ASSET PURCHASE AGREEMENT

Exhibit 2.1

 

 

ASSET PURCHASE AGREEMENT

 

dated as of December 19 , 2005

 

between

 

SPECTRAL DIAGNOSTICS INC.

 

and

 

NANOGEN, INC.

 

and

 

SYNX PHARMA, INC.

 

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(continued)

 

 

ii

TABLE OF CONTENTS

(continued)

 

 

iii

TABLE OF CONTENTS

(continued)

 

 

iv

ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT, dated as of December 19, 2005 (the “Agreement” ), between SynX Pharma, Inc., a corporation formed under the Business Corporation Act (Ontario) ( “Subsidiary” ), Nanogen, Inc., a Delaware corporation ( “Parent” ) and Spectral Diagnostics Inc., a corporation formed by amalgamation under the Business Corporation Act (Ontario) ( “Seller” ).

 

WHEREAS, the Seller Group (as defined below) are engaged through Seller’s (i) Cardiac Products Division in the business of the research, development, manufacture, testing and distribution of rapid cardiac immunoassay tests, and (ii) Primecare Division in the business of the development and manufacture of plasma separation and collection membranes, cartridges and other plasma separation products; and

 

WHEREAS, the parties desire that the Seller Group sell, assign, transfer, convey and deliver to Subsidiary and/or such Affiliates of Subsidiary as Subsidiary may designate in writing to Seller not less than three Business Days prior to the Closing ( “Buyer” ), and that Buyer purchase and acquire from the Seller Group, all of the right, title and interest of the Seller Group in and to the Purchased Assets (as hereinafter defined), and that Buyer assume the Assumed Liabilities (as hereinafter defined), upon the terms and subject to the conditions of this Agreement; and

 

WHEREAS, in connection with, and contemporaneously with, the execution and delivery of this Agreement by Seller, certain of Seller’s officers, directors and stockholders will enter into voting agreements with Parent with respect to among other things the agreement to vote in favor of the approval of the transaction described herein at the Seller Meeting (as defined herein).

 

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1 Definitions . When used in this Agreement, the following terms shall have the meanings:

 

“Accounts Receivable” means (a) any trade accounts receivable and other rights to payment from customers Related to the Business and (b) any other account or note receivable Related to the Business, together with, in each case, the full benefit of any security interest of any member of the Seller Group in respect thereof.

 

“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

“Ancillary Agreements” means the Bill of Sale, the Assignment and Assumption Agreement, the Patent Assignment, the Trademark Assignment, the Copyright Assignment, the Patent Licenses, the Amendment, the Transition Services Agreement and the other agreements, instruments and documents delivered at the Closing.

 

“Authorization” means any authorization, approval, consent, certificate, license, permission, permit or franchise of or from any Governmental Entity or pursuant to any Law.

 

“Books and Records” means, in whatever form comprised and to the extent Related to the Business, (i) originals of all (a) files and laboratory notebooks, (b) design history files, device master records, research and development reports, product and component specifications, formulations and designs, plans, drawings, technical and design manuals, engineering records, lot records, flow diagrams, quality control or quality assurance records and data, software instrument, reagent and equipment validations, standard operating procedures, audits or assessments, testing results, manufacturing process reports, and other documentation relating to the manufacture, supply, testing, labeling or packaging of Products or Reagents; (c) correspondence and documentation relating to FDA Authorizations or required by FDA Regulations (including study protocols, study plans, pre-clinical and clinical study test results and data, and investigator and study site lists and contact reports, studies and bibliography of published reports relied upon to demonstrate safety and effectiveness, quality system certificates, pre-market submissions and applications, CE dossiers, annual certifications for renewal, recall procedures); (d) books and records relating to Seller IP, including copies of all software, source code, software documentation, development records and licenses; and (e) employee and personnel records of the Transferred Employees; and (ii) copies of all books, documents or records including (x) books of account, general, financial, warranty and shipping records, invoices, supplier lists, pricing lists, maintenance, operating and production records; and (y) current and prospective customer lists and records, credit records of customers, customer marketing records call lists or similar materials, market research, marketing and media plans, advertising and promotional materials.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which banks located in San Diego, California, USA or Toronto, Ontario, Canada are authorized or required by Law to close.

 

“Business” means the research, development, manufacture, production, design, marketing, distribution and sale of (i) assays for the detection of biological markers associated with cardiovascular disease, including the Cardiac STATUS™, Decision Point™ and iLynx™ product lines of the Seller Group, but excluding the urinary Myoglobin test (uMyo); (ii) the Reagents; (iii) plasma separation and collection membranes cartridges and other plasma separation products, including hydrophilic polymeric membranes; and (iv) analytical tests using, incorporating or otherwise associated with the Alladin patents (identified on Schedule 1.1 hereto) or technologies.

 

2

“Business Employee” means any individual employed by any member of the Seller Group in or in connection with the Business.

 

“Circular” means the management information circular and notice of Seller Meeting, including all schedules and exhibits thereto, to be sent to Seller Shareholders in connection with the Seller Meeting.

 

“Common Stock” means the common stock of Parent.

 

“Contract” means any agreement, contract, license, lease, commitment, arrangement or understanding, written or oral, including any sales or purchase orders.

 

“Employee Claims” means any Liability for any employment related claims, including claims involving, alleging or arising out of wrongful dismissal or constructive discharge, discrimination or sexual harassment by any member of the Seller Group (or their officers, directors, employees or agents), pay equity, workplace safety and insurance, worker’s compensation, occupational health and safety, labor relations or employment standards; in each case, whether such claims are known or unknown, threatened or pending, arise out of the transactions contemplated hereby or otherwise.

 

“Employment Contracts” means each written employment Contract including retention agreements, between Seller, on the one hand, and a Business Employee, on the other hand.

 

“Environmental Laws” means any and all applicable Laws and Authorizations issued or promulgated by any Governmental Entity relating to the environment, worker health and safety, preservation or reclamation of natural resources, or to the management, handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, Release or threatened Release of or exposure to Hazardous Substances, whether now existing or subsequently amended or enacted.

 

“Environmental Liabilities” means any Liability arising out of (a) the ownership or operation of the Business or ownership of the Leased Real Property at any time on or prior to the Closing, or (b) the operation or condition of Leased Real Property in each case to the extent based upon or arising out of (i) Environmental Law, (ii) a failure to obtain, maintain or comply with any Environmental Permit, (iii) a Release of any Hazardous Substance, or (iv) the use, generation, storage, transportation, treatment, sale or other off-site disposal of Hazardous Substances.

 

“Environmental Permit” means any Authorization or order under Environmental Law.

 

“Equipment” means machinery, clinical laboratory instrumentation, fixtures, furniture, supplies, accessories, materials, equipment, parts, automobiles, trucks, vehicles, tooling, tools, molds, office equipment and computers in each case (i) listed on Schedule 1.2, (ii) primarily used in the Business as presently conducted or (iii) necessary to support the Business as presently conducted and as to be conducted post-Closing

 

3

(assuming the Business is conducted on the same basis as it is conducted prior to Closing).

 

“Excluded Inventory” means the Inventory listed on Schedule 1.3, as updated pursuant to Section 6.10.

 

“FDA Authorities” means the United States Food and Drug Administration, Canadian Department of Health (“Health Canada”), China State Food and Drug Administration, applicable Notified Bodies in the European Union and any other similar regulatory authority or certification body in any jurisdiction (whether federal, state, provincial, territorial, or local, governmental or non-governmental).

 

“FDA Authorizations” means all Authorizations issued or administered by any FDA Authority.

 

“FDA Regulations” means all rules, regulations, directives, decrees, protocols, codes, guidelines, interpretations, policies, Authorizations or Laws (including the US Food Drug and Cosmetic Act and the Food and Drugs Act of Canada) issued or administered by any FDA Authority, including those relating to investigational use, investigational device exemption, premarket notification, premarket approval, approval, 501(k) clearance, good clinical and good laboratory practices, good manufacturing practices, record keeping, filing of reports, packaging, labeling, testing, advertising, problem and complaint investigations and handling, and patient medical record security.

 

“GAAP” means generally accepted accounting principles as defined from time to time by the Accounting Standards Board of the Canadian Institute of Chartered Accountants in the Handbook of the Canadian Institute of Chartered Accountants, as they exist on the date of this Agreement.

 

“Governmental Entity” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any federal, provincial, state, local, or municipal government of Canada, the United States or any other foreign, international, multinational or other governmental body, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory, administrative or judicial authority thereof, and any non-governmental regulatory body to the extent that the rules and regulations or orders of such body have the force of Law.

 

“Hazardous Substances” means all explosive or regulated radioactive materials or substances, hazardous or toxic materials, wastes or chemicals, petroleum and petroleum products (including crude oil or any fraction thereof), asbestos or asbestos containing materials, and all other materials, chemicals or substances which are regulated by, form the basis of liability or are defined as hazardous, extremely hazardous, toxic, poisonous, corrosive or words of similar import, under any Environmental Law.

 

“Indebtedness” means any of the following: (a) any indebtedness for borrowed money, (b) any obligations evidenced by bonds, debentures, notes or other similar instruments, (c) any obligations to pay the deferred purchase price of property or

 

4

services, except trade accounts payable arising in the ordinary course of the Business, (d) any obligations as lessee under capitalized leases, (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property, (f) any obligations, contingent or otherwise, under acceptance credit, letters of credit or similar facilities, and (g) any guaranty of any of the foregoing.

 

“Indemnitee” means any Person that is seeking indemnification from an Indemnitor pursuant to the provisions of this Agreement.

 

“Indemnitor” means any party hereto from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.

 

“Insolvent” means, with respect to any Person, that (i) the sum of the debts and other probable Liabilities of such Person exceed the present fair saleable value of such Person’s assets; or (ii) such Person will not be able to pay its Liabilities as they become due in the usual course of its business, or (iii) such Person will have an unreasonably small capital with which to conduct its present or proposed business.

 

“Inventory” means all raw materials, work-in-process, finished goods, supplies, spare parts, Reagents and other inventories Related to the Business, wherever located and in whoever’s possession, including Inventory held by, or in transit to or from, any supplier, distributor, sales agent, or consignee.

 

“Key Employees” means David Ray and Garth Styba.

 

“Knowledge” of Seller or any similar phrase means, with respect to any fact or matter, the actual knowledge of the directors and executive officers of each member of the Seller Group and any of the Persons listed on Schedule 1.4, after reasonable inquiry of the Persons employed by the Seller’s Group having responsibility for, and knowledge of, the applicable subject matter.

 

“Law” means any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, judgment, rule, regulation and any other binding requirement or determination of any Governmental Entity.

 

“Liabilities” means any liabilities, obligations or commitments of any nature whatsoever, and whether asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, matured or unmatured.

 

“Lien” means any mortgage, lien, pledge, charge, security interest, adverse claim, title retention, conditional sale, or other encumbrance.

 

“NNM” means the NASDAQ Stock Market Inc.’s National Market.

 

“Order” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.

 

5

“Parties” means Seller, Buyer, Parent and any other Person who may become a party to this Agreement.

 

“PBM Settlement” means the Restructuring Agreement among Spectral Diagnostics Inc., Carepoint Cardiac Corporation and Princeton Biomeditech Corporation dated July 30, 2002.

 

“Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any other entity or body.

 

“Product” means any product, currently or formerly, under development, developed, manufactured, tested, marketed, sold, distributed, shipped, licensed, commercialized by the Business or otherwise Related to the Business.

 

“Reagents” means (i) all reagents and human or other samples, including those used in the processes for testing, development, production or purification of reagents (including reagents used in developing NTproBMP), or used in assays, including biological markers, labeled and unlabeled monoclonal and polyclonal antibodies, calibrators, controls and cell lines (including hybridoma and recombinant proteins, plasmids and expression systems), recombinant proteins and their isoforms and amplification systems used in assays and (ii) the genebank and patient sample bank.

 

“Related to the Business” means used, held for use or acquired or developed for use in the Business or otherwise relating to, or arising out of, the operation or conduct of the Business.

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous Substances into the environment.

 

“Required Seller Vote” means approval of the transactions contemplated by this Agreement by the requisite number of the votes cast by Seller Shareholders at the Seller Meeting, in person or by proxy.

 

“Retained Names” means “Spectral”, “Spectral Diagnostics” or any name, logo, domain name, or trademark that includes “Spectral”, any variation and derivatives thereof and any other logos or trademarks of the Seller Group not assigned pursuant to the Trademark Assignment or otherwise exclusively Related to the Business.

 

“Retained Reagents” means the Reagents listed on Schedule 1.5.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Seller Group” means Seller and its Affiliates (including Spectral Diagnostics (US), Inc., Spectral Europe GmbH, Deltapoint Cardiac Diagnostics, Inc., and Primecare BV).

 

6

“Seller Group Benefit Plans” means all plans, arrangements, agreements, programs, policies, practices or undertakings, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, registered or unregistered to which any member of the Seller Group is a party or bound or in which the Business Employees participate or under which any member of the Seller Group has, or will have, any liability or contingent liability, or pursuant to which payments are made, or benefits are provided to, or an entitlement to payments or benefits may arise with respect to any of Business Employees or former employees of the Business, directors or officers of any member of the Seller Group, or other individuals providing services to any member of the Seller Group relating to the Business of a kind normally provided by employees (or any spouses, dependants, survivors or beneficiaries of any such persons).

 

“Seller Meeting” means the special meeting of Seller Shareholders, including any adjournment thereof, to be called for the purpose of obtaining the Required Seller Vote.

 

“Seller Shareholders” means the holders of voting shares in the capital stock of Seller.

 

“Tax” or “Taxes” means any and all federal, state, provincial, local, or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, goods and services, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, transaction, license, lease, service, service use, occupation, severance, energy, unemployment, social security, workers’ compensation, capital, premium, and other taxes, assessments, customs, duties, fees, levies, health insurance and Canada, Quebec and other government pension plan premiums or contributions or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax, or additional amounts with respect thereto.

 

“Tax Returns” means any return, declaration, election, notice, report, claim for refund, or information return, statement and other document (whether in tangible, electronic or other form) relating to Taxes, including any schedule, appendix, exhibit or attachment thereto, and including any amendment thereof.

 

“Taxing Authority” means any Governmental Entity having jurisdiction with respect to any Tax.

 

“Troponin I Patents” means the patents set forth on Schedule 1.6 hereto.

 

“Troponin I Single Chain” means the unique recombinant fusion protein in which the N-terminal fragment of Troponin I is fused to Troponin C to mimic endogenous native Troponin, protected by the Troponin I Patents.

 

“$” means United States dollars and “C$” means Canadian dollars.

 

7

ARTICLE II

 

PURCHASE AND SALE

 

2.1 Purchase and Sale of the Purchased Assets . Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall, and shall cause each other relevant member of the Seller Group to, sell, assign, transfer, convey and deliver to Buyer and Buyer or such Affiliate shall purchase, acquire and accept from the Seller Group, free and clear of Liens, the entire right, title and interest of Seller and each other member of the Seller Group in, to and under all of the assets, properties and rights of every kind and description, personal and mixed, tangible and intangible, wherever situated, that are Related to the Business other than the Excluded Assets (the “Purchased Assets” ). The Purchased Assets include the following assets, properties and rights:

 

(a) all Inventory other than Excluded Inventory;

 

(b) all Equipment;

 

(c) all Seller IP including rights to the cardiacstatus domain name ;

 

(d) (i) all Contracts Related to the Business, that are approved by Buyer and set forth on Schedule 2.1(d) of the Agreement, which schedule the Buyer has the right to update at any time prior to Closing, (ii) all In-Bound Licenses, Work Product Agreements and Non-Disclosure Agreements Related to the Business, and (iii) Contracts Related to the Business entered after the date of this Agreement in accordance with the provisions of this Agreement including Section 6.2 hereof (the “Assigned Contracts” );

 

(e) all Accounts Receivable;

 

(f) all Business Authorizations;

 

(g) all Books and Records;

 

(h) all claims, causes of action, general intangibles, choses in action, rights of recovery and rights under all warranties, representations and guarantees made by suppliers of products, materials or equipment, or components thereof, arising from or relating to the Purchased Assets or the Assumed Liabilities;

 

(i) all insurance benefits, including rights and proceeds, arising from or relating to the Purchased Assets or the Assumed Liabilities;

 

(j) the benefit of all non-competition and confidentiality agreements or undertakings to the extent related to the Purchased Assets or the Business;

 

(k) all goodwill of the business as going concern.

 

2.2 Excluded Assets . The Purchased Assets do not include, and no member of the Seller Group is selling, assigning, transferring, conveying or delivering, and neither

 

8

Buyer nor any Affiliate of Buyer is purchasing, acquiring or accepting from any member of the Seller Group, any of the assets, properties or rights set forth in this Section 2.2 (collectively, the “Excluded Assets” ):

 

(a) subject to Section 2.1(d) and (k) of this Agreement, all cash, cash equivalents and bank accounts of the Seller Group;

 

(b) all Contracts that are not Assigned Contracts (the “Excluded Contracts” );

 

(c) all Excluded Inventory;

 

(d) All real property (except to the extent any Equipment comprises a fixture) and real property leases;

 

(e) the corporate seals, articles of incorporation, by-laws, minute books, share books, Tax Returns, or other records having to do with the corporate organization of any member of the Seller Group;

 

(f) all Policies and, subject to Section 2.1(i) hereof, all rights and benefits thereunder;

 

(g) the Employment Contracts (subject to Section 2.1(j));

 

(h) the Troponin I Patent on Troponin I Single Chain (except to the extent of any licenses granted to Buyer or its Affiliates);

 

(i) the Retained Names;

 

(j) claims or causes of action (whether based on warranty claims, indemnities, product defect or product liability theories or otherwise) against suppliers of inventory, equipment or components delivered to and used or disposed of by the Seller prior to Closing, to the extent that such claims or causes of action give rise to a right of indemnity or contribution or recovery from such supplier on account of liabilities of the Seller to third parties as a result of defects in or other claims related to the quality or condition of such supplies or their use or disposal by Seller prior to Closing;

 

(k) the shares of capital stock of any member of the Seller Group; and

 

(l) the rights which accrue or will accrue to Seller under this Agreement and the Ancillary Agreements.

 

2.3 Assumed Liabilities . Upon the terms and subject to the conditions of this Agreement, Buyer shall assume effective as of the Closing, and from and after the Closing Buyer shall pay, discharge or perform when due, as appropriate, only the following Liabilities of the Seller Group (the “Assumed Liabilities” ) and no other Liabilities:

 

(a) all accounts payable to trade creditors of the Business other than in respect of Inventory that are unpaid and not delinquent at the Closing Date and that arose in the ordinary course of the Business between the date of signing of this Agreement and the Closing and in compliance with the terms of this Agreement including Section 6.2;

 

9

(b) All trade payables related to the acquisition of Inventory ordered from third parties prior to the Closing Date, in the ordinary course of business and consistent with past practice, but not delivered as of the Closing Date;

 

(c) all Liabilities in respect of the Assigned Contracts but only to the extent that such Liabilities are required to be performed after the Closing Date, were incurred in the ordinary course of the Business, and otherwise in compliance with the terms of this Agreement, and do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by any member of the Seller Group on or prior to the Closing.

 

2.4 Excluded Liabilities . Neither Buyer nor any of its Affiliates shall assume any Liabilities of the Seller Group (such unassumed Liabilities, the “Excluded Liabilities” ) other than Assumed Liabilities. Without limiting the generality of the foregoing, in no event shall Buyer or any of its Affiliates assume or incur any Liability in respect of, and the Seller Group shall remain bound by and liable for, and shall pay, discharge or perform when due, the following (each of which shall be deemed an Excluded Liability):

 

(a) all Liabilities for Taxes of Seller or its Affiliates (except for sales, use, transfer, harmonized sales tax, transfer or value added tax imposed in respect of the transactions contemplated by this Agreement or any Ancillary Agreement);

 

(b) all Liabilities in respect of the Excluded Contracts and other Excluded Assets;

 

(c) all product Liability, warranty and similar claims for damages or injury to person or property, claims of infringement of Intellectual Property Rights and all other Liabilities, regardless of when made or asserted, which arise out of or are based upon any events occurring or actions taken or omitted to be taken by any member of the Seller Group, or otherwise arising out of or incurred in connection with the conduct of the Business, on or before the Closing Date;

 

(d) all Employee Claims and Liabilities under Seller Group Benefit Plans;

 

(e) all Environmental Liabilities;

 

(f) all Indebtedness of the Seller Group; and

 

(g) all Liabilities arising out of or incurred in connection with the negotiation, preparation and execution of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants and other experts.

 

10

2.5 Purchase Price . The consideration to be paid by Buyer to Seller for the Purchased Assets (the “Purchase Price” ) is exclusive of all applicable sales, transfer and value added taxes and shall be (i) 5.65 million Canadian Dollars (C$5,650,000) (the “Cash Consideration” ), (ii) that number of shares of Common Stock of Parent (rounded down to the nearest whole share) equal to 3.35 million Canadian Dollars (C$3,350,000) divided by the average closing price (the “Closing Price” ) as quoted on the NNM of one share of Parent common stock for the ten trading days ending two Business days prior to the Closing (converted to Canadian Dollars at the exchange rate stated in the Wall Street Journal (Western Edition) two Business Days prior to Closing) (the “Stock Consideration” ) and (iii) the assumption of the Assumed Liabilities; subject in the case of (i) to holdback and adjustment as set forth in Section 2.6 and any withholding with respect to the Purchase Price required by applicable Tax Law.

 

2.6 Purchase Price Adjustment

 

(a) For purposes of this Section 2.6, the following terms shall have the meanings:

 

(i) “Accounting Principles” means GAAP; provided, that (i) there shall be excluded from Inventory any Inventory which (A) is “short dated” or otherwise has an expiration date which makes unsuitable for sale in the ordinary course of business without discount in the 90 days after the Closing Date, or (B) does not comply with applicable FDA Requirements, or (C) is not received as of Closing; and (ii) Accounts Receivable shall be reduced by any amounts on account of (A) prepaid expenses, advance billings, retainers or other prepayments, (B) Inventory sold on a sale or return, or consignment basis, and (C) rebates, refunds or other credits issued to customers against an Accounts Receivable.

 

(ii) “Closing Accounts Receivable” means the Accounts Receivable as of the Closing, determined in accordance with Accounting Principles, collected by Buyer as of the date 90 days after the Closing Date;

 

(iii) “Closing Inventories” means the value of the Inventory as of the Closing, determined in accordance with Accounting Principles.

 

(iv) “Closing Accounts Receivable Statement” means an unaudited statement of the Closing Account Receivables collected by Buyer as of the date 90 days after the Closing Date.

 

(v) “Closing Inventory Statement” means an unaudited statement of the Closing Inventories.

 

(vi) “Closing Statements” means the Closing Inventory Statement and Closing Accounts Receivable Statement.

 

(b) Within 10 days of Closing the Buyer and Seller shall conduct a joint eye inspection review of the Inventory at which a physical count of the Inventory will be made. Buyer will prepare, or cause to be prepared, and deliver to Seller the

 

11

Closing Inventory Statement within 60 days after the Closing Date and the Closing Account Receivable Statement within 120 days after the Closing Date. Seller shall have 10 days from receipt of the Closing Inventory Statement or the Closing Account Receivable Statement, as applicable, to review such Closing Statement (the “Review Period” ). If Seller disagrees with the calculation of the Closing Inventories or Closing Accounts Receivable, as applicable, Buyer may, on or prior to the last day of the Review Period, deliver a notice to Seller (the “Notice of Objection” ), which sets forth its objections to Buyer’s calculation Closing Inventories or Closing Accounts Receivable, as applicable. Any Notice of Objection shall specify those items or amounts with which Seller disagrees, together with a detailed written explanation of the reasons for disagreement with each such item or amount. To the extent not set forth in the Notice of Objection, Seller shall be deemed to have agreed with Buyer’s calculation of all other items and amounts contained in the Closing Statements.

 

(c) If Seller delivers the Notice of Objection to Buyer within the Review Period, Buyer and Seller shall, during the 30 days following such delivery or any mutually agreed extension thereof, use their commercially reasonable efforts to reach agreement on the disputed items and amounts in order to determine the amount of Closing Inventories or Closing Accounts Receivable, as applicable. If, at the end of such period or any mutually agreed extension thereof, Buyer and Seller are unable to resolve their disagreements, they shall jointly retain and refer their disagreements to KPMG LLP or, if such firm shall decline or is unable to act, or has a conflict of interest with Buyer or Seller or any of their respective Affiliates, another nationally recognized independent accounting firm mutually acceptable to Buyer and Seller (the “Independent Expert” ). The decision of the Independent Expert shall be final, conclusive and binding on the parties. The costs and expenses of the Independent Expert shall be allocated between the parties based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. Each party agrees to execute, if requested by the Independent Expert, a reasonable engagement letter, including customary indemnities in favor of the Independent Expert.

 

(d) Within three Business Days after the Closing Inventories or Closing Accounts Receivable, as applicable, have been finally determined pursuant to this Section 2.6, (i) if Closing Inventories are less than C$1,000,000, Seller shall pay to Buyer, as an adjustment to the Purchase Price, an amount equal to the difference between the Closing Inventories and C$1,000,000; and (ii) if Closing Accounts Receivable are less than C$500,000, Seller shall pay to Buyer, as an adjustment to the Purchase Price, an amount equal to the difference between the Closing Accounts Receivable and C$500,000 (the payments pursuant to (i) and (ii) each an “Adjustment Payment” ). Adjustment Payments shall be made in immediately available funds to an account designated in writing by Buyer; provided, that, without limitation to the obligation of the Seller to make an Adjustment Payment but without duplication, Buyer shall also be entitled to offset against and recoup from the Holdback on account of any Adjustment Payments payable hereunder.

 

(e) Buyer shall be entitled to holdback from the Cash Consideration payable at Closing an amount equal to Cdn$200,000 (the “Holdback” ). Within 10 days

 

12

following the final determination of the Adjustment Payments, except to the extent subject to any offset by Buyer pursuant to Section 2.6(d), the Buyer shall pay to the Seller the amount, if any, of the Holdback not offset against the Adjustment Payments.

 

(f) Any rights accruing to a party under this Section 2.6 shall be in addition to and independent of the rights to indemnification under Article X and any payments made to any party under this Section 2.6 shall not be subject to the terms of Article X.

 

(g) Buyer will use commercially reasonable efforts consistent with its ordinary course practices to collect the Closing Accounts Receivable. For purposes of clarity, Buyer shall not be required (i) to exhaust all of its recourse against any account debtor or (ii) to initiate litigation or arbitration or enforce any security interest against any account debtor. Amounts collected from the account debtor in respect of a Closing Accounts Receivable, unless required to applied differently under applicable Law, will be applied first to the oldest of such account debtor’s Closing Account Receivables outstanding.

 

2.7 Allocation . Buyer and Seller shall use their best efforts to agree, as soon as reasonably practicable, upon the allocation of the Purchase Price for Tax purposes pursuant to any applicable Tax Laws. Except as otherwise required by Law, Buyer and Seller shall, and Seller shall cause each other member of the Seller Group to, file all Tax Returns in a manner that is consistent with such agreed allocation statement and refrain from taking any action inconsistent therewith. In the event Buyer and Seller are unable to agree upon an allocation with 60 days after Closing the proper allocation shall be referred to the Independent Expert for determination (acting as an expert) consistent with applicable Tax Laws, with Buyer and Seller each bearing one half of the cost of retaining the Independent Expert. Buyer and Seller agree to treat any payments made pursuant to the indemnification provisions of this Agreement as an adjustment to the Purchase Price for Tax purposes. In the event the Purchase Price is adjusted pursuant to Section 2.6, the allocation of purchase price shall be adjusted accordingly.

 

2.8 Consents .

 

(a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to sell, assign, transfer, convey or deliver any Purchased Asset or any benefit arising under or resulting from such Purchased Asset if the sale, assignment, transfer, conveyance or delivery thereof, without the Consent of a third party, (i) would constitute a breach or other contravention of the rights of such third party, (ii) would be ineffective with respect to any party to a Contract concerning such Purchased Asset, or (iii) would, upon transfer, in any way adversely affect the rights of Buyer under such Purchased Asset. If the sale, assignment, transfer, conveyance or delivery by any member of the Seller Group to, or any assumption by Buyer of, any interest in, or Liability under, any Purchased Asset requires the Consent of a third party, then such sale, assignment, transfer, conveyance, delivery or assumption shall be subject to such Consent being obtained. Without limiting Section 2.8(b), to the extent any Assigned Contract may not be assigned to Buyer by reason of the absence of any such

 

13

Consent ( “Restricted Contract” ), Buyer shall not be required to assume any Assumed Liabilities arising under such Restricted Contract.

 

(b) To the extent that any Consent in respect of a Restricted Contract or any other Purchased Asset shall not have been obtained on or before the Closing Date, Buyer may elect to proceed with the Closing, in which case, Seller shall continue to use reasonable best efforts to obtain any such Consent after the Closing Date until such time as it shall have been obtained. Seller shall, and shall cause each other relevant member of the Seller Group to, cooperate with Buyer to provide that Buyer shall receive the benefits under such Restricted Contract or other Purchased Asset. Seller shall pay and discharge, and shall indemnify and hold harmless, Buyer and its Affiliates from and against any and all out-of-pocket costs of seeking to obtain or obtaining any such Consent whether before or after the Closing Date. As soon as a Consent for the sale, assignment, transfer, conveyance, delivery or assumption of a Restricted Contract or other Purchased Asset is obtained, Seller shall promptly assign, transfer, convey and deliver such Restricted Contract or Purchased Asset to Buyer, and Buyer shall assume the Assumed Liabilities under any such Restricted Contract from and after the date of assignment to Buyer pursuant to a special-purpose assignment and assumption agreement substantially similar in terms to those of the Assignment and Assumption Agreement.

 

(c) Nothing contained in this Section 2.8 or elsewhere in this Agreement shall be deemed a waiver by Buyer of its right to have received on the Closing Date an effective assignment of all of the Purchased Assets or of the covenant of Seller to obtain all Consents, nor shall this Section 2.8 or any other provision of this Agreement be deemed to constitute an agreement to exclude from the Purchased Assets any Assigned Contracts or other Purchased Asset as to which a Consent may be necessary.

 

ARTICLE III

 

CLOSING

 

3.1 Closing Date . The closing of the transactions contemplated by this Agreement (the “Closing” ) shall take place at the offices of Osler, Hoskin & Harcourt LLP, at 10:00 a.m. on a date to be specified by the parties which shall be no later than three Business Days after satisfaction (or waiver as provided herein) of the conditions set forth in Article VIII (other than those conditions that by their nature will be satisfied at the Closing), unless another time, date and/or place is agreed to in writing by the parties. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”

 

3.2 Deliveries by Seller at the Closing . At the Closing, Seller shall (i) take all steps necessary to place Buyer in actual possession, and operating control of the Purchased Assets, and (ii) deliver to Buyer the following:

 

(a) a Bill of Sale in the form of Exhibit A hereto (the “Bill of Sale” ) duly executed by each member of the Seller Group;

 

14

(b) an Assignment and Assumption Agreement in the form of Exhibit B hereto (the “Assignment and Assumption Agreement” ) duly executed by each member of the Seller Group;

 

(c) Patent Assignments in the form of Exhibit C hereto (the “Patent Assignments” ) duly executed by each relevant member of the Seller Group;

 

(d) a Patent Licenses in the form of Exhibit D hereto duly executed by each relevant member of the Seller Group (the “Patent Licenses” );

 

(e) Trademark Assignments in the form of Exhibit E hereto (the “Trademark Assignments” ) duly executed by each relevant member of the Seller Group;

 

(f) Copyright Assignments in the form of Exhibit F hereto (the “Copyright Assignments” ) duly executed by each relevant member of the Seller Group;

 

(g) the Transition Services Agreement in the form of Exhibit G hereto (the “Transition Services Agreement” ) duly executed by each relevant member of the Seller Group;

 

(h) the Amendment Agreement in the form of Exhibit H hereto (the “Amendment” ) duly executed by IDx, Inc. and the Seller;

 

(i) such other good and sufficient instruments of transfer as Buyer reasonably deems necessary and appropriate to vest in Buyer all right, title and interest in, to and under the Purchased Assets;

 

(j) Consent and Release letters, in form and substance satisfactory to Buyer, from Royal Bank of Canada and Onset Capital Corporation together with termination statements or termination agreements in proper form for filing pursuant to the Personal Property Security Act (Ontario), Uniform Commercial Code, or with the US Patent and Trademark Office, US Copyright Office, Canadian Intellectual Property Office and other applicable registries with respect to any Lien on any of the Purchased Assets or the Business;

 

(k) original copies of Assigned Contracts and Consents;

 

(l) the Seller Closing Certificate;

 

(m) a certificate of the Secretary of each member of the Seller Group dated the Closing Date and certifying: (A) that attached thereto are true and complete copies of all resolutions adopted by the Board of Directors of such member of the Seller Group and of the stockholders of the Seller in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement and the Ancillary Agreements; and (B) to the incumbency and specimen signature of each officer of such member of the

 

15

Seller Group executing this Agreement and/or the Ancillary Agreements, and a certification by another officer of such member of the Seller Group as to the incumbency and signature of the Secretary of such member of the Seller Group;

 

(n) a legal opinion of Stikeman Elliott LLP in the form and substance reasonably satisfactory to Buyer;

 

(o) evidence satisfactory to Buyer that, in respect of the purchase and sale of the Purchased Assets, the Seller has complied with the requirements of (a) the Bulk Sales Act (Ontario) and any other applicable bulk sales legislation and (b) section 6 of the Retail Sales Tax Act (Ontario) and any equivalent or corresponding provision under any other applicable tax legislation.

 

3.3 Deliveries by Buyer at the Closing . At the Closing, Buyer shall deliver to Seller the following:

 

(a) the Cash Consideration (less the Holdback and any withholding required by applicable Tax Law) by wire transfer of immediately available funds to an account of Seller designated in writing by Seller to Buyer no later than three Business Days prior to the Closing Date;

 

(b) the Stock Consideration evidenced by stock certificates in the name of Seller as fully paid and non-assessable;

 

(c) the Assignment and Assumption Agreement duly executed by Buyer or its designee pursuant to Section 2.1;

 

(d) the Transition Services Agreement duly executed by Buyer or its designee pursuant to Section 2.1;

 

(e) the Patent Licenses duly executed by Buyer or its designee pursuant to Section 2.1;

 

(f) the Buyer Closing Certificate;

 

(g) a legal opinion of counsel to Buyer in the form and substance reasonably satisfactory to Seller;

 

(h) a certificate of the Secretary of Buyer dated the Closing Date and certifying: (A) that attached thereto are true and complete copies of all resolutions adopted by the Board of Directors of Buyer in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement and the Ancillary Agreements; and (B) to the incumbency and specimen signature of each officer of Buyer, and a certification by another officer of such member of Buyer as to the incumbency and signature of the Secretary of Buyer.

 

16

3.4 Release of Seller Liens . Effective as of Closing Seller releases, and shall cause its Affiliates to release, any security interest held by them in any Purchased Assets.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer as of the date hereof and as of the Closing Date that the statements contained in this Article IV are true and correct, except as set forth in the disclosure letter executed, dated and delivered as of the date hereof by Seller to, and in form and content acceptable to, Buyer (the “Seller Disclosure Letter” ).

 

4.1 Organization and Good Standing . Each member of the Seller Group is (i) a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation, has all requisite power to own, lease and operate its properties and to carry on its business as now being conducted and as proposed to be conducted, and (ii) duly qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification.

 

4.2 Authority and Enforceability . Each member of the Seller Group has the requisite power and authority to enter into this Agreement and/or each Ancillary Agreement to which it is, or specified to be, a party and to consummate the transactions contemplated thereby. The execution and delivery by each member of the Seller Group of this Agreement and/or each Ancillary Agreement to which it is, or specified to be, a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate or other action on the part of each such Person. This Agreement has been duly executed and delivered by each member of the Seller Group party to it and prior to the Closing each member of the Seller Group will have duly executed and delivered each Ancillary Agreement to which it is, or specified to be, a party. This Agreement constitutes, and the Ancillary Agreements will upon execution constitute, the valid and binding obligation of each member of the Seller Group party thereto, enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies.

 

4.3 No Conflicts; Consents .

 

(a) The execution, delivery and performance of this Agreement and each Ancillary Agreement to which each member of the Seller Group is, or specified to be, a party, and the consummation of the transactions contemplated thereby (in each case, with or without the giving of notice or lapse of time, or both), will not, directly or indirectly, (i) violate the provisions of any of the constating or organizational documents of any member of the Seller Group, (ii) violate or constitute a default, an event of default or an event creating rights of acceleration, termination, cancellation, imposition of additional obligations or loss of rights under any Contract (A) to which any member of

 

17

the Seller Group is a party or a beneficiary or (B) by which any member of the Seller Group or any of their respective assets is bound, (iii) violate or conflict with any Law, Authorization or Order applicable to any member of the Seller Group, or give any Governmental Entity or other Person the right to challenge any of the transactions contemplated by this Agreement or the Ancillary Agreements or to exercise any remedy, obtain any relief under or revoke or otherwise modify any rights held under, any such Law, Authorization or Order, or (iv) result in the creation of any Liens upon any of the Purchased Assets.

 

(b) Except as set forth on Schedule 4.3(b) of the Seller Disclosure Letter, no Authorization or Order of, registration, declaration or filing with, or notice to, or consent of any Governmental Entity or other Person, is required in connection with the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated thereby. Schedule 4.3(b) of the Seller Disclosure Letter sets forth all consents, waivers, assignments and other approvals and actions (including under any Contract) that are required in connection with the transactions contemplated by this Agreement (any of the foregoing a, “Consent” ).

 

4.4 Revenues . The net revenues of the Business, as determined in accordance with GAAP in each of the fiscal years ending March 30, 2004, March 30, 2005 and the two fiscal quarters ended September 30, 2005 have not been less than the amounts specified in Schedule 4.4 to the Seller Disclosure Letter.

 

4.5 Inventory . Each item of Inventory is of a quality, quantity and condition useable and, as to finished goods, saleable in the ordinary course of the Business and conforms to the warranties provided by Seller with respect to sales of Inventory in the ordinary course of the business. The quantities of each item of Inventory are reasonable and adequate for the operation of the Business as presently conducted and as would be necessary for the continued operation of the Business in the ordinary course of business following the Closing. None of the Inventory is obsolete or has an expiration date which is less than 90 days after the Closing Date. Schedule 4.5 of the Seller Disclosure Letter provides an accurate and complete description of all Inventory (including locations) and no such Inventory is held on consignment.

 

4.6 Accounts Receivable and Prepaid Assets .

 

(a) Schedule 4.6(a) of the Seller Disclosure Letter provides an accurate and complete breakdown and aging of all Accounts Receivable and, notes receivable Related to the Business. The Accounts Receivable are (a) valid and genuine, have arisen solely out of bona fide business transactions in the ordinary course of the Business consistent with past practice, (b) are not subject to defenses, set-offs or counterclaims and (c) no account debtor has contested or objected to the amount or validity thereof.

 

(b) There are no prepaid expenses, prepayments, retainers or advanced billings paid to any member of the Seller Group, nor any security deposits, earned

 

18

deposits or other deposits placed with any member of the Seller Group, with respect to any Assigned Contract or otherwise related to the Business.

 

4.7 Taxes .

 

(a) Each member of the Seller Group has, in accordance with applicable law, invoiced, collected, withheld, reported and remitted to the appropriate Governmental Entity (within the time prescribed) all: (i) sales, transfer, use, customs, goods and services and other taxes which are due and payable by such member of the Seller Group; (ii) withholding, payroll or employment taxes, employment insurance, Canada Pension Plan and provincial pension plan contributions and other deductions at source as required by applicable Law; and (iii) all non-resident withholding taxes as required by applicable Law.

 

(b) There are no Inventories or Equipment located in the United States or other Purchased Assets that would be subject to sales tax in the United States by virtue of the transfer of the Purchased Assets pursuant to this Agreement.

 

(c) Each member of the Seller Group has duly and timely collected all amounts on account of any sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by Law to be collected by it and has duly and timely remitted to the appropriate Governmental Entity any such amounts required by Law to be remitted by it.

 

(d) Except as disclosed in Schedule 4.7(d) of the Seller Disclosure Letter, (i) no member of the Seller Group is a non-resident of Canada for purposes of the Income Tax Act (Canada) and (ii) none of the Purchased Assets are taxable Canadian property (for purposes of the Income Tax Act (Canada) to any members of the Seller Group; furthermore, no member of the Seller Group is resident for tax purposes in the United States.

 

(e) Each applicable member of the Seller Group is duly registered under Subdivision (d) of Division V of Part IX of the Excise Tax Act (Canada) with respect to the goods and services tax and harmonized sales tax and under Division I of Chapter VIII of Title I of the Quebec Sales Tax Act with respect to the Quebec sales tax.

 

4.8 Compliance with Law . Each member of the Seller Group has conducted, and is conducting, the Business in compliance with all applicable Laws, FDA Regulations, FDA Authorizations and requirements for certification pursuant to ISO 13485:2003 (“ISO Requirements”). No event has occurred and to Seller’s Knowledge no circumstances exists, and no member of the Seller Group has received notice alleging any circumstance or condition that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with or failure to conduct the Business in compliance with, any applicable Law, FDA Regulation, FDA Authorizations and ISO Requirements.

 

19

4.9 Business Authorizations .

 

(a) Schedule 4.9 of the Seller Disclosure Letter sets forth all Authorizations (including FDA Authorizations) which are necessary for ownership and use of the Purchased Assets or the conduct the Business as currently conducted or as proposed to be conducted (the “Business Authorizations” ). Such Business Authorizations are valid and in full force and effect, free and clear of all Liens. No event has occurred and, to Seller’s Knowledge, no circumstances exist, and no member of the Seller Group has received notice regarding any circumstance or condition, that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with, default or failure to comply with the terms of, or the revocation, withdrawal, termination, cancellation, loss, refusal to renew, suspension or modification of any Business Authorization. No Person other than the Seller Group has any proprietary, financial or other interest (direct or indirect) in any Business Authorization.

 

(b) All Products have, and currently are, being developed, manufactured, tested, modified, stored, packaged, labeled, marketed, sold, distributed, or commercialized in compliance with applicable FDA Regulations and ISO Requirements. The Products are eligible for certification under ISO 13485:200. None of the Products have been subject to voluntary withdrawal from the market or recalled or subject to FDA Authority correction or removal requirements, and no member of the Seller Group has received notice of any proceeding seeking a corrective action, recall, suspension, or seizure of any Products or any withdrawal of any Products from the market. All manufacturing facilities Related to the Business are operated, and Books and Records maintained, in compliance with applicable FDA Regulations and ISO Requirements.

 

(c) All preclinical and clinical trials conducted, supervised or monitored by the Seller Group Related to the Business have been conducted in compliance with all applicable FDA Regulations and the Seller Group has obtained and maintained any necessary Institutional Review Board approvals of clinical trials or modifications thereto and no such trial has been suspended, terminated, put on clinical hold, or voluntarily withdrawn because of deficiencies attributed to any member of the Seller Group. All patients in such trials have provided full and informed consent to participate in such trials in accordance with all applicable Laws and applicable FDA Regulations. True, complete and accurate copies of all such data and reports have been provided to Buyer and the Seller Group has otherwise provided Buyer with all material pre-clinical and material clinical studies and trials and all other material information regarding the efficacy and safety of the Products. The Seller has provided to Buyer all material correspondence and contact information between any member of the Seller Group and the FDA Authorities regarding the Products.

 

(d) No Governmental Entity has served any notice, warning letter, regulatory letter, Section 305 notice, inspection report, or any other similar communication on any member of the Seller Group indicating that any such member is in violation of any FDA Regulation applicable to the Business, or subject to any pending, threatened or anticipated investigation, proceeding, review, or inquiry, nor to Seller’s Knowledge are there any circumstances which might reasonably be expected to lead to

 

20

any loss of, or refusal to renew, any of the FDA Authorizations applicable to the Business.

 

(e) No member of the Seller Group nor, to Seller’s Knowledge any Business Employee, has made an untrue statement of a material fact or fraudulent statement to any FDA Authority, or failed to disclose a material fact required to be disclosed to any FDA Authority, or committed an act or failed to act in a manner that would reasonably be expected to result in the application of any FDA Authority’s fraud, untrue statements, bribery and illegal gratuities or similar policies. No member of the Seller Group nor, to Seller’s Knowledge, any Business Employee has been disqualified or debarred by any FDA Authority, or otherwise excluded from participating in any health care programs, or violated or caused a violation of any health care fraud and abuse or false claims statute or regulation (including, the Canada Health Act and its provincial counterparts, the U.S. Medicare/Medicaid Anti-kickback provisions of the Social Security Act, 42 U.S.C. § 1320a-7b(b), and the relevant regulations in 42 C.F.R. Part 1001).

 

4.10 Personal Property Assets .

 

(a) Schedule 4.10 of the Seller Disclosure Letter sets forth a complete and accurate list of all Purchased Assets (other than Inventory, Accounts Receivable, Seller IP and Material Contracts) with a current fair market value in excess of $25,000 as well as all Equipment Related to the Business specifying whether, and by which member of the Seller Group, such Purchased Assets are owned or leased, the location of such Purchased Assets and, in the case of leased assets, indicating the parties to, execution dates of and annual payments under, the applicable lease.

 

(b) The Seller Group has good and transferable title to all Purchased Assets, free and clear of all Liens (other than the Liens expressly identified on Schedule 4.10(b) of the Seller Disclosure Letter). None of IDx Inc., Princeton BioMedtech or any other Person other than the Seller Group has any interest in or claim against any of the Purchased Assets. This Agreement and the Ancillary Agreements will effectively vest in Buyer good, valid and marketable title to all the Purchased Assets free and clear of all Liens.

 

(c) All leases under which Purchased Assets are leased are in full force and effect and constitute valid and binding obligations of the other party(ies) thereto, and no member of the Seller Group or, to Seller’s Knowledge, any other party thereto, is in breach of any of the terms of any such lease.

 

(d) All tangible Purchased Assets are in good operating condition and repair (normal wear and tear excepted) and are usable in the ordinary course of the Business. There are no facts or conditions affecting such tangible Purchased Assets that could interfere in any material respect with their use or operation in the Business.

 

21

4.11 Real Property .

 

(a) The Seller Group does not own any real property Related to the Business.

 

(b) Schedule 4.11 of the Seller Disclosure Letter (i) contains a complete and accurate list of all real property leased, subleased or otherwise occupied by the Business (the “Leased Real Property” ) (ii) identifies the lessor, rental rate, lease term, and expiration date. Except as disclosed in Schedule 4.11, the leases relating to the Leased Real Property ( “Real Property Leases” ) have not been altered or amended and are in full force and effect. There are no contracts between the landlord and tenant, or sublandlord and subtenant, or other relevant parties, relating to the use and occupation of the Leased Real Property, other than as contained in the Real Property Leases. The Seller Group has the sole right to use, and is in sole possession and occupancy of, the Leased Real Property.

 

(c) All interests held by any member of the Seller Group as lessee or occupant under the Real Property Leases are free and clear of all leases and sub-leases, restrictions, development or similar agreements, zoning, build or use restrictions, easements, rights-of-way, title defects, options, rights to purchase or Liens of any kind or character whatsoever ( “Encumbrances” ) which could significantly impair the occupation in use of the Leased Premises by Buyer pursuant to the Transition Services Agreement.

 

(d) There are no outstanding material defaults (or events which would constitute a default with the passage of time or giving of notice or both) under the Real Property Leases on the part of any member of the Seller Group or, to Seller’s Knowledge, on the part of any other party. No member or the Seller Group has waived, or omitted to take any action in respect of any material rights under any of the Real Property Leases.

 

(e) To Seller’s Knowledge, there is no expropriation or condemnation or similar proceeding pending or threatened against any part of the Leased Real Property.

 

(f) There are no matters affecting the right, title and interest of any member of the Seller Group in and to the Leased Real Property which, in the aggregate, would materially and adversely affect the ability of Buyer to carry on the Business upon the Leased Real Property.

 

4.12 Intellectual Property .

 

(a) As used in this Agreement, the following words and terms have the meanings set out below:

 

“Intellectual Property” means all industrial and intellectual property including any or all: (i) inventions (whether or not patentable), trade secrets, technical data, databases, financial, marketing and business data, customer and supplier lists, designs, tools, methods, processes, technology, manufacturing and production processes and techniques, research and development information, ideas, know-how, source code, product road maps

 

22

and other proprietary information and materials ( “Proprietary Information” ); (ii) trademarks and service marks (whether or not registered), trade names, logos, trade dress and other proprietary indicia and all goodwill associated therewith; (iii) documentation, advertising copy, marketing materials, specifications, mask works, drawings, graphics, databases, recordings and other works of authorship, whether or not protected by Copyright; (iv) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, design documents, flow-charts, user manuals and training materials relating thereto and any translations thereof (collectively, “Software” ); and (v) all forms of legal rights and protections that may be obtained for, or may pertain to, the Intellectual Property set forth in clauses (i) through (iv) in any country of the world ( “Intellectual Property Rights” ), including all letters patent, patent applications, provisional patents, design patents, PCT filings, invention disclosures and other rights to inventions or designs ( “Patents” ), all registered and unregistered copyrights in both published and unpublished works ( “Copyrights” ), all trademarks, service marks and other proprietary indicia (whether or not registered) ( “Marks” ), industrial designs, trade secret rights, mask works, moral rights or other literary property or authors rights, and all applications, registrations, issuances, divisions, revisions, continuations, continuations-in-part, renewals, reissuances, extensions and re-examinations of the foregoing, as applicable.

 

“Registered IP” means all Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any Government Entity at any time.

 

“Seller IP” means all Intellectual Property Related to the Business.

 

“Seller Owned IP” means all Seller IP owned by any member of the Seller Group.

 

(b) Schedule 4.12(b) of the Seller Disclosure Letter contains a complete and accurate list and particulars of (i) all Seller Owned IP that is Registered IP (“Seller Registered IP”) ; and (ii) all Seller Owned IP that is not Registered IP other than trade secrets and immaterial unregistered Intellectual Property.

 

(c) Schedule 4.12(c) of the Seller Disclosure Letter lists (including the parties to and exclusivity or non-exclusivity of) all licenses, sublicenses and other agreements pursuant to which (i) a third party authorizes any member of the Seller Group to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property Related to the Business owned by a third party ( “In-Bound Licenses” ), other than “shrink-wrap” and similar commercially available end-user licenses; (ii) any member of the Seller Group authorizes a third party to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property ( “Out-Bound Licenses” ); and (iii) agreements between any member of the Seller Group and any third party relating to the development or use of any Seller IP.

 

(d) The members of the Seller Group exclusively own, or otherwise rightfully use or enjoy pursuant to the terms of a valid and enforceable In-Bound License, the entire right, interest and title to all Seller IP transferred pursuant to this Agreement

 

23

free and clear of Liens. The Seller IP constitutes all the Intellectual Property used in or necessary for the operation of the Business as it is currently conducted and as proposed to be conducted, and Seller has the unrestricted right to transfer such Seller IP to Buyer without payment of any royalties, fees or other amounts.

 

(e) With respect to any Seller Registered IP, the members of the Seller Group have (i) paid all registration, maintenance and renewal fees and (ii) filed all documents and certificates currently required to be filed with such Governmental Entities to maintain the registration, or application for registration, of such Seller Registered IP. Except as set forth in Schedule 4.12(e) of the Seller Disclosure Letter, there are no actions that must be taken by Buyer (i) within 90 days after the date hereof for the purposes of maintaining, perfecting, preserving or renewing any Seller Registered IP or (ii) with respect to any proceeding before any Governmental Entity related to such Seller Registered IP. All Seller Registered IP is in good standing, held in compliance with all applicable legal requirements, subsisting, valid, and enforceable, and no Seller IP has been adjudged invalid or unenforceable in whole or in part.

 

(f) Seller is not aware of any unresolved challenges with respect to the ownership, use, validity or enforceability of any Seller Owned IP. No member of the Seller Group has taken any action or to Seller’s Knowledge failed to take any action that could reasonably be expected to result in the abandonment, non-renewal, cancellation, forfeiture, relinquishment, invalidation, or waiver of any Seller Owned IP.

 

(g) None of the Seller IP is subject to any outstanding consent, settlement, or Order restricting the use of such Seller IP or that could impair the validity or enforceability of such Seller IP.

 

(h) No member of the Seller Group has received any communication alleging that any member of the Seller Group has violated or, by conducting the Business as currently conducted or as proposed to be conducted, would violate, any Intellectual Property Rights of a third party. To Seller’s Knowledge, no Person has used without authorization, infringed, misappropriated or otherwise violated, or is using without authorization, infringing, misappropriating or otherwise violating, any Seller IP. No member of the Seller Group has entered any Contract granting or authorizing any person to bring, enforce or control any infringement proceedings with respect to any Seller IP, or agreeing with any Person not to sue or otherwise enforce any legal rights with respect to any Seller IP.

 

(i) Each member of the Seller Group has maintained the confidentiality of all Proprietary Information Related to the Business. Any receipt or use by, or disclosure to, a third party of Proprietary Information Related to the Business has been pursuant to the terms of binding written confidentiality and non-use agreements between a member of the Seller Group and such third party ( “Nondisclosure Agreements” ). Schedule 4.12(i) of the Seller Disclosure Letter lists all such Nondisclosure Agreements, true and complete copies of which have been provided to Buyer. Each member of the Seller Grou