONG

INNERCOOL THERAPIES, INC.,

as Seller,

CARDIUM THERAPEUTICS, INC.,

the Sole Stockholder of Seller,

AND

PHILIPS ELECTRONICS NORTH AMERICA CORPORATION,

as Buyer

Dated as of July 10, 2009

 

 

TABLE OF CONTENTS

 

 

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EXHIBITS AND SCHEDULES

 

EXHIBITS:

 

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of July 10, 2009, is made by and among INNERCOOL THERAPIES, INC., a Delaware corporation (the “ Seller ”), CARDIUM THERAPEUTICS, INC., a Delaware corporation (the “ Parent ”), and PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, a Delaware corporation (“ Buyer ”).

WHEREAS, the Seller is engaged in the business of developing, manufacturing, marketing and selling medical technology products in the field of patient temperature modulation therapy, therapeutic hypothermia including, among other products, the RapidBlue™ endovascular cooling system, the CoolBlue™ surface cooling system, Urocool™ , Urochill™ and CoolFuse™ systems and other systems and associated consumables and accessories (the “ Business ”) and owns substantially all of the assets used in connection with the operation of the Business;

WHEREAS, the Parent is the sole stockholder of the Seller and owns certain assets used in, and is a party to certain Contracts relating to, the operation of the Business;

WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller and the Parent wish to sell, assign and transfer to Buyer, and Buyer wishes to purchase from the Seller and the Parent, all of the Seller’s and the Parent’s (where applicable) right, title and interest in and to the Acquired Assets (as defined below) and Buyer is willing to assume from the Seller and the Parent the Assumed Liabilities (as defined below), all as set forth herein;

WHEREAS, as a condition and an inducement to Buyer entering into this Agreement, concurrently with the execution and delivery of this Agreement, Messrs. Michael Magers, Brad Klos, Steve Yon and Anthony Mullin (the “ Designated Employees ”) have entered into employment agreements with Buyer, dated as of the date hereof, which agreements shall become effective upon the Closing (each, a “ Post-Closing Employment Agreement ”);

WHEREAS, as a condition and an inducement to Buyer entering into this Agreement, concurrently with the execution and delivery of this Agreement, the Seller, the Parent and Messrs. Christopher Reinhard and Tyler Dylan have entered into non-competition agreements with Buyer, dated as of the date hereof, which agreements shall become effective upon the Closing (each, a “ Post-Closing Non-Competition Agreement ”); and

WHEREAS, capitalized terms used and not otherwise defined herein shall have the meanings set forth on Schedule I attached hereto.

 

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NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the Seller, the Parent and Buyer hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

1.1       Purchase and Sale of Assets .  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Seller and the Parent, as applicable, shall sell, transfer, assign and deliver to Buyer, and relinquish to Buyer in perpetuity, free and clear of all Liens (other than Permitted Liens), all of their respective right, title and interest in and to the Acquired Assets. As used in this Agreement, the term “ Acquired Assets ” means (x) all of the assets, properties, rights, interests and goodwill of the Seller of every kind and nature whatsoever, whether real, personal or mixed, tangible or intangible, wherever located, owned, used or held for use by the Seller, whether now owned, used or held or acquired prior to the Closing, including the following, but excluding the Excluded Assets:

  (a)      all right, title and interest in, to and under (i) all Contracts listed on Schedule 1.1(a)(i) attached hereto; (ii) all non-competition, non-solicitation, confidentiality, assignment of invention and similar Contracts to which the Seller is a party or is entitled to rights thereunder, the primary purpose of which are to provide for non-competition, non-solicitation, confidentiality, assignment of invention or similar covenants running in favor of the Seller; (iii) all customer Contracts entered into by the Seller between the date of this Agreement and the Closing in accordance with Section 5.1(b)(vii); and (iv) any other Contract entered into by the Seller between the date of this Agreement and the Closing which Buyer, in its sole discretion, agrees in writing prior to the Closing shall constitute a “Seller Assigned Contract” pursuant to this Section 1.1(a) (the “ Seller Assigned Contracts ”);

  (b)      all tangible personal property wherever located, including all equipment, machinery, tools, dies, molds, furniture, fixtures, office equipment, computers, communications equipment, supplies, spare and replacement parts and other physical assets of the Seller, including the items listed on Schedule 1.1(b) attached hereto;

  (c)      all accounts receivable, notes receivable and other rights to receive payment from any Person outstanding on the Closing Date;

  (d)      all rights to credits, refunds, prepaid expenses, deferred charges, advance payments, security deposits and prepaid items, including those listed on Schedule 1.1(d) attached hereto;

  (e)      all Approvals and Orders, to the extent their transfer is permitted by Law, including those listed on Schedule 1.1(e) attached hereto;

  (f)       all Seller Intellectual Property, and the goodwill associated therewith, licenses and sublicenses granted in respect thereto and rights thereunder, together with all claims against third parties for profits and all costs, losses, claims, liabilities, fines, penalties, damages and expenses (including interest which may be imposed in connection therewith), court costs and reasonable fees and disbursements of counsel, consultants and expert witnesses incurred by reason of the past infringement, alleged infringement, unauthorized use or disclosure or alleged unauthorized use or disclosure of any Seller Intellectual Property, together with the right to sue for, and collect the same, or to sue for injunctive relief, for Buyer’s own use and benefit, and for the use and benefit of its successors, assigns or other legal representatives;

 

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  (g)      all claims, demands, causes of action, choses in action, rights of recovery, rights of set off, rights of recoupment, rights to payment or to enforce payment and rights to insurance proceeds, except to the extent related to the Excluded Assets;

  (h)      all guarantees, warranties, indemnities and similar rights in favor of the Seller, except to the extent related to the Excluded Assets;

  (i)       all books, records, information, files, manuals, databases and other materials maintained by or on behalf of the Seller in any medium (including, where available, digital media), including all customer, supplier and mailing lists and databases, advertising materials, research files and correspondence, market research studies and surveys, operating data and plans, production data, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), equipment repair, maintenance and service records, sales and promotional materials and records, purchasing and billing records, research and development files, data, intellectual property disclosures, media materials, accounting files and records, sales order files and non-medical personnel files for all Transferred Employees, and all lists of and all rights in and to the information contained therein;

  (j)       all telephone and facsimile numbers, websites (including the content thereof), e-mail addresses, Internet domain names and business and trade names of the Seller, including those listed on Schedule 1.1(j) attached hereto;

  (k)      all inventory of the Seller, including all inventory set forth on Schedule 1.1(k) attached hereto (other than inventory that is sold in the ordinary course of business prior to Closing);

  (l)       all goodwill of the Business; and

(y)  all of the assets, properties, rights, interests and goodwill of the Parent of every kind and nature whatsoever, whether real, personal or mixed, tangible or intangible, wherever located, owned, used or held for use by the Parent and used in connection with the operation of the Business, whether now owned, used or held or acquired prior to the Closing, including all of the Parent’s right, title and interest in, to and under all Contracts listed on Schedule 1.1(a)(ii) attached hereto (such Contracts, collectively with the Seller Assigned Contracts, the “ Assigned Contracts ”), but excluding the Excluded Assets.

1.2       Excluded Assets .  Notwithstanding the provisions of Section 1.1, the following assets and properties are to be retained by the Seller and the Parent and shall not constitute Acquired Assets (collectively, the “ Excluded Assets ”):

  (a)      all right, title and interest in, to and under all Contracts to which the Seller or the Parent is a party or by which the Seller, the Parent or any of their respective assets or properties is otherwise subject to or bound other than the Assigned Contracts (collectively, the “ Excluded Contracts ”);

 

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  (b)      any capital stock or other equity interest in any Subsidiary, Affiliate or other Person, and all options, warrants or other rights to acquire such capital stock or other equity interest;

  (c)      subject to Section 1.1(g), all right, title and interest to all insurance policies of the Seller and the Parent and all rights of the Seller and the Parent to insurance claims, refunds and proceeds thereunder;

  (d)      all minute books and stock records of the Seller and the Parent;

  (e)      all personnel records of all Business Employees other than Transferred Employees and all medical records and other medical information of Transferred Employees that the Seller is required by Law to retain in its possession;

  (f)       all rights of the Seller and the Parent under this Agreement and the Related Agreements;

  (g)      all Employee Benefit Plans of the Seller or the Parent and all assets related thereto;

  (h)      certain shared assets that are owned by the Parent and used in connection with the Business to the extent such assets are specifically set forth on Schedule 1.2(h) attached hereto; and

  (i)       those assets specifically set forth on Schedule 1.2(i) attached hereto.

1.3       Assumption of Liabilities .  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall assume from the Seller and the Parent, as applicable, only the following Liabilities (the “ Assumed Liabilities ”):

  (a)      obligations of the Seller or the Parent, as applicable, for performance arising after the Closing under the Assigned Contracts to the extent that the Seller’s or the Parent’s rights thereunder are actually (with consent where required) assigned to Buyer, including those certain obligations set forth in Schedule 1.3(a) ; provided , that , Buyer shall not assume, and does not hereby agree to pay, discharge or perform, (i) any Losses relating in any manner to or arising from any breach or default of the Seller or the Parent of any Assigned Contract occurring on or prior to the Closing Date regardless of whether such breach or default is disclosed pursuant to this Agreement, other than as specifically described in Schedule 1.3(a)(i) attached hereto or (ii) any Liability to indemnify any Person under such Assigned Contract arising from or relating to any act or omission occurring prior to the Closing; and

  (b)      (i) all accounts payable, accrued expenses and accrued vacation and sick pay reflected in Section 3.21(b) of the Disclosure Schedule to the extent that (x) such accounts payable, accrued expenses and accrued vacation and sick pay remain unpaid, or in the case of accrued vacation and sick pay, unused or unpaid, as of the Closing Date and (y) such accounts payable, accrued expenses and accrued vacation and sick pay

 

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are reflected in the calculation of the Final Working Capital, and (ii) any trade payables and accrued expenses of the Seller incurred by the Seller between the date of this Agreement and the Closing in the ordinary course of business and in compliance with Section 5.1 of this Agreement, but only to the extent that such trade payables and accrued expenses are reflected in the calculation of the Final Working Capital.

1.4       Excluded Liabilities .  Except as expressly assumed pursuant to Section 1.3, Buyer is not assuming and shall not have any liability or obligation whatsoever for any Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates whatsoever, whether or not arising out of the ownership or operation of the Business or the Acquired Assets, all of which will be retained and satisfied when due by the Seller (the “ Excluded Liabilities ”). Without limiting the generality of the foregoing, Buyer shall not assume or be deemed to assume any of the following Liabilities, all of which shall constitute Excluded Liabilities:

  (a)      Liabilities arising under or relating to any written or oral Contract to which the Seller or the Parent is a party or by which the Seller, the Parent or any of their respective assets or properties is otherwise subject or bound, other than Liabilities arising under the Assigned Contracts to the extent provided in Section 1.3(a), including those Contracts set forth on Schedule 1.4(a) attached hereto;

  (b)      Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates in respect of any Indebtedness;

  (c)      Liabilities of the Seller, the Parent or any of their respective Affiliates in respect of any Transaction Expenses;

  (d)      Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates to any Affiliate or current or former stockholder, convertible debt holder or option or warrant holder (or any of their successors, assigns, heirs or legal representatives) of the Seller, the Parent or any of their respective predecessors or Affiliates;

  (e)      Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates for or in respect of Taxes, and, except to the extent provided in Section 1.9, any Taxes resulting from or relating to the consummation of the transactions contemplated hereby (including any Taxes that may become due as a result of any bulk sales or similar tax that may be assessed against the Seller, the Parent or any of their respective Affiliates following the Closing);

  (f)       Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates to any present or former director, officer, employee, consultant or independent contractor of the Seller, the Parent or any of their respective predecessors or Affiliates, including Liabilities arising under any federal, state, local or foreign Laws, Approvals or Orders and including any Liability for transaction or retention bonuses payable by the Seller or the Parent to any such person;

  (g)      Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates for any Actions against the Seller, the Parent or any of their respective predecessors or Affiliates, including any Actions pending or threatened against the Seller, the Parent, or any of their respective predecessors or Affiliates as of the Closing Date;

 

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  (h)      Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates arising out of or resulting from any violation of or non-compliance with any federal, state, local or foreign Approvals, Laws or Orders;

  (i)       Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates arising out of, relating to or resulting from any obligation to indemnify any Person (other than pursuant to an Assigned Contract to the extent assumed pursuant to Section 1.3(a));

  (j)       Liabilities of the Seller or the Parent arising under this Agreement or any of the Related Agreements;

  (k)      Liabilities resulting from or relating to products sold or services performed by the Seller, the Parent or any of their respective predecessors or Affiliates, including any Liabilities resulting from or relating to any product liability claims with respect to any Seller Products;

  (l)       Liabilities of the Seller, the Parent or any of their respective predecessors or Affiliates based upon such Person’s acts or omissions;

  (m)     Liabilities arising under any Employee Benefit Plan or any benefit, tax or compensation Liability of any ERISA Affiliate;

  (n)      Liabilities arising in connection with or in any way relating to the Business, any Acquired Assets, any property now or previously owned, leased or operated by the Seller, the Parent, or any of their respective predecessors or Affiliates, or any activities or operations occurring or conducted at any property now or previously owned, operated or leased by the Seller, the Parent, or any of their respective predecessors or Affiliates (including offsite disposal), which arise under or relate to any Environmental Laws;

  (o)      Liabilities attributable in any manner to the Excluded Assets; and

  (p)      Liabilities set forth in Schedule 1.4(p) attached hereto.

The disclosure of any Liability on any schedule to this Agreement shall not create an Assumed Liability or other Liability of Buyer, except where such disclosed Liability has been expressly assumed by Buyer as an Assumed Liability pursuant to Section 1.3.

1.5       Closing .  Subject to the terms and conditions hereof, the closing of the transactions contemplated by this Agreement (the “ Closing ”) will take place at 11:00 a.m. (EST) on the third (3 ^rd ) Business Day following the date on which all of the conditions set forth in ARTICLE VI have been satisfied or waived (other than any such conditions that by their terms cannot be satisfied until the Closing Date, which conditions shall be required to be so satisfied or waived on the Closing Date), unless another time and/or date is agreed to in writing by the Seller and Buyer (the “ Closing Date ”). The Closing shall be held at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts, unless another place is

 

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agreed to in writing by the parties hereto (it being understood that the Closing may be effected by the delivery of documents via e-mail, facsimile and/or overnight courier). The consummation of the transactions contemplated by this Agreement to occur at the Closing shall be deemed to occur at 12:01 a.m. (EST) on the Closing Date.

1.6       Transfer Documents .  At the Closing, in addition to the other Closing deliverables contemplated by ARTICLE VI, the parties shall execute and deliver to each other, or cause to be executed and delivered to each other, the following documents (collectively, the “ Transfer Documents ”):

  (a)      the Seller and the Parent shall execute and deliver to Buyer one or more bills of sale and assignment agreements in substantially the form of Exhibit A attached hereto (each, a “ Bill of Sale and Assignment Agreement ”) pursuant to which the Seller and the Parent will transfer and assign to Buyer the Acquired Assets;

  (b)      Buyer shall execute and deliver to the Seller and the Parent one or more assumption agreements in substantially the form of Exhibit B attached hereto (each, an “ Assumption Agreement ”) pursuant to which Buyer will assume from the Seller and the Parent the Assumed Liabilities;

  (c)      the Seller and, if applicable, the Parent, will execute and deliver to Buyer one or more copyright assignments in substantially the form of Exhibit C attached hereto (the “ Copyright Assignment ”) pursuant to which the Seller and, if applicable, the Parent will transfer and assign to Buyer the Copyrights being acquired by Buyer pursuant to this Agreement, if any;

  (d)      the Seller and, if applicable, the Parent, will execute and deliver one or more trademark assignments in substantially the form of Exhibit D attached hereto (the “ Trademark Assignment ”) pursuant to which the Seller and, if applicable, the Parent will transfer and assign to Buyer the Trademarks being acquired by Buyer pursuant to this Agreement, if any;

  (e)      the Seller and, if applicable, the Parent, will execute and deliver one or more patent assignments in substantially the form of Exhibit E attached hereto (the “ Patent Assignment ”) pursuant to which the Seller and, if applicable, the Parent, will transfer and assign to Buyer the Patents being acquired by Buyer pursuant to this Agreement, if any; and

  (f)       the Seller and the Parent will execute and deliver all such other bills of sale, assignments, endorsements, intellectual property right assignments, trade name assignments, domain name assignments, certificates of title, consents and other good and sufficient instruments and documents of conveyance and transfer in a form reasonably satisfactory to Buyer, as Buyer reasonably shall deem necessary or appropriate to vest in or confirm to Buyer all of the Seller’s and the Parent’s (if applicable) right, title and interest in and to all of the Acquired Assets.

1.7       Consents of Third Parties .

  (a)      Notwithstanding anything in this Agreement or in any Related Agreement to the contrary, neither this Agreement nor any such Related Agreement shall constitute an agreement to assign or otherwise transfer, or require Buyer to assume any obligations under, any Assigned Contract if an attempted assignment

 

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or transfer thereof would, without the consent of a third party to such assignment or transfer, constitute a breach thereof, would be ineffective, would affect adversely the rights of Buyer thereunder or would violate any applicable Law. If any such consent has not been obtained as of the Closing Date and Buyer nevertheless determines to proceed with the Closing, the Seller and the Parent shall use their respective best efforts to obtain such consent following the Closing, and Buyer will provide reasonable cooperation to the Seller and the Parent in seeking to obtain any such consent. The Seller and the Parent shall pay and discharge any and all out-of-pocket costs or expenses of seeking to obtain or obtaining any such consent or approval whether before or after the Closing Date.

  (b)      If any Assigned Contract is not transferred to Buyer at the Closing pursuant to this Agreement, the Seller and the Parent shall cooperate with Buyer in any reasonable arrangement designed to provide for Buyer all of the benefits of, and to have Buyer assume the obligations to the extent set forth in Section 1.3 with respect to, such Assigned Contract. In such event, until such consent has been obtained, (i) Buyer shall use commercially reasonable efforts to perform in the Seller’s or the Parent’s name (as applicable) all of such obligations; provided , however , that Buyer shall not be required to take any action in performing such obligations which, in Buyer’s reasonable judgment, would subject Buyer to any Liability or an unreasonable risk of incurring any such Liability and (ii) the Seller and the Parent shall take all actions reasonably requested by Buyer to enforce for the benefit of Buyer any and all rights of the Seller with respect to any such Assigned Contract.

  (c)      The Seller and the Parent hereby authorize Buyer to perform all of their respective obligations after the Closing with respect to all Assigned Contracts that are not assigned to Buyer at the Closing. The Seller and the Parent agree to remit promptly to Buyer all collections or payments received by the Seller or the Parent in respect of all such Assigned Contracts, and shall hold all such collections or payments in trust for the benefit of, and promptly pay the same over to, Buyer; provided , however , that nothing herein shall create or provide any rights or benefits in or to third parties.

  (d)      Nothing in this Section 1.7 shall be deemed to modify in any respect any of the Seller’s or the Parent’s representations or warranties set forth herein or the conditions to Buyer’s obligations contained in ARTICLE VI hereof, be deemed a waiver by Buyer of its right to have received on or before the Closing Date an effective assignment of all of the Acquired Assets or be deemed to constitute an agreement to exclude from the Acquired Assets any assets described under Section 1.1.

1.8       Further Assurances .  At any time and from time to time after the Closing, at the request of Buyer and without further consideration, the Seller and the Parent will execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation, and will take such further action, as may be reasonably requested in order to more effectively transfer, convey and assign to Buyer, and to confirm Buyer’s title in and to, all of the Seller’s and the Parent’s (where applicable) right, title and interest in and to the Acquired Assets, and each of the parties shall execute such other documents and take such further action as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby.

 

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1.9       Transfer Taxes .  All sales (including bulk sales), transfer and similar Taxes, if any, payable in connection with the transactions contemplated hereby (“ Transfer Taxes ”) shall be shared equally by the Seller and the Parent, jointly and severally, on the one hand, and Buyer on the other hand. Any Tax Returns required to be filed in connection with Transfer Taxes shall be prepared and filed when due by the party responsible under applicable Law for filing such Tax Returns. The party filing any such Transfer Tax Return shall provide the other parties with a copy of such return for review and comment at least twenty (20) days prior to such filing.

ARTICLE II

PURCHASE PRICE

2.1       Purchase Price .    The purchase price for the Acquired Assets (the “ Purchase Price ”) shall be $11,250,000, subject to adjustment pursuant to Section 2.2. At the Closing, the Buyer shall deposit or cause to be deposited with the Escrow Agent $1,125,000 of the Purchase Price (the “ Escrow Amount ”) in accordance with the terms of the Escrow Agreement and shall pay or cause to be paid to the Seller the balance of the Purchase Price less the Escrow Amount by wire transfer of immediately available funds to the Seller Bank Account. In addition to the foregoing, Buyer will reimburse the Seller and/or the Parent for certain amounts as provided in Schedule 2.1 attached hereto.

2.2       Working Capital Adjustment .

  (a)      Two (2) Business Days prior to the Closing, the Seller shall deliver to Buyer a certificate (the “ Working Capital Statement ”) certified by the Seller’s Chief Financial Officer setting forth in reasonable detail a calculation of its good faith estimate of the Working Capital (the “ Estimated Working Capital ”), which shall be subject to approval by Buyer.

  (b)      If the Working Capital Target exceeds the Estimated Working Capital, the Purchase Price payable at Closing shall be reduced by an amount equal to the amount by which the Working Capital Target exceeds the Estimated Working Capital (the “ Closing Working Capital Adjustment Amount ”)

  (c)      Following the Closing, Buyer shall have the opportunity to prepare its calculation of Working Capital. The Seller and the Parent shall make the books and records used in preparing the Working Capital Statement (to the extent such books and records (including work papers) are not included in the Acquired Assets) available to Buyer and its Representatives at reasonable times and upon reasonable notice following the Closing. Within ninety (90) days following the Closing, Buyer shall deliver to the Seller its calculation of Working Capital (the “ Revised Working Capital ”) together with reasonable detail and reasonable supporting documentation with respect to the line item differences between the Revised Working Capital and the Estimated Working Capital. If the Seller objects to the calculation of the Revised Working Capital, the Seller shall deliver to Buyer, no later than thirty (30) days following receipt of Buyer’s calculation of the Revised Working Capital, a notice setting forth in reasonable detail such objections (an “ Objection Notice ”), together with reasonable supporting documentation. If the Seller does not timely deliver an Objection Notice to Buyer or if the Seller notifies Buyer that it has no objections, Buyer’s determination of the Revised Working Capital shall be final and binding on all parties.

 

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  (d)      If the Seller timely delivers an Objection Notice to Buyer, Buyer and the Seller shall attempt in good faith to resolve such matters within thirty (30) days after receipt of the same by Buyer, and if unable to do so, Buyer and the Seller shall refer all remaining disputes to an independent public accounting firm mutually agreeable to the Seller and Buyer (the “ Dispute Accounting Firm ”) which shall be instructed to resolve such disputes within sixty (60) days of the referral. Buyer and the Seller shall have the right to meet jointly with the Dispute Accounting Firm during this period and to present their respective positions. The resolution of disputes by the Dispute Accounting Firm will be set forth in writing and will be conclusive and binding upon the parties, upon the date of such resolution, absent manifest error. In making its determination, the Dispute Accounting Firm shall consider only those items that the Seller and Buyer are unable to resolve and the Dispute Accounting Firm shall be bound by the terms and conditions of this Agreement, including the definition of Working Capital and the terms of this Section 2.2. The Seller and the Parent, on the one hand, and Buyer, on the other hand, will each pay their own fees and expenses (including any fees and expenses of their accountants and other Representatives) in connection with the resolution of any dispute under this Section 2.2 (excluding the fees and expenses of the Dispute Accounting Firm). The fees and expenses of the Dispute Accounting Firm pursuant to this Section 2.2(d) shall be borne by Buyer, on the one hand, and the Seller and the Parent, on the other hand, in inverse proportion as they may prevail on matters resolved by the Dispute Accounting Firm, which proportionate allocations shall also be determined by the Dispute Accounting Firm at the time the determination of such firm is rendered on the merits of the matters submitted.

  (e)      Upon the final determination of Working Capital in accordance with this Section 2.2 (the “ Final Working Capital ”), the Purchase Price shall be subject to adjustment as follows:

    (i)      If the Purchase Price was previously adjusted in accordance with Section 2.2(b):

(A)       if the Final Working Capital exceeds the Estimated Working Capital, the Purchase Price shall be increased by an amount equal to the amount by which the Final Working Capital exceeds the Estimated Working Capital;

(B)       if the Estimated Working Capital exceeds the Final Working Capital, the Purchase Price shall be decreased by an amount equal to the amount by which the Estimated Working Capital exceeds the Final Working Capital; or

(C)       if the Final Working Capital equals the Estimated Working Capital, there shall be no further adjustment to the Purchase Price pursuant to this Section 2.2(e); and

 

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    (ii)     If the Purchase Price was not previously adjusted in accordance with Section 2.2(b):

(A)       if the Final Working Capital exceeds the Working Capital Target, the Purchase Price shall be increased by an amount equal to the amount by which the Final Working Capital exceeds the Working Capital Target;

(B)       if the Working Capital Target exceeds the Final Working Capital, the Purchase Price shall be decreased by an amount equal to the amount by which the Working Capital Target exceeds the Final Working Capital; or

(C)       if the Final Working Capital equals the Working Capital Target, then there shall be no further adjustment to the Purchase Price pursuant to this Section 2.2(e).

Within five (5) Business Days following the determination of the Final Working Capital, (i) if the Purchase Price is increased pursuant to this Section 2.2(e), Buyer shall pay to Seller by wire transfer of immediately available funds to an account designated by the Seller at least two (2) Business Days prior to the expiration of such five-day period an amount in cash equal to the amount by which the Purchase Price was so increased and (ii) if the Purchase Price is decreased pursuant to this Section 2.2(e), the Seller and the Parent, jointly and severally, shall pay to Buyer by wire transfer of immediately available funds to the account designated by Buyer an amount in cash equal to the amount by which the Purchase Price was so decreased; provided that, all or any portion of such Purchase Price adjustment may be satisfied from the Escrow Amount in Buyer’s discretion.

2.3     Allocation of Purchase Price .  The Purchase Price shall be allocated among the Acquired Assets as determined by Buyer in good faith and shall be set forth in a schedule produced by Buyer within one hundred twenty (120) days following the Closing Date (the “ Allocation Schedule ”). The parties shall, and shall cause their respective Affiliates to, use the allocations set forth in the Allocation Schedule (as reasonably adjusted to account for events occurring after the determination of the Allocation Schedule) for all Tax purposes, file all Tax Returns in a manner consistent with the Allocation Schedule (as adjusted) and take no tax position contrary thereto unless required to do so by a change in applicable Laws or a good faith resolution of a Tax contest.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT

Except as disclosed by the Seller and the Parent in the disclosure schedule, dated as of the date of this Agreement and delivered by the Seller and the Parent to Buyer (the “ Disclosure Schedule ”), the Seller and the Parent, jointly and severally, hereby represent and warrant to Buyer that the representations and warranties contained in this ARTICLE III are true, complete and correct. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this ARTICLE III, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify only the corresponding section or subsection of this ARTICLE III.

 

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3.1       Organization, Good Standing and Qualification of the Seller and the Parent .  The Seller and the Parent are duly incorporated and validly existing and in corporate and tax good standing under the Laws of the State of Delaware. The Seller is duly qualified or licensed as a foreign corporation to do business and is in corporate and tax good standing under the Laws of each jurisdiction where the character of the Acquired Assets or the nature of the Business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing would not, individually or in the aggregate, be reasonably likely to have a Business Material Adverse Effect. The Seller has all requisite power and authority, and is in possession of all Approvals necessary, to own, lease and operate the Acquired Assets and to carry on the Business as it is now being conducted. The Seller and the Parent have delivered to Buyer complete and accurate copies of their respective Organizational Documents, in each case as amended (if applicable) and in effect as of the date hereof. Set forth in Section 3.1(a) of the Disclosure Schedule is a list of (i) the jurisdictions in which the Seller is qualified or licensed to transact business, (ii) every state or foreign jurisdiction in which the Seller has employees or facilities and (iii) the directors and officers of the Seller.

3.2       Ownership of the Seller; Subsidiaries .  All outstanding shares of capital stock of the Seller are owned solely by the Parent and no other Person has at any time held any shares of capital stock of the Seller. There are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind (contingent or otherwise) obligating the Seller to issue, deliver or sell, or cause to be issued, delivered or sold, any shares of capital stock of the Seller. The Seller has not had, nor does it currently have, any Subsidiaries, nor has it ever owned, nor does it currently own, any capital stock or other proprietary interest, directly or indirectly, in any other Person.

3.3       Authorization; Binding Obligation .  Each of the Seller and the Parent have all necessary power and authority to execute and deliver this Agreement, each Related Agreement to which it is a party and each other instrument or document required to be executed and delivered by it pursuant to this Agreement or any such Related Agreement, and to perform each of their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of the Seller and the Parent of this Agreement and each Related Agreement to which it is a party, the performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all requisite action on the part of the Seller and the Parent and no other corporate proceedings on their part are necessary to authorize this Agreement or any Related Agreement to which it is a party or to consummate the transactions so contemplated herein and therein. This Agreement has been, and each of the Related Agreements to which the Seller or the Parent is a party, when executed and delivered by the Seller or the Parent, will be, duly and validly executed and delivered by the Seller or the Parent, as applicable, and this Agreement constitutes, and each Related Agreement to which the Seller or the Parent is a party, when executed and delivered by the Seller or the Parent, and each other party hereto and thereto, constitutes, a legal, valid and binding obligation of the Seller or the Parent, as applicable, enforceable against the Seller or the Parent in accordance with its terms, except (i) as limited by applicable

 

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bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

3.4       Consents and Approvals .  The execution and delivery by the Seller and the Parent of this Agreement, the Related Agreements to which the Seller or the Parent is a party or any other instrument or document required by this Agreement or any Related Agreement to be executed and delivered by the Seller or the Parent do not, and the performance of this Agreement, the Related Agreements to which the Seller or the Parent is a party and any other instrument or document required by this Agreement or any Related Agreement to be executed and delivered by the Seller or the Parent shall not, require the Seller or the Parent to obtain any Approval of any Person or Approval of, observe any waiting period imposed by, or make any filing with or notification to, any Governmental Authority.

3.5       No Violation .  The execution and delivery by the Seller and the Parent of this Agreement, the Related Agreements to which the Seller or the Parent is a party or any other instrument or document required by this Agreement or any Related Agreement to be executed and delivered by the Seller or the Parent do not, and the performance of this Agreement, the Related Agreements to which the Seller or the Parent is a party or any other instrument or document required by this Agreement or any Related Agreement to be executed and delivered by the Seller or the Parent, will not, (a) conflict with or violate the Organizational Documents of the Seller or the Parent, (b) conflict with or violate any Law or Order applicable to the Seller or the Parent or by which they or any of the Acquired Assets are bound or affected, or (c) result in any breach or violation of or constitute a default (or an event that with notice or lapse of time or both would become a breach, violation or default) under, or result in the creation of a Lien on any of the Acquired Assets pursuant to, any Assigned Contract or any other material Contract to which the Seller or the Parent is a party or is otherwise bound, or any Approval to which the Seller or the Parent is a party or by which the Seller or the Parent is bound or affected.

3.6       Regulatory Matters; Licenses and Permits .  Section 3.6 of the Disclosure Schedule contains a correct and complete list of all Approvals and Orders that have been issued, granted or otherwise made available to the Seller with respect to the Business (the “ Business Licenses ”). No Approvals or Orders have been issued, granted or otherwise made available to the Parent in connection with the operation of the Business. Each Business License is valid and in full force and effect, no Business License is subject to any Lien, limitation, restriction, probation or other qualification, and there is no default under any Business License or, to the knowledge of the Seller or the Parent, any basis for the assertion of any default thereunder. There is no Action pending or, to the knowledge of the Seller or the Parent, threatened that would reasonably be expected to result in the termination, revocation, limitation, suspension, restriction or impairment of any Business License or the imposition of any fine, penalty or other sanctions for violation of any legal or regulatory requirements relating to any Business License or, to the knowledge of the Seller or the Parent, any basis therefor. The Seller has, and has had at all relevant times, all Approvals that are or were necessary in order to enable the Seller to own and operate the Acquired Assets and to conduct the Business, including all necessary Approvals from the U.S. Food and Drug Administration (the “ FDA ”) or any foreign regulatory agency with a similar regulatory purpose. None of the Business Licenses will be adversely affected by the consummation of

 

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the transactions contemplated hereby. The Seller is in compliance in all material respects with the terms and conditions of each Business License held by it and the Seller has not received notice of any Action, and no such Action is pending, relating to the cancellation, suspension, revocation, modification or non-renewal of any Business License.

3.7       Title to and Condition of Properties; Sufficiency of Assets.

  (a)      Each of the Seller and the Parent, as applicable, is the sole and exclusive legal and equitable owner of all right, title and interest in, and has good, valid and marketable title to, all of the Acquired Assets purported to be owned by the Seller or the Parent, as applicable, and the legal and valid right to use all other Acquired Assets used or held for use by the Seller or the Parent, as applicable, including all Acquired Assets held under Personal Property Leases, the Real Property Lease or License Agreements, in any case, free and clear of all Liens, other than Permitted Liens. Each of the Seller and the Parent, as applicable, has the power and the right to sell, assign and transfer good, valid and marketable title to all of the Acquired Assets purported to be owned by the Seller or the Parent, as applicable, and the valid, enforceable and sufficient right to use all of the other Acquired Assets, free and clear of all Liens other than Permitted Liens.

  (b)      All tangible assets and personal property included in the Acquired Assets have been maintained in accordance with normal industry practice and are in good operating condition and repair, subject to ordinary wear and tear, and there has not been any interruption of the operations of the Business due to the condition of any such assets or properties.

  (c)      Except for the assets set forth on Schedule 1.2(h) attached hereto, the Acquired Assets, including all assets and properties held under the Personal Property Leases, the Real Property Lease and License Agreements, comprise all assets, properties, rights and Contracts used in connection with the operation of the Business, which are all of the assets, properties, rights and Contracts necessary for Buyer to operate the Business following the Closing in the manner in which the Business is currently conducted. All operations of the Business are conducted by the Seller and, except for its ownership of certain Acquired Assets and in its capacity as the sole stockholder of the Seller, the Parent is not involved in the operations of the Business.

3.8       Real Property .

  (a)      Neither the Seller nor the Parent own, nor have they ever owned, any real property. Section 3.8 of the Disclosure Schedule sets forth a complete and accurate list of all real property that is leased by the Seller or the Parent and used in connection with the operation of the Business, including all real property subject to the Real Property Lease (the “ Leased Real Property ”). The Real Property Lease is in full force and effect and is the legal, valid and binding obligation of the Parent and, to the knowledge of the Seller and the Parent, of the other parties thereto in accordance with its terms, and neither the Seller, the Parent nor, to the knowledge of the Seller or the Parent, the other parties thereto is in breach or default thereunder and there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a breach, default or alleged breach or default by the Parent or, to the knowledge of the Seller and the Parent, the other parties thereto of any of the foregoing. No consent of, or notice to, any third party is

 

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required under the Real Property Lease as a result of or in connection with, and the enforceability of the Real Property Lease will not be affected in any manner by, the execution, delivery and performance of this Agreement or the transactions contemplated hereby. The Seller and the Parent have delivered to Buyer a true and complete copy of the Real Property Lease, including all amendments thereto.

  (b)      The Parent holds the property leased to it under the Real Property Lease (the “ Leased Real Property ”) free and clear of all Liens, claims or rights of any third parties and the possession of the Leased Real Property (the “ Premises ”) by the Parent and the Seller has not been disturbed and no claim has been asserted against the Seller or the Parent adverse to its rights in such Premises. All improvements, fixtures and structures on the Premises and the current uses of the Premises conform in all material respects to all applicable Laws, including building, zoning, health, safety and other Laws, and applicable zoning Laws permit the presently existing improvements and the conduct of the Business as being conducted on the Premises. All improvements, mechanical equipment, fixtures and operating systems included in the Premises are in good operating condition and repair (ordinary wear and tear excepted) and there does not exist any condition which materially interferes with the economic value or use of such property and improvements.

  (c)      Neither the Parent nor the Seller has granted any leases or licenses, or created any tenancies, affecting the Premises. Except as disclosed in Section 3.8(c) of the Disclosure Schedule, there are no other parties in possession of any portion of the Premises as trespassers or otherwise.

  (d)      Neither the Parent nor the Seller is a party to or is otherwise bound by, nor is any of the Premises subject to, any Contract requiring it to pay any commissions or other compensation to any brokers or agents in connection with any of the Premises, and has had no dealings with any broker or agent with respect to the Premises upon which any such broker or agent would be entitled to a commission or other compensation.

  (e)      To the knowledge of the Parent and the Seller, (i) there are no Laws or Orders now in existence or under active consideration by any Governmental Authority which could require the tenant of any Leased Real Property to make any expenditure in excess of $10,000 to modify or improve such Leased Real Property to bring it into compliance therewith and (ii) neither the Parent nor the Seller is required to expend more than $10,000 in the aggregate under the Real Property Lease to restore the Leased Real Property at the end of the term of the Real Property Lease to the condition required under the Real Property Lease (assuming the conditions existing in such Leased Real Property as of the date hereof).

3.9       Personal Property Leases .  Section 3.9 of the Disclosure Schedule sets forth a complete and accurate list of all personal property that is leased by the Seller (the “ Leased Personal Property ” and, the leases covering the Leased Personal Property, collectively, the “ Personal Property Leases ”). The Parent does not lease any personal property that is used in connection with the operation of the Business. The Seller is the owner and holder of the leasehold interests purported to be granted by each Personal Property Lease, and all Personal Property Leases are in full force and effect in accordance with the terms thereof and are the legal, valid and binding obligations of the Seller and, to the knowledge of the Seller, of each other party thereto enforceable in

 

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accordance with their respective terms, and neither the Seller nor, to the knowledge of the Seller, the other party or parties thereto is or are in material breach or default thereunder and there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a material breach, default or alleged breach or default by the Seller or, to the knowledge of the Seller, the other party or parties thereto of any of the foregoing. No consent of, or notice to, any third party is required under any Personal Property Lease as a result of or in connection with, and the enforceability of any such Personal Property Lease will not be affected by, the execution, delivery and performance of this Agreement or any Related Agreement, or the transactions contemplated hereby or thereby. The Seller has delivered to Buyer complete and accurate copies of all Personal Property Leases, including all amendments thereto.

3.10     Environmental Matters .

  (a)      The Seller and the Parent have complied and are in compliance in all material respects with all Environmental Laws, which compliance includes the possession by the Seller and the Parent of all Approvals required under Laws and compliance with the terms and conditions thereof. Section 3.10(a) of the Disclosure Schedule includes a list of all of the Approvals required under Environmental Laws necessary to own and operate the Acquired Assets or the Business as currently conducted. There are no past or present facts, circumstances, conditions, activities or incidents which could give rise to any Liability or result in a claim against the Seller, the Parent or Buyer under any Environmental Law. There have been no releases by the Seller or any of its Affiliates of any Materials of Environmental Concern into the environment at any real property or facility formerly or currently owned or operated by the Seller or any of its Affiliates that is or was ever used by the Seller or any of its Affiliates. Neither the Parent nor the Seller has any knowledge of any release by any other Person of any Materials of Environmental Concern into the environment at any parcel of real property or any facility formerly or currently operated by the Seller that is or was ever used by the Seller or any of its Affiliates. There is no Action pending or, to the knowledge of the Seller or the Parent, threatened or other notice of violation, formal administrative proceeding or written information request by any Governmental Authority, nor has the Seller or the Parent received notice of any investigation by any Governmental Authority relating to any Environmental Law nor any other notice from a Governmental Authority or any Person alleging that the Seller or the Parent is not in compliance with any Environmental Law or Approval required under any Environmental Law or has any Liability under any Environmental Law or for the remediation of any Materials of Environmental Concern at any property.

  (b)      There are no facts, circumstances or conditions existing at any facilities owned or operated by the Seller or any of its Affiliates, including the release of any Materials of Environmental Concern, that would reasonably be expected to give rise to any material Liability or result in a claim against the Seller or any of its Affiliates, under any Environmental Law.

  (c)      Set forth in Section 3.10(c) of the Disclosure Schedule is a complete and accurate list of all environmental reports, investigations or audits (whether in hard copy or electronic form) relating to premises currently or previously leased, owned or operated by the Seller or any of its Affiliates (whether conducted by or on behalf of the Seller or any of its Affiliates or a third party, and whether done at the initiative of the Seller or an Affiliate or directed by a Governmental Authority or other third party) of which the Seller or the Parent is aware. A complete and accurate copy of each such document has been provided to Buyer.

 

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3.11     Financial Statements; No Undisclosed Liabilities .

  (a)      Section 3.11 of the Disclosure Schedule contains the following financial statements (collectively, the “ Financial Statements ”):

    (i)      the unaudited balance sheet of the Seller as of May 31, 2009 (the “ Interim Balance Sheet ”) and the related statements of income, cash flow and stockholders’ equity for the five-month period then ended (the “ Interim Financial Statements ”); and

    (ii)     the unaudited balance sheets of the Seller as of December 31, 2008 and December 31, 2007 and the related statements of income, cash flow and stockholders’ equity for the respective twelve-month periods then ended.

The Financial Statements were prepared in accordance with the books and records of the Seller, are complete and correct and fairly and accurately present in all material respects the financial condition of the Seller and the Business as of the dates indicated and the results of operations of the Seller and the Business for the respective periods indicated, and have been prepared in accordance with GAAP, consistently applied, except for the absence of complete footnote disclosure as required by GAAP and subject to changes resulting from normal, recurring period-end audit adjustments. The Financial Statements reflect the consistent application of GAAP throughout the periods involved.

  (b)      Except as and to the extent the amounts are specifically accrued or disclosed in the Interim Balance Sheet, neither the Seller nor the Parent (with respect to the Business) have any material Liabilities, whether or not required by GAAP to be reflected in the Interim Balance Sheet, except for Liabilities that were incurred in the ordinary course of business consistent with past practice since the date of the Interim Balance Sheet.

3.12     Absence of Certain Events .  Since December 31, 2008, the Business has been conducted only in the ordinary and usual course and in a manner consistent with past practice and there has not been any change, event, loss, development, damage or circumstance affecting the Acquired Assets or the Business which, individually or in the aggregate, has had or could reasonably be expected to have a Business Material Adverse Effect (a “ Business Material Adverse Change ”). As amplification and not in limitation of the foregoing, since December 31, 2008, there has not been:

  (a)      any material decrease in the value of any of the Acquired Assets, other than ordinary depreciation consistent with past practices;

  (b)      any voluntary or involuntary sale, assignment, license or other disposition of any kind of any material asset or property of the Seller or the Parent used in connection with the operation of the Business, except the sale of inventory in the ordinary course of business;

  (c)      any Lien imposed or created on any of the Acquired Assets;

 

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  (d)     any damage, destruction or loss of any material asset or property of the Seller or the Parent used in connection with or relating to the operation of the Business, by fire or other casualty, whether or not covered by insurance;

  (e)     any capital expenditure or commitment by the Seller in excess of $10,000 or series of capital expenditures or commitments in excess of $20,000 in the aggregate;

  (f)      any payment, discharge or satisfaction of any material Liability of the Seller or the Business other than payments made in the ordinary course of business of Liabilities reflected or reserved against in the Interim Balance Sheet or Liabilities incurred since that date in the ordinary course of business consistent with past practice;

  (g)     any assignment, termination, modification or amendment of any material Contract to which the Seller was or is a party or which is otherwise related to the Business, except for terminations, modifications or amendments made in the ordinary course of business consistent with past practice and which would not, either individually or in the aggregate, have a Business Material Adverse Effect;

  (h)     any notice to the Seller or the Parent that any Assigned Contract or other material Contract to which the Seller or the Parent was or is a party that relates to the Business or the operation thereof has been breached, repudiated or terminated or will be breached, repudiated or terminated;

  (i)      any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable or to become payable to any Business Employee, or any agreement to pay any bonus or extra compensation or other employee benefit to any Business Employee;

  (j)      any failure to pay or discharge when due (after the application of any applicable grace periods) any material Liabilities of the Seller or the Parent arising from the operation of the Business, except for Liabilities contested in good faith by the Seller or the Parent and for accounts payable of the Seller which are paid in accordance with the historical practices of the Seller, provided that, such Liabilities and accounts payable have been fully reflected and reserved for in the Interim Balance Sheet;

  (k)     any change in any of the accounting principles adopted by the Seller or the Parent, or any change in the Seller’s or the Parent’s accounting policies, procedures, practices or methods with respect to applying such principles, other than as required by GAAP;

  (l)      any material transaction or Contract entered into, or Liability created, assumed, guarantied or incurred, by the Seller outside the ordinary course of business;

  (m)    any amendment to the Organizational Documents of the Seller;

  (n)     any Tax election made by the Seller, or any change of any annual Tax accounting period, amendment of any Tax Return, settlement of any income Tax Liability, entry into any closing agreement, settlement of any Tax claim or assessment, surrender of any right to claim a Tax refund or consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment;

 

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  (o)      any acquisition of or agreement to acquire by merging or consolidating with, or by purchasing a substantial portion of the capital stock or assets of, or by any other manner, any business or any corporation, partnership, limited liability entity, joint venture, association or other business organization;

  (p)      any termination of employment (or other form of engagement) of any Business Employee or any expression of intention by the Seller or the Parent or by any such Business Employee to terminate employment (or other engagement);

  (q)     any cancellation or forfeiture of any material debts or claims of the Seller or any waiver of any material rights of material value to the Seller or the Business or settlement of any Action;

  (r)      any write-off of any accounts receivable or notes receivable of the Seller or any portion thereof in excess of $10,000 individually or $20,000 in the aggregate, or any sale, assignment or disposition of any such account or note receivable (including by means of any factoring agreement);

  (s)      any incurrence, assumption or creation of any Indebtedness or guarantee of any Indebtedness of any other Person, or making, incurrence, assumption, creation or guarantee of any loan, or making of any advance or capital contribution to or investment in any Person by the Seller;

  (t)      any engagement by the Seller in any transaction with any Affiliate, employee, officer, director or security holder thereof, other than the payment of normal wages and salaries to employees in the ordinary course of business and consistent with past practice and advances to employees in the ordinary course of business for travel and similar business expenses and consistent with past practice;

  (u)     any grant of any license or sublicense of any rights under or with respect to, or sale, transfer or permission to lapse, of any Seller Intellectual Property; or

  (v)     any agreement, understanding, authorization or proposal, whether in writing or otherwise, for the Seller to take any of the actions specified in this Section 3.12.

3.13     Legal Proceedings .

  (a)     Section 3.13(a) of the Disclosure Schedule sets forth all Actions pending or, to the knowledge of the Seller or the Parent, threatened against the Seller or any of its officers or directors (in their capacities as such), and the Seller has not received any claim, complaint, incident, report, threat or notice of any such Action. There is no Action pending or threatened against any other Person by the Seller.

  (b)     Section 3.13(b) of the Disclosure Schedule sets forth all Actions that (i) involved the Seller at any time during the past three (3) years and (ii) are no longer pending (the “ Prior Actions ”). All of the Prior

 

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Actions have been concluded in their entirety and the Seller does not have and will not have any Liability with respect to the Prior Actions. The Seller and the Parent have provided Buyer with all formal written communications relating to the Prior Actions between the Seller and a Governmental Authority and any Orders related thereto.

  (c)      Neither the Seller nor the Parent has received any communication or advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any Liability relating to their ownership or operation of the Acquired Assets or the Business.

  (d)      There are no outstanding Orders against, involving or affecting the Seller, the Business or the Acquired Assets, and the Seller is not in default with respect to any such Order of which it has knowledge or was served upon it.

  (e)      There is no Action pending or, to the knowledge of the Seller or the Parent, threatened by or against or affecting the Parent that (a) relates to the Business, the Acquired Assets or the Assumed Liabilities, (b) would give any Person the right to enjoin or rescind the transactions contemplated by this Agreement, or (c) would otherwise prevent the Parent from (i) executing and delivering this Agreement or the Related Agreements to which it is a party or (ii) performing the Parent’s obligations pursuant to, or observing any of the terms and provisions of, this Agreement or the Related Agreements to which it is a party.

3.14     Compliance with Laws .

  (a)      The Seller and the Parent have complied and are in compliance in all material respects with all Laws applicable to (i) the Seller, (ii) the Acquired Assets and (iii) the Seller’s and the Parent’s ownership, use or operation thereof, and to the operation of the Business. Neither the Seller nor the Parent has received any notice to the effect that, or otherwise been advised that, the Seller or the Parent is not in compliance with any such Laws, and neither the Seller nor the Parent have any reason to anticipate that any existing circumstances are likely to result in an Action or a violation of any such Law. No investigation or review by any Governmental Authority with respect to the Seller, the Parent (relating to the Business) or the Business is pending or, to the knowledge of the Seller or the Parent, threatened, nor has any Governmental Authority indicated an intention to conduct the same.

  (b)      The Seller and the Parent have complied and are in compliance in all material respects with all applicable security and privacy standards regarding protected health information under the Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”) and the Regulations promulgated thereunder and all applicable state privacy Laws in connection with the operation of the Business. The Seller Products contain technical security mechanisms, which are reasonably capable of protecting the confidentiality, integrity and availability of the data stored or transmitted by such products, and include access controls, audit controls, mechanisms to verify the integrity of the data or images, Person authentication, and transmission security mechanisms. Neither the Seller nor the Parent have received from any Person, nor have been made aware of, any written complaints or concerns regarding the Seller’s or any Seller Product’s noncompliance with HIPAA, any regulations promulgated thereunder, or any applicable state privacy Laws. To the extent that the Seller or the Parent has represented to a customer of the Business that Business’ products or services comply with any privacy or security Laws or standards, the Seller and the Parent have undertaken all activities reasonably necessary to comply with such Laws or standards.

 

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3.15     Employment Matters .

  (a)      Section 3.15(a) of the Disclosure Schedule sets forth a complete and accurate list of all current Business Employees as of the date hereof and each such Business Employee’s (i) rate of pay or annual compensation (including actual or potential annual, incentive, retention, change-of-control or other bonus or similar payments and the terms of any commission payments or programs) as of the date hereof an as of immediately prior to the Seller’s compensation reduction implemented in the fourth quarter of 2008, (ii) title(s), (iii) status of employment or engagement, (iv) date of hire or engagement, (v) annual vacation, sick and other paid time off allowance, (vi) amount of accrued vacation, sick and other paid time off and the economic value thereof, (vii) description of other fringe benefits and (viii) terms of severance benefits. Section 3.15(a) of the Disclosure Schedule also identifies each Business Employee who is not fully available to perform his or her duties as a result of disability or other leave and sets forth the basis of such leave and the anticipated date of return to full service. Section 3.15(a) of the Disclosure Schedule sets forth all employment, consulting, independent contractor, severance pay, continuation pay, termination or indemnification Contracts between the Seller or any of its Affiliates and any current or former Business Employee.

  (b)      Neither the Seller nor any of its Affiliates are, and, as of the Closing Date, will be delinquent in payments to any Business Employee for any wages, salaries, commissions, bonuses, benefits or other compensation for any services performed by them to date or through the Closing Date or any amounts required to be reimbursed to any Business Employee or any post-employment or post-engagement obligations of any type. Upon termination of employment or engagement of any Business Employee, neither Buyer nor any of its Affiliates will, by reason of anything done prior to the Closing, be liable to any Business Employee for so-called “severance pay” or any other similar payments, and to the Seller’s or the Parent’s knowledge, there are no circumstances whereby any current or former Business Employee may demand payment or compensation in connection with the termination of his or her employment. No current Business Employee has informed the Seller or the Parent that such individual intends to terminate his or her employment or engagement with the Seller.

  (c)      Neither the Seller or any of its Affiliates nor, to the knowledge of the Seller or the Parent, any Business Employee is in violation of any term of any employment, consulting, independent contractor, non-disclosure, non-competition, inventions assignment or any other Contract (or any other legal obligation such as a trade secrets statute or common law duty of loyalty) relating to the relationship of such Business Employee with the Seller or any of its Affiliates or any other Person or has been notified that such Business Employee may be in violation of any such Contract or other legal obligation. Each current Business Employee who is required to be licensed by applicable Law is so licensed, and complete and accurate copies of such Licenses have previously been delivered to Buyer.

  (d)      During the preceding twelve (12) months, the Seller has had adequate levels of staffing to conduct the Business in a commercially reasonable manner.

 

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  (e)      Neither the Seller nor any of its Affiliates is a party to any collective bargaining Contracts or other Contracts with any labor unions or other representatives of the Business Employees nor is it under any obligation to bargain with any bargaining agent on behalf of any Business Employees. To the knowledge of the Seller or the Parent, there have not been any organization campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit which could affect the Business. There are no existing or threatened labor strikes, work stoppages or organized slowdowns affecting the Business.

  (f)      There are no unfair labor practice complaints or other Actions pending or, to the knowledge of the Seller or the Parent, threatened against the Seller before the National Labor Relations Board, any Court or any Governmental Authority concerning any Business Employee. There are no complaints or other Actions pending or, to the knowledge of the Seller or the Parent, threatened by or on behalf of any Business Employee alleging breach of any express or implied Contract.

  (g)      Section 3.15(g) of the Disclosure Schedule sets forth all Employee Benefit Plans under which current or former Business Employees (or their beneficiaries) are eligible to participate or derive a benefit or for which the Acquired Assets may be subject to any Liability. The Seller has delivered to Buyer correct and complete copies of all Employee Benefit Plans listed in Section 3.15(g) of the Disclosure Schedule. Each Employee Benefit Plan intended to be qualified under section 401(a) of the Code, and the trust (if any) forming a part thereof, is so qualified and has received a favorable determination letter from the IRS. Each Employee Benefit Plan has been operated in accordance with applicable Law in all material respects.

  (h)      The Seller and its Affiliates have complied in all material respects with all its obligations under Law with respect to any aspect of the employment or engagement of all Business Employees, including with respect to employment practices, terms and conditions of employment, wage and hours, and the health and safety at work of their employees, and there are no claims pending or, to the knowledge of the Seller or the Parent, threatened by any person in respect of employment or engagement or any accident or injury. Neither the Seller nor any ERISA Affiliate has maintained a “multiemployer plan” (as defined in Section 3(37) of ERISA) or an arrangement subject to Section 501(c)(9), 419 or 419A of the Code, or a “pension plan” (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, a self insured plan providing medical benefits or a plan providing for medical or life insurance coverage beyond termination of employment (other than COBRA Coverage or under similar state Laws).

  (i)      Each current Business Employee who is located in the United States and is not a United States citizen has all Approvals necessary to work in the United States in accordance with applicable Law.

  (j)      There is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or, to the knowledge of the Seller or the Parent, threatened with respect to the Seller or the Business.

  (k)      There is no charge of discrimination in employment or employment practices, for any reason, including age, gender, race, religion or other legally protected category, or any alleged violation of any privacy Laws, which has been asserted or, to the knowledge of the Seller or the Parent, is now pending or threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Seller has employed or currently employs any person.

 

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3.16     Taxes .  All Taxes payable by the Seller have been timely paid, or, to the extent not required to have been paid, have been accrued in the Interim Balance Sheet; all federal, state, local and foreign Tax Returns required to be filed by or on behalf of the Seller with respect to any such Taxes have been timely filed, and all such Tax Returns are complete and correct in all material respects and have been filed in accordance with all applicable Law; all Taxes that the Seller is or was required by Law to have withheld have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Authority; no unpaid Tax deficiency has been asserted against or with respect to the Seller and neither the Seller nor the Parent has received notice of any such assertion; neither the Seller nor the Parent has been informed by any jurisdiction that such jurisdiction believes that the Seller is or was required to file any Tax Return. The Seller has not executed or entered into any ruling or agreement with any Governmental Authority regarding Taxes or has agreed to make any adjustment to its income or deductions pursuant to a change in its method of accounting. The Seller has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, and no withholding pursuant to Section 1445 of the Code will be required in connection with this Agreement or the transactions contemplated hereby. There are no Liens with respect to Taxes upon any of the Acquired Assets other than Permitted Liens.

3.17     Contracts .

  (a)      Section 3.17(a)(i) of the Disclosure Schedule sets forth a complete and accurate list of all of the following Contracts to which the Seller is a party or is otherwise bound or by which any of the Acquired Assets are subject (and with respect to any oral Contract provides a complete description of the terms of such Contract) (the “ Scheduled Contracts ”):

    (i)       all notes, loans, credit agreements, mortgages, indentures, security agreements, operating leases, capital leases and other Contracts relating to Indebtedness and any Contract of suretyship or guaranty;

    (ii)      all employment, consulting and independent contractor Contracts, and all bonus, commission, compensation, pension, insurance, retirement, deferred compensation and other plans, Contracts and other arrangements for the benefit of any Business Employee;

    (iii)     all Contracts involving an annual payment to or by the Seller from or to any Person in excess of $5,000 individually or $20,000 in the aggregate with respect to all Contracts with such Person;

    (iv)     all Contracts for capital expenditures or the purchase or sale of any asset or property of the Seller in excess of $5,000 individually for any Person or $20,000 in the aggregate for all Contracts with such Person;

 

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    (v)      all customer Contracts for the purchase of products or services from the Seller;

    (vi)     all joint venture, partnership or other Contracts involving a share of profits or losses with another Person;

    (vii)    all Contracts with any Affiliate of the Seller;

    (viii)   all Contracts restricting competition, solicitation or the business activities of the Seller;

    (ix)     all Contracts pursuant to which the Seller has granted or received manufacturing rights, most favored nation pricing provisions or exclusive marketing, sales or other similar rights relating to any product, service, technology, asset or territory;

    (x)      all Government Contracts and Government Bids;

    (xi)     all sales, agency, representative, distributor, franchise or similar Contracts;

    (xii)    all Contracts under which the Seller subcontracts services to a third party;

    (xiii)   any material Contract which is terminable upon or prohibits a sale of substantially all of the assets of Seller;

    (xiv)   all Contracts granting or permitting any Lien on any of the Acquired Assets;

    (xv)    all Contracts with any vendors, suppliers or contractors; and

    (xvi)   any other Contracts that are material to the Seller or the Business and have not been previously disclosed pursuant to this Section 3.17.

The Seller has delivered to Buyer complete and accurate copies of all Assigned Contracts and Scheduled Contracts, including all amendments thereto. Except as set forth in Section 3.17(a)(ii) of the Disclosure Schedule, the Parent is not a party to or bound by any Contract that relates to the operation of the Business other than the Parent Assigned Contracts.

  (b)      Neither the Seller nor the Parent is in breach or default in any material respects under the terms of any Assigned Contract and, there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a breach or default by the Seller or the Parent, nor has the Seller or the Parent received any notice of any breach or default or alleged breach or default under any Assigned Contract. To the knowledge of the Seller or the Parent, no other party to any Assigned Contract is in default under the terms thereof, and, to the knowledge of the Seller or the Parent, there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a breach or default by any such party, nor has the Seller or the Parent received any notice of any breach or default by any such party.

 

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  (c)      The Assigned Contracts are in full force and effect and are valid and binding obligations of the Seller and, to the knowledge of the Seller or the Parent, the other parties thereto. Neither the Seller nor the Parent has received any notice from any other party to a Assigned Contract of the termination or threatened termination thereof, or of any claim, dispute or controversy with respect thereto, nor, to the knowledge of the Seller or the Parent, is there any basis therefor.

  (d)      No consent of, or notice to, any third party is required under any Assigned Contract as a result of or in connection with, and neither the enforceability nor any of the terms or provisions of any Assigned Contract will be affected in any manner by, the execution, delivery and performance of this Agreement or any Related Agreement, or the transactions contemplated hereby or thereby.

  (e)      Except as set forth in Section 3.17(e) of the Disclosure Schedule, (i) there are no non-United States citizens employed by the Seller or any of its Affiliates actively working on any Government Contract nor are there any employees or contractors working on Government Contracts outside of the United States, (ii) the final indirect rate submissions, including all support schedules, submitted to any Governmental Authority with respect to Government Contracts have been approved and (iii) to the extent required by Law, all Government Contracts have been awarded, and all Government Bids have been submitted, under a full and open procurement process without preferential treatment of any kind. To the knowledge of the Seller or the Parent, there exists no basis for a claim of any liability by any Governmental Authority as a result of defective cost and pricing data submitted to such Governmental Authority, including any such data relating to liabilities accrued on the Seller’s books or in its financial accounts for deferred compensation to any Business Employee. To the knowledge of the Seller or the Parent, no audit or review of any Government Contract will likely result in the disallowance of, or claim for, any amount paid or payable to the Seller under such Government Contract, whether as a result of excess payments, excess profit recapture or otherwise.

3.18     Transactions With Affiliates .  Section 3.18 of the Disclosure Schedule lists all Contracts or transactions to or by which the Seller, on the one hand, and any of its Affiliates, officers, directors or employees or, to the knowledge of the Seller or the Parent, any family member, relative or Affiliate of any such officer, director or employee, on the other hand, are or have been a party or otherwise bound or affected and that (i) were entered into since January 1, 2008, (ii) are currently pending or in effect or (iii) involve continuing Liabilitie