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Exhibit 2.5
EXECUTION COPY
OPTION AND ASSET PURCHASE AGREEMENT
THIS OPTION AND ASSET PURCHASE AGREEMENT (this "Agreement") is made
and
entered into as of May 31, 2005 (the "Agreement Date"), by and
among (i) ATS
Medical, Inc., a Minnesota corporation (the "Purchaser"), and (ii)
em Vascular,
Inc., a Minnesota corporation (the "Company"), and (iv) Keith L.
March, M.D.,
John Hauck, Walter L. Sembrowich and James E Shapland II, acting in
each case in
his capacity as a stockholder of the Company (individually, a
"Principal
Shareholder" and collectively, the "Principal Shareholders").
Capitalized terms
used herein without definition shall have the respective meanings
set forth in
Article 9 hereof.
WHEREAS, the Company is developing cardiovascular medical products
for
treating ischemic vascular disease using electrical
stimulation.
WHEREAS, the parties hereto wish to provide for the terms and
conditions
upon which the Company will grant to the Purchaser the Option (as
defined below)
to acquire substantially all the Assets (as defined below) of the
Company and
upon which the Purchaser will provide certain financial assistance
to the
Company during the term of the Option.
WHEREAS, the parties hereto wish to make certain
representations,
warranties, covenants and agreements in connection with the grant
of the Option
and, in the event Purchaser exercises the Option, in connection
with the
purchase of the Assets.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants
and agreements herein contained and intending to be legally bound
hereby, the
Purchaser and the Company and the Principal Shareholders hereby
agree as
follows:
ARTICLE 1
OPTION AND ASSET PURCHASE
1.1 Grant of Option.
(a) Subject to the other terms and conditions of this Agreement,
the
Company hereby grants to the Purchaser the irrevocable and
unconditional right,
privilege and option (the "Option") to acquire from the Company the
Assets (as
defined in Section 1.2(d)).
(b) The Option vests and is exercisable in full with respect to
the
Assets immediately on the Agreement Date. Subject to the terms and
conditions
contained in this Agreement, the Purchaser may exercise this Option
at any time
during the Option Period.
(c) In connection with the exercise of the Option, and subject to
the
terms and conditions set forth this Agreement, on the Asset
Purchase Closing
Date (as defined in Section 1.2(c)), the Company shall sell,
convey, assign,
transfer and deliver to the Purchaser, and the Purchaser shall
purchase, acquire
and accept from the Company, all of the Assets, free and clear
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of all mortgages, pledges, liens, encumbrances and security
interests of any
kind or nature except for Permitted Liens.
(d) Notwithstanding anything to the contrary in this Agreement,
(i)
none of the parties hereto shall have any obligation to consummate
the Asset
Purchase (as defined in Section 1.2) unless and until the Purchaser
delivers an
Option Exercise Notice (as defined in Section 1.2(b)) and (ii)
Purchaser is
under no obligation to deliver any Option Exercise Notice at any
time.
(e) Upon expiration of the Option Period without the Purchaser
having
timely delivered an Option Exercise Notice, the Option shall expire
and
terminate and shall be of no further force and effect.
1.2 Asset Purchase. Subject to the other terms and conditions of
this
Agreement, including those set forth in Article 6 hereof, the
purchase of the
Assets by Purchaser (the "Asset Purchase") shall be consummated
under the
following circumstances:
(a) Disclosure Schedules. Attached hereto as Exhibit A is a
schedule
of disclosures and exceptions to the representations and warranties
made by the
Company in Article 2 hereof (the "Disclosure Schedule"). At any
time and from
time to time during the Option Period, the Purchaser may, upon
notice to the
Company (the "Disclosure Schedule Request"), require that the
Company prepare an
updated schedule of disclosures and exceptions to the
representations and
warranties of the Company contained in Article 2 hereof (each, an
"Updated
Disclosure Schedule"), as if such representations and warranties
were made as of
the date of such Updated Disclosure Schedule, except to the extent
any such
representations and warranties refer expressly to an earlier date.
Within twenty
(20) business days after receipt of the Disclosure Schedule
Request, the Company
shall prepare and deliver to the Purchaser an Updated Disclosure
Schedule. The
Updated Disclosure Schedule shall refer only to (i) disclosures
contained on the
Disclosure Schedule attached to this Agreement or (ii) disclosures
in existence
on the date of such Updated Disclosure Schedule that have occurred
or been
discovered since the Agreement Date, and the Updated Disclosure
Schedule shall
not otherwise limit or modify any of the representations and
warranties made in
this Agreement.
(b) Election by Purchaser to Cause the Asset Purchase. The
Purchaser
may exercise the Option by providing written notice (the "Option
Exercise
Notice") of exercise to the Company at any time during the Option
Period. Such
Notice must (i) identify the Option, (ii) specify a proposed
closing date of the
Asset Purchase (which shall be no more than sixty (60) days after
the date of
the Option Exercise Notice), (iii) be signed by an officer of the
Purchaser, and
(iv) be given during the Option Period in accordance with Section
10.1 of this
Agreement.
(c) Consummation of the Asset Purchase. Subject to the fulfillment
or
waiver of all of the conditions contained in Article 6, as soon as
is reasonably
practicable on or after the closing date specified in the Option
Exercise
Notice, which closing date shall be scheduled to occur no more than
sixty (60)
days after the date of the Option Exercise Notice (or such other
date as the
parties may agree upon), a closing (the "Asset Purchase Closing")
will be held
at the offices of Oppenheimer Wolff & Donnelly LLP in
Minneapolis, Minnesota (or
such other place as the parties may agree). The date on which the
Asset Purchase
Closing is actually held is
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referred to herein as the "Asset Purchase Closing Date." On the
Asset Purchase
Closing Date, the Purchaser and the Company shall cause the Asset
Purchase to be
consummated by exchanging the documents and instruments reasonably
necessary or
appropriate to effect the transactions contemplated by this
Agreement. All
matters at the Asset Purchase Closing shall be considered to have
taken place
simultaneously and no delivery of any document shall be deemed
complete until
all transactions and deliveries of documents are completed.
(d) Assets to be Purchased. Upon satisfaction of all conditions to
the
obligations of the parties contained herein (other than such
conditions as will
have been waived in accordance with the terms hereof), the Company
will sell,
transfer, convey, assign and deliver to the Purchaser and the
Purchaser will
purchase from the Company, at the Asset Purchase Closing hereunder,
free and
clear of all mortgages, pledges, liens, encumbrances and security
interests of
any kind or nature, except for Permitted Liens, all right, title
and interest of
the Company in and to the following assets:
(1) all production equipment that is owned or leased by the
Company, as listed in Section 2.25 of the Disclosure Schedule,
provided,
however, that with respect to such production equipment that is
leased by the
Company, such production equipment shall be subject to the liens,
encumbrances
and security interests of the lessor(s) of such equipment;
(2) all patents and patent applications owned by or licensed to
the Company, as listed in Section 2.8(a) of the Disclosure
Schedule, including
all rights to sue for past infringements, provided, however, that
with respect
to such patents and patent applications which are licensed to the
Company, such
patents and applications are subject to the provisions of the
applicable license
with respect to such patents and applications;
(3) all research, development, manufacturing processes, trade
secrets, know-how, inventions, invention disclosures and
clinical,
manufacturing, engineering and other technical information and
documentation
(collectively "Technical Information"), whether owned by the
Company or licensed
from third parties by the Company, provided, however, with respect
to Technical
Information licensed from third parties, such Technical Information
is subject
to the provisions of the applicable license with respect to such
Technical
Information;
(4) all trade names, logos, URLs, domain names, service marks,
trade dress, trademarks, trademark applications and trademark
registrations
listed in Section 2.8(a) of the Disclosure Schedule, including the
goodwill
associated therewith, and all rights to sue for past
infringements;
(5) all works of authorship, writings, designs, copyrights
subsisting in any of the foregoing, copyright applications and
copyright
registrations as set forth in Section 2.8(a) of the Disclosure
Schedule,
including all rights to sue for past infringements;
(6) the agreements and contracts listed in Section 2.10 of the
Disclosure Schedule, to the extent that such agreements and
contracts are
assignable and any required consent to such assignment has been
obtained;
(7) all prepaid expenses and deposits related to inventory,
patents, trademarks and manufacturing equipment included in the
Assets;
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(8) all quantities of inventory, including, but not limited to,
inventory ordered but not yet delivered, all raw materials,
components,
sub-assemblies, work-in-process and finished goods of the Company
all as more
fully described in Section 2.26 of the Disclosure Schedule;
(9) all purchase orders and advance payments for the Company's
Products;
(10) all rights of the Company under or pursuant to all
warranties, representations and guarantees made by suppliers,
manufacturers and
contractors;
(11) all rights of the Company to any research and development
data, internally and externally developed or generated, from any
animal,
clinical or marketing trials;
(12) all consents from any Governmental Authority for the
manufacture, marketing or sale of the Company's Products, including
all files
and documents related thereto, to the extent that such consents may
be assigned
to the Purchaser;
(13) all customer, prospect and vendor lists of the Company,
and
all of the Company's files and documents (including credit
information) relating
to such customers, prospects and vendors, and other Company
business and
financial records, files, books and documents, including without
limitation
regulatory files, computer programs, operating manuals,
instructions for use,
clinical data, sales and marketing materials, training materials,
sales,
distribution and purchase correspondence;
(14) all books, records, documents and related information in
possession of the Company relating to any of the foregoing and
necessary for the
design, development, manufacture, marketing or sale of the
Products; and
(15) all other assets owned or leased by the Company that are
specifically identified on Exhibit B attached hereto.
The foregoing are sometimes collectively referred to as the
"Assets."
(e) Excluded Assets. The Purchaser and the Company acknowledge
and
agree that the only assets of the Company to be sold to the
Purchaser are the
Assets specifically identified in Section 1.2(d) and that no other
assets of the
Company are being sold under this Agreement. Notwithstanding
anything to the
contrary contained in Section 1.2(d) or elsewhere in this
Agreement, the
following interests of the Company are not part of the sale and
purchase
contemplated by this Agreement, are excluded from the Agreement and
will be
retained by the Company and remain the property of the Company
following the
Asset Purchase Closing:
(1) all cash and bank accounts;
(2) all accounts or notes receivable;
(3) any right to recovery by Company arising out of litigation
relating to the Assets that is pending prior to the Asset Purchase
Closing Date;
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(4) all insurance policies of the Company and all rights of the
Company of any nature and description under or arising out of such
insurance
policies;
(5) all losses, carryovers and rights to receive refunds in the
respect to any and all Taxes of the Company or its Shareholders of
every nature
and description, including interest payable with respect
thereto.
(6) all rights of the Company under this Agreement and any
other
agreements between the Company and Buyer entered into on or after
the date of
this Agreement;
(7) the Company's records relating to the organization,
maintenance, existence and good standing of the Company as a
corporation, namely
the Company's (i) corporate charter, (ii) qualifications to conduct
business as
a foreign corporation, (iii) taxpayer and other identification
numbers, (iv)
minute books, (v) stock records, (vi) tax records, (vii) books of
account and
(vii) corporate seals; and
(8) any records that the Company is required by Law to retain
in
its possession (provided, that copies of any such records that are
not "Excluded
Assets" by another provision of this Section 1.2 will, to the
extent permitted
by Law, be provided to Buyer at the Asset Purchase Closing);
(f) No Liabilities Assumed. Except as set forth in this Section
1.2(f), the Purchaser will not assume, and will not be liable for,
any
liabilities or obligations of the Company, whether known, unknown,
contingent,
absolute, determined, indeterminable or otherwise on the Asset
Purchase Closing
Date, whether incurred or accruing prior to, on or after the Asset
Purchase
Closing Date, and whether or not relating to or arising from the
Products or the
Assets (the "Retained Liabilities"). From and after the Asset
Purchase Closing
Date, the Purchaser shall assume, pay, perform and will be
responsible for all
obligations under the contracts and agreements set forth in Section
2.10 of the
Disclosure Schedule to the extent that such obligations are
incurred, accruing
or arising on or after the Asset Purchase Closing Date.
1.3 Option Consideration. In consideration for the grant of the
Option, on
the Agreement Date, the Purchaser shall pay to the Company the
non-refundable
amount of one hundred thousand dollars ($100,000) by check or wire
transfer (the
Option Payment"). The Option Payment shall not be credited against
or applied to
the purchase price of the Assets set forth in Section 1.4 of this
Agreement.
1.4 Asset Purchase Consideration. In the event that the Asset
Purchase is
consummated, subject to the holdback provisions set forth in
Section 1.5, the
set-off rights of the Purchaser pursuant to Sections 1.8 and 8.5
and completion
of the milestones set forth in this Section 1.4, the Purchaser
shall make the
purchase price payments, in aggregate Two Million Seven Hundred
Thousand Dollars
($2,700,000.00) plus a percentage of Net Product Revenue, to the
Company as set
forth in this Section 1.4 and subject to the terms of Section 1.4,
1.6 and 1.7.
(a) Initial Payment. On the Asset Purchase Closing Date, the
Purchaser
shall make an initial payment to the Company of five hundred
thousand dollars
($500,000) (the "Initial Payment"), payable in the form of
Purchaser Common
Stock, in accordance with Sections 1.5 and 1.7, or, at the election
of the
Purchaser, in cash by check or wire transfer.
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(b) First Contingent Payment. Following receipt by the Purchaser
of
FDA approval to market a Product, the Purchaser shall make a
contingent payment
to the Company of one million dollars ($1,000,000) (the "First
Contingent
Payment"), payable in the form of Purchaser Common Stock, in
accordance with
Sections 1.6 and 1.7.
(c) Second Contingent Payment. For a period of ten (10) years from
the
date the Purchaser, its affiliates, representatives, agents,
successors or
assigns (collectively "Purchaser Affiliates") makes its first
commercial sale of
a Product (the "Second Contingent Payment Period"), the Purchaser
shall make a
contingent payment to the Company in an amount equal to four
percent (4%) of Net
Product Revenue (the "Second Contingent Payment"), payable in cash
by check or
wire transfer, in accordance with Section 1.6.
(d) Third Contingent Payment. Following the end of the first
quarter
in which Purchaser has recognized cumulative Net Product Revenues
of ten million
dollars ($10,000,000), the Purchaser shall make a contingent
payment to the
Company of one million two hundred thousand dollars ($1,200,000)
(the "Third
Contingent Payment"), payable in the form of Purchaser Common
Stock, in
accordance with Sections 1.6 and 1.7.
1.5 Initial Payment/Holdback. In the event the Asset Purchase
is
consummated, on the Asset Purchase Closing Date, the Purchaser
shall issue to
the Company, in accordance with Section 1.7, a number of shares of
Purchaser
Common Stock valued at five hundred thousand dollars ($500,000)
(the "Initial
Payment Shares"). The Company shall execute stock powers in blank
and re-deliver
to the Purchaser a number of shares of Purchaser Common Stock
valued at one
hundred fifty thousand dollars ($150,000) (the "Holdback Shares"),
to secure
indemnification obligations of the Company under Section 8.3 below.
The Holdback
Shares shall be released by the Purchaser, and delivered to the
Company, within
ten days following the first anniversary of the Asset Purchase
Closing Date,
unless there is a pending indemnification claim subject to Section
8.3 and the
Purchaser determines in its good faith judgment that such actual
claim for
indemnification subject to Section 8.3 could exceed the amount of
the Holdback
Shares. All dividends or other rights (including voting rights) or
distributions
with respect to such Holdback Shares shall belong to and be
distributed to the
Company as if such shares were not Holdback Shares; provided,
however, dividends
payable in stock or stock issued in connection with a stock split
with respect
to Holdback Shares shall be returned to the Purchaser and held as
and be deemed
to be Holdback Shares. If, upon payment from the Purchaser, any
portion of such
Purchaser Common Stock is treated as the payment of imputed
interest to the
Company, separate share certificates for such Purchaser Common
Stock
representing imputed interest will be issued to the Company.
1.6 Contingent Payments.
(a) Calculation of Net Product Revenues.
(i) During the Second Contingent Payment Period, the Purchaser
shall deliver to the Company, no later than thirty (30) days
following the end
of each fiscal quarter of such period, a statement with reasonable
detail
reflecting the Purchaser's calculation of Net Product Revenues for
such quarter
and cumulative Net Product Revenues from the beginning of the
Second Contingent
Payment Period through the end of such quarter, which such
statement
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shall be prepared in accordance with GAAP on a basis consistent
with the
accounting principles and revenue recognition policies followed by
the Purchaser
in the preparation of its financial statements (the "Net Product
Revenue
Statement").
(ii) The Purchaser's calculation of Net Product Revenues set
forth in the Net Product Revenue Statement will be deemed to be
accepted by the
Company and shall be conclusive for purposes of determining the
amount of the
respective Second Contingent Payment and the timing of the Third
Contingent
Payment, unless the Company shall have delivered to the Purchaser
within
forty-five (45) days following delivery of the Net Product Revenue
Statement, a
written statement objecting to any of the information contained in
the
statement.
(iii) In the event of a dispute or disagreement relating to a
Net
Product Revenue Statement which the Company and the Purchaser are
unable to
resolve by good faith discussions, either the Company or the
Purchaser may elect
to have all such disputes or disagreements resolved by an
accounting firm of
nationally recognized standing to be mutually selected by the
Company and the
Purchaser. Such designated accounting firm shall make a resolution
of the
Purchaser's calculation of Net Product Revenue for the disputed
period, which
shall be final, binding and enforceable as an arbitration award for
all
purposes. The designated accounting firm shall be instructed to use
every
reasonable effort to perform its services within thirty (30) days
of submission
of the calculation of Net Product Revenue to it and, in any case,
as soon as
practicable after such submission. In the event any such audit
reveals any
discrepancy less than three percent (3%) of the Net Product Revenue
for the
disputed period, the Company shall pay the entire costs and
expenses for the
services of the designated accounting firm. In the event any such
audit reveals
any discrepancy greater than or equal to three percent (3%) of the
Net Product
Revenue for the disputed period, the Purchaser shall pay the entire
costs and
expenses for the services of the designated accounting firm. Any
additional
amount determined to be payable to the Company through good faith
discussion or
by the designated accounting firm shall be payable in accordance
with Section
1.5.
(b) Payment of First Contingent Payment. Subject to Section
8.5,
within thirty (30) days of receipt by the Purchaser or any
Purchaser Affiliate
of FDA approval to market a Product, the Purchaser shall issue and
deliver to
the Company a number of shares of Purchaser Common Stock valued at
one million
dollars ($1,000,000) in accordance with Section 1.7.
(c) Payment of Second Contingent Payment. Subject to Section
8.5,
within fifteen (15) days following final determination of the
Second Contingent
Payment pursuant to Section 1.6(a) for each fiscal quarter during
the Second
Contingent Payment Period, the Purchaser shall pay to the Company
the Second
Contingent Payment, if any, for such fiscal quarter.
(d) Payment of Third Contingent Payment. Subject to Section
8.5,
within fifteen (15) days following final determination of the
timing of the
Third Contingent Payment pursuant to Section 1.6(a), the Purchaser
shall issue
and deliver to the Company a number of shares of Purchaser Common
Stock valued
at one million two hundred thousand dollars ($1,200,000) in
accordance with
Section 1.7.
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1.7 Payment of Purchaser Common Stock.
(a) Purchaser Common Stock. The Purchaser shall make the
Initial
Payment, the First Contingent Payment and the Third Contingent
Payment by
issuing to the Company that number of shares of Purchaser Common
Stock equal to
the quotient obtained by dividing (i) the amount of the respective
payment by
(ii) either the Reference Market Value on the date of the Option
Exercise
Notice, in the case of the Initial Payment, or the Reference Market
Value on the
date that the milestone is achieved, in the case of the Contingent
Payments.
(b) No Fractional Shares. With respect to any Contingent Payment
paid
in the form of shares of Purchaser Common Stock, no certificates or
scrip
representing fractional shares of Purchaser Common Stock shall be
issued, and
such fractional share interests will not entitle the owner thereof
to vote or to
any other rights of a stockholder of the Purchaser. Upon payment to
the Company
of any Contingent Payment in the form of shares of Purchaser Common
Stock,
instead of the Company receiving a fractional share interest, the
Purchaser
shall pay to the Company an amount in cash equal to the product
obtained by
multiplying (i) such fractional share interest to which the Company
would
otherwise be entitled, by (ii) the Reference Market Value of a
share of
Purchaser Common Stock applicable to such Contingent Payment as
provided for in
Section 1.7(a) above.
(c) Legend. Any certificates issued to the Company representing
shares
of Purchaser Common Stock that have not been registered under the
Securities Act
shall be imprinted with the following legend (or the substantial
equivalent
thereof):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF,
IN
WHOLE OR IN PART, OTHER THAN PURSUANT TO REGISTRATION UNDER SAID
ACT
OR IN CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR OTHER
SIMILAR
RULE OR EXEMPTION AS THEN IN EFFECT, WITHOUT FIRST OBTAINING (I)
IF
REQUIRED BY THE COMPANY, A WRITTEN OPINION OF COUNSEL SATISFACTORY
TO
THE COMPANY, WHICH MAY BE COUNSEL TO THE COMPANY, TO THE EFFECT
THAT
THE CONTEMPLATED SALE OR OTHER DISPOSITION WILL NOT BE IN VIOLATION
OF
SAID ACT, OR (II) A 'NO-ACTION' OR INTERPRETIVE LETTER FROM THE
STAFF
OF THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT
SUCH
STAFF WILL TAKE NO ACTION IN RESPECT OF THE CONTEMPLATED SALE OR
OTHER
DISPOSITION."
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In the event that any certificate issued to the Company
representing shares
of Purchaser Common Stock is imprinted with the foregoing legend
(or a similar
legend), the Purchaser shall cause such legends to be removed in
connection with
any resale of such shares of Purchaser Common Stock that is made in
compliance
with, or pursuant to a valid exemption from, the registration
provisions of the
Securities Act.
(d) Filing of Reports. Upon issuance of any shares of Purchaser
Common
Stock pursuant to this Section 1.7, the Purchaser shall, from and
after such
time as it has issued such shares make timely filings of such
reports as are
required to be filed by it with the SEC so that Rule 144 under the
Securities
Act or any successor provision thereto will be available to the
security holders
of the Company who are otherwise able to take advantage of the
provisions of
such rule.
(e) Registration Rights. The shares of Purchaser Common Stock
issued
pursuant to this Agreement shall have the registration rights set
forth in
Section 5.16 below.
1.8 No Right of Set-Off. Notwithstanding anything to the contrary
in this
Agreement, the obligation of the Purchaser to make any Contingent
Payment shall
not be subject to any set-off rights of the Purchaser.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Purchaser to enter into this
Agreement,
with the understanding that the Purchaser will be relying thereon
in
consummating the transactions contemplated hereunder, the Company
hereby
represents and warrants to the Purchaser that, except as set forth
in the
Disclosure Schedule, the statements contained in this Article 2 are
true and
correct. The Disclosure Schedule is arranged in sections
corresponding to the
sections and subsections of this Article 2, and disclosure in one
section of the
Disclosure Schedule shall constitute disclosure for all sections of
the
Disclosure Schedule only to the extent to which the applicability
of such
disclosure is specifically identified (by cross-reference or
otherwise) in the
Disclosure Schedule as being qualified by such exception, except
where the
relevance of such exception to another representation or warranty
is clear on
the face of the disclosure.
2.1 Organization; Good Standing and Qualification. The Company is
a
corporation duly organized, validly existing and in good standing
under the laws
of the State of Minnesota and has all requisite corporate power and
authority to
carry on its business as now conducted. The Company is duly
qualified to
transact business and is in good standing in each jurisdiction in
which the
nature of its business or its ownership of property requires it to
be so
qualified except for those jurisdictions in which the failure to so
qualify
would not have a Material Adverse Effect. The Company has all
requisite
corporate power and authority to own and operate its properties and
assets, to
execute and deliver this Agreement and the applicable Related
Agreements, and to
perform its obligations under, and carry out the provisions of,
this Agreement
and the applicable Related Agreements, and to carry on its business
as presently
conducted.
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2.2 Capitalization of the Company. The authorized capital stock of
the
Company consists of 50,000,000 shares, $.01 par value, of which
20,000,000
shares are designated as common stock (the "Company Common Stock")
and
30,000,000 shares are undesignated (the "Undesignated Stock"). As
of the date
hereof, 2,760,000 shares of Company Common Stock are the only
issued and
outstanding capital stock of the Company. Section 2.2 of the
Disclosure Schedule
lists the registered and beneficial owners of the Company Common
Stock and the
number of shares of Company Common Stock held by such
Shareholders
(collectively, the "Company Shares"). Except as set forth in
Section 2.2 of the
Disclosure Schedule, all of the Shareholders are accredited
investors (as
defined in, and determined in accordance with, Rule 501(a) of
Regulation D under
the Securities Act). As of the Agreement Date and as of the Asset
Purchase
Closing Date not more than 35 Shareholders of the Company are or
will be
non-accredited investors. The Company Shares represent all of the
issued and
outstanding capital stock of the Company. All of the issued and
outstanding
shares of Company Common Stock are duly authorized, validly issued,
fully paid,
nonassessable and free of preemptive rights. There are 500,000
shares of Company
Common Stock reserved for issuance pursuant to Company Stock Option
Plan
(including 426,000 shares subject to outstanding Company Stock
Options). Except
as set forth in this Section 2.2 and Section 2.2 of the Disclosure
Schedule,
there are outstanding (a) no shares of capital stock or other
voting securities
of the Company, (b) no securities of the Company convertible into
or
exchangeable for shares of capital stock or voting securities of
the Company,
(c) no options, warrants, contracts, understandings, agreements or
other rights
to purchase or acquire from the Company, and, no obligations of the
Company to
issue, any capital stock, voting securities or securities
convertible into or
exchangeable for capital stock or voting securities of the Company,
and (d) no
equity equivalent interests in the ownership or earnings of the
Company or other
similar rights (collectively, "Company Securities"). There are no
outstanding
obligations of the Company to repurchase, redeem or otherwise
acquire any
Company Securities. Except as set forth in Section 2.2 of the
Disclosure
Schedule, there are no stockholder agreements, voting trusts or
other agreements
or understandings to which the Company is a party or by which it is
bound
relating to the voting or registration of any shares of capital
stock of the
Company.
2.3 Subsidiaries. The Company does not presently own or control,
directly
or indirectly, any interest in any other corporation, association,
partnership,
limited liability company or other business entity. The Company is
not a
participant in any joint venture or similar arrangement.
2.4 Authorization; Binding Obligations; Governmental Consents.
(a) All corporate action on the part of the Company, its
officers,
directors and Shareholders necessary for the authorization,
execution and
delivery of this Agreement and the Related Agreements, the
performance of all
obligations of the Company hereunder and thereunder have been taken
prior to the
Agreement Date. This Agreement and the Related Agreements are valid
and legally
binding obligations of the Company, enforceable in accordance with
their
respective terms, except (i) as limited by applicable bankruptcy,
insolvency,
reorganization, moratorium, and other laws of general application
affecting
enforcement of creditors' rights, and (ii) as limited by laws
relating to the
availability of specific performance, injunctive relief, or other
equitable
remedies.
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(b) No consent, approval, permit, order or authorization of, or
registration, qualification, designation, declaration or filing
with, any
federal, state or local governmental authority on the part of the
Company is
required in connection with the execution and delivery of this
Agreement or the
Related Agreements and the consummation of the transactions
contemplated hereby
or thereby.
2.5 Financial Statements.
(a) The Company has made available to the Purchaser, and included
in
the Disclosure Schedule are the balance sheet of the Company dated
February 20,
2005, the statement of accounts payable dated February 20, 2005,
and the
statement of capital equipment as of February 20, 2005
(collectively, the
"Financial Statements"). The Financial Statements are complete and
correct in
all material respects. The Financial Statements accurately set out
and describe
the financial condition of the Company as of the dates and during
the periods
indicated therein, subject to normal year-end adjustments, which
are neither
individually nor in the aggregate material.
(b) Except for Indebtedness reflected in the Financial Statements,
the
Company has no Indebtedness outstanding at the date hereof. The
Company is not
in default with respect to any outstanding Indebtedness or any
instrument
relating thereto, nor is there any event which, with the passage of
time or
giving of notice, or both, would result in a default, and no such
Indebtedness
or any instrument or agreement relating thereto purports to limit
the issuance
of any Securities by the Company or the operation of the business
of the
Company. Complete and correct copies of all instruments (including
all
amendments, supplements, waivers and consents) relating to any
Indebtedness of
the Company have been furnished to the Purchaser.
2.6 Liabilities. Except as and to the extent reflected in the
Financial
Statements, the Company has no liabilities or obligations (whether
accrued,
absolute, contingent, unliquidated or otherwise, whether due or to
become due,
whether known or unknown, and regardless of when asserted) arising
out of
transactions or events heretofore entered into, or any action or
inaction, or
any state of facts existing, with respect to or based upon
transactions or
events heretofore occurring, except (a) liabilities or obligations
that have
arisen after the date of the latest balance sheet in the ordinary
course of the
Company's business, or (b) liabilities or obligations under
agreements or
matters listed on any schedule to this Agreement.
2.7 Litigation. There is no action, suit, proceeding or
investigation
pending or, to the Company's knowledge, threatened against the
Company or any
Principal Shareholder. The foregoing includes, without limitation,
actions,
suits, proceedings or investigations pending or threatened
involving the use by
any of the Company's employees in connection with the Company's
business of any
information or techniques allegedly proprietary to any of their
former
employers, or their obligations under any agreements with prior
employers. The
Company is not a party or subject to the provisions of any order,
writ,
injunction, judgment or decree of any court or government agency
or
instrumentality. There is no action, suit, proceeding or
investigation by the
Company currently pending or that the Company intends to
initiate.
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2.8 Intellectual Property.
(a) Section 2.8(a) of the Disclosure Schedule sets forth a
complete
and accurate list of (i) all Intellectual Property owned, licensed
or used by
the Company, and (ii) all written agreements relating to patents,
technology,
know-how and processes that the Company has licensed to or from
third parties or
has otherwise authorized for use by others.
(b) The operation of the business of the Company as currently
conducted does not infringe upon, misappropriate or otherwise
violate the
Intellectual Property rights of any third party, and no action or
claim is
pending or, to the Company's knowledge, threatened alleging that
the operation
of such business interferes with, infringes upon, misappropriates
or otherwise
violates the Intellectual Property rights of any third party and,
to the
knowledge of the Company, there is no basis therefor.
(c) The Company is the sole and exclusive owner of all right,
title
and interest in and to, Company Owned Intellectual Property and has
a valid,
unexpired license or other legal right to Company Licensed
Intellectual Property
used in or necessary to the operation of its business as presently
conducted.
(d) Except as set forth in Section 2.8(d) of the Disclosure
Schedule,
there are no outstanding options, licenses, or agreements of any
kind relating
to the Company's Owned Intellectual Property, nor is the Company
bound by or a
party to any options, licenses or agreements of any kind with
respect to the
patents, trademarks, service marks, trade names, copyrights, trade
secrets,
licenses, proprietary rights and processes of any other person.
(e) To the Company's knowledge, neither the Company Owned
Intellectual
Property nor the Company Licensed Intellectual Property are invalid
or
unenforceable, and the same have not been adjudged invalid or
unenforceable in
whole or in part. The Company Owned Intellectual Property and the
Company
Licensed Intellectual Property constitute all of the Intellectual
Property
necessary for the operation of the business of the Company as
currently
conducted. The Company has complied in all material respects with
all of its
obligations of confidentiality in respect of the claimed trade
secrets or
proprietary information of others and knows of no violation of such
obligations
of confidentiality owed to it.
(f) No written claims or actions have been asserted, are pending
or,
to the knowledge of the Company, threatened against the Company (i)
challenging
or seeking to deny or restrict the ownership of the Company in the
Company Owned
Intellectual Property or the license rights of the Company in the
Company
Licensed Intellectual Property, (ii) alleging that any services
provided by,
processes used by, or products manufactured or sold by the Company
infringe or
misappropriate any Intellectual Property right of any third party,
or (iii)
alleging that the Company Licensed Intellectual Property is being
licensed or
sublicensed in conflict with the terms of any license or other
agreement, and,
to the knowledge of the Company, there is no reasonable basis for
such a claim.
(g) As of the Agreement Date, to the knowledge of the Company,
no
person is engaging in any activity that infringes or
misappropriates the Company
Owned Intellectual Property or Company Licensed Intellectual
Property. Except as
set forth in Section 2.8(g) of the
12
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Disclosure Schedule, the Company has not granted any license or
other right to
any third party with respect to the Company Owned Intellectual
Property or
Company Licensed Intellectual Property. The execution, delivery and
performance
of this Agreement and the consummation of the transactions
contemplated by this
Agreement by the Company will not breach, violate or conflict with
any
instrument or agreement concerning the Company Owned Intellectual
Property, will
not cause the forfeiture or termination, or give rise to a right of
forfeiture
or termination of any of the Company Owned Intellectual Property or
Company
Licensed Intellectual Property, or materially impair the right of
the Purchaser
to license or dispose of, or to bring any action for infringement
of Company
Owned Intellectual Property or Company Licensed Intellectual
Property.
(h) The Company has delivered or made available to the
Purchaser
correct and complete copies of all licenses falling within the
definition of
Company Licensed Intellectual Property, other than licenses of
commercial
off-the-shelf computer software. With respect to each such
delivered or made
available license:
(1) such license is valid and binding upon the Company and in
full force and effect and represents the entire agreement between
the respective
licensor and licensee with respect to the subject matter of such
license;
(2) such license will not cease to be valid and binding upon
the
Company and in full force and effect on terms identical in all
material respects
to those currently in effect as a result of the consummation of the
transactions
contemplated by this Agreement, nor will the consummation of the
transactions
contemplated by this Agreement constitute a material breach or
default under
such license or otherwise so as to give the licensor or any other
person a right
to terminate such license;
(3) the Company has not (A) received any written notice of
termination or cancellation under such license, (B) received any
written notice
of breach or default under such license, which breach has not been
cured, or (C)
granted to any other third party any rights, adverse or otherwise,
under such
license that would constitute a material breach of such license;
and
(4) neither the Company nor, to the knowledge of the Company,
any
other party to such license is in material breach or default
thereof, and, to
the knowledge of the Company, no event has occurred that, with
notice or lapse
of time, would constitute such a material breach or default or
permit
termination, modification or acceleration under such license.
(i) Except as set forth in Section 2.8(i) of the Disclosure
Schedule,
the Company is not aware that any of its respective employees,
officers,
directors, or consultants is (1) subject to confidentiality
restrictions in
favor of any third person the breach of which could subject the
Company to any
liability, or (2) obligated under any contract (including licenses,
covenants or
commitments of any nature) or other agreement, or subject to any
judgment,
decree or order of any court or administrative agency, that would
interfere with
their duties to the Company, as applicable, or that would conflict
with the
Company's business as presently conducted. Each current employee
and current
officer of and current consultant to the Company and the Company's
former
employees, Brian Pederson and John Hauck, and the Company's
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<PAGE>
former consultant, Keith L. March, M.D., has executed a proprietary
information
and inventions agreement in the form of Exhibit C attached hereto,
or in the
case of Mr. Pederson and Dr. March in a form substantially similar
to Exhibit C
as approved by the Purchaser. There are no former employees, former
officers, or
former consultants that developed or worked on the Company Owned
Intellectual
Property, other than Brian Pederson, Keith L. March, M.D. and John
Hauck. Except
as set forth in Section 2.8(i) of the Disclosure Schedule, no
current or former
employee or officer of or consultant to the Company has excluded
works or
inventions made prior to his or her employment or relationship with
the Company
from his or her assignment of inventions pursuant to such employee,
officer or
consultant's proprietary information and inventions agreement.
(j) The Company has taken reasonable steps in accordance with
normal
industry practice to maintain the confidentiality of its trade
secrets and other
confidential Intellectual Property. To the knowledge of the
Company, (1) there
has been no misappropriation of any Company Owned Intellectual
Property or
Company Licensed Intellectual Property; (2) no employee,
independent contractor
or agent of the Company has misappropriated any trade secrets from
any third
party during the course of his performance as an employee,
independent
contractor or agent of the Company; and (3) no employee,
independent contractor
or agent of the Company is in material default or breach of any
term of any
employment agreement, non-disclosure agreement, assignment of
invention
agreement or similar agreement or contract relating in any way to
the
protection, ownership, development, use or transfer of Company
Owned
Intellectual Property or Company Licensed Intellectual
Property.
(k) Neither the execution nor delivery of this Agreement or the
Related Agreements, nor the carrying on of the Company's business
by the
employees of and consultants to the Company, as the case may be,
nor the conduct
of the Company's business as presently conducted, will, to the
knowledge of the
Company, conflict with or result in a breach of the terms,
conditions or
provisions of, or constitute a default under, any contract,
covenant or
instrument under which any of such employees is now obligated.
Except to the
extent already assigned or licensed to the Company, the Company
does not believe
that it is, or will be, necessary to utilize any inventions or
proprietary
information of any of its employees (or people it currently intends
to hire)
made prior to their employment by the Company, as the case may
be.
2.9 Compliance with Other Instruments. The Company is not in
violation or
default of any provision of its Articles of Incorporation or
Bylaws, or of any
mortgage, indenture, contract, agreement, instrument, judgment,
order, writ,
decree or contract to which it is a party or by which it is bound
or, to the
Company's knowledge, of any material provision of any federal or
state statute,
rule or regulation applicable to the Company, which violation or
default would
have a Material Adverse Effect on the Company. The execution,
delivery and
performance of this Agreement and the Related Agreements will not
result in any
such violation or be in conflict with or constitute, with or
without the passage
of time or giving of notice, either a default under any such
provision,
instrument, judgment, order, writ, decree or material contract, or
result in the
creation of any mortgage, pledge, lien, charge or encumbrance upon
any of the
properties or assets of the Company or the suspension, revocation,
impairment,
forfeiture, or nonrenewal of any permit, license, authorization, or
approval
applicable to the business, operations or any of the assets or
properties the
Company.
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<PAGE>
2.10 Agreements; Actions.
(a) Except as set forth in Section 2.10(a) of the Disclosure
Schedule,
there are no agreements, understandings or proposed transactions
between the
Company and any of its officers, directors, Shareholders,
Affiliates, or any
Affiliate thereof.
(b) Section 2.10(b) of the Disclosure Schedule sets forth all
agreements, understandings, instruments, contracts, proposed
transactions,
judgments, orders, writs or decrees to which the Company is a party
or by which
it is bound that involve (1) obligations (contingent or otherwise)
of, or
payments to, the Company that may not be extinguished on thirty
(30) days notice
or less, (2) the license, assignment or transfer of any patent,
copyright, trade
secret or other proprietary right to or from the Company (other
than licenses to
the Company arising from the purchase of "off the shelf' or other
standard
products), (3) the manufacture, marketing, sale or distribution of
any products
of the Company in any jurisdiction, or any restrictions on the
Company's
exclusive rights to develop, manufacture, assemble, distribute,
market and sell
its products, (4) indemnification by the Company with respect to
infringements
of proprietary rights (other than indemnification obligations
arising from
purchase, sale or license agreements entered into in the ordinary
course of
business), (5) any supply agreements or (6) other agreements that
are otherwise
material to the business of the Company.
(c) The Company has delivered, has caused to be delivered or
made
available to the Purchaser correct and complete copies of each
contract,
agreement or other arrangement listed in Section 2.10(b) of the
Disclosure
Schedule, as such contracts, agreements and arrangements are
amended to date.
Each such contract, agreement or other arrangement is a valid,
binding and
enforceable obligation of the Company, as applicable, and, to the
knowledge of
the Company, of the other party or parties thereto, and is in full
force and
effect. Except as set forth in Section 2.10(c) of the Disclosure
Schedule,
neither the Company nor, to the knowledge of the Company, the other
party or
parties thereto, is in breach or non-compliance, or is considered
to be in
breach or noncompliance by the other party thereto, of any material
term of any
such contract, agreement or other arrangement. Except as set forth
in Section
2.10(c) of the Disclosure Schedule, the Company has not received
written notice
of any default or threat thereof with respect to any such contract,
agreement or
other arrangement and the Company has no reasonable basis for
suspecting that
any such default exists or will be forthcoming. Subject to
obtaining any
necessary consents by the other party or parties to any such
contract, agreement
or other arrangement (as further set forth in Section 2.10(c) of
the Disclosure
Schedule), no contract, agreement or other arrangement listed in
Section 2.10 of
the Disclosure Schedule includes or incorporates any provision the
effect of
which would be to enlarge or accelerate any obligations of the
Company or give
additional rights to any other party thereto or will in any other
way be
materially adversely affected by, or terminate or lapse by reason
of, the
transactions contemplated by this Agreement or the Related
Agreements.
(d) Since January 1, 2004, the Company has not (1) declared or
paid
any dividends or authorized or made any distribution upon or with
respect to any
class or series of its capital stock, (2) incurred any Indebtedness
for money
borrowed or any other liabilities, (3) made any loans or advances
to any person,
other than ordinary advances for travel and other business
expenses, or (4)
sold, exchanged or otherwise disposed of any of its assets or
rights, other than
the sale of its inventory in the ordinary course of business.
15
<PAGE>
2.11 Related-Party Transactions. No employee, officer,
director,
Shareholder or consultant to the Company, or member of his or her
immediate
family, is indebted to the Company, nor is the Company indebted (or
committed to
make loans or extend or guarantee credit) to any of them other than
(1) for
payment of salary, bonus or fees (in the case of consultants) for
services
rendered, (2) reimbursement or advances for reasonable expenses
incurred on
behalf of the Company, and (3) for other standard employee benefits
made
generally available to all employees (including stock option
agreements
outstanding under any stock option plan approved by the Company's
board of
directors. To the knowledge of the Company, no employee, officer,
director,
Shareholder or member of his or her immediate family has any direct
or indirect
ownership interest in any firm or corporation with which the
Company is
affiliated, has a business relationship or has a material contract,
or any firm
or corporation that competes with the Company, except that
employees, officers,
directors and Shareholders of the Company and members of their
immediate
families may own stock in publicly-traded companies that may
compete or do
business with the Company. Except as may be disclosed in the
Financial
Statements, the Company is not a guarantor or indemnitor of any
Indebtedness of
any other person.
2.12 Changes. Since the end of the latest completed fiscal year of
the
Company and except as set forth in Section 2.12 of the Disclosure
Schedule,
there has not been:
(a) Any change in the assets, liabilities, financial condition
or
operations of the Company from that reflected in the Financial
Statements, other
than changes in the ordinary course of business consistent with
past practice,
none of which individually or in the aggregate has had or could
reasonably be
expected to have a Material Adverse Effect;
(b) Any resignation or termination of any key officers or employees
of
the Company;
(c) Any material change, except in the ordinary course of
business
consistent with past practice, in the contingent obligations of the
Company by
way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, to the Company's assets or properties which has had or
could
reasonably be expected to have a Material Adverse Effect;
(e) Any waiver by the Company of a right or of a debt owed to it of
a
material nature or material amount;
(f) Any direct or indirect loans made by the Company to any
Shareholder, employee, officer or director of the Company, or a
subsidiary of
the Company to any shareholder, employee, officer or director of
such
subsidiary, other than advances made in the ordinary course of
business
consistent with past practice;
(g) Any material change in any compensation arrangement or
agreement
with any employee, officer or director of the Company;
16
<PAGE>
(h) Any declaration or payment of any dividend or other
distribution
to the Shareholders of the Company of the assets of the
Company;
(i) Any labor organization activity;
(j) Any Indebtedness, obligation or liability incurred, assumed
or
guaranteed by the Company, except those for immaterial amounts and
for current
liabilities incurred in the ordinary course of business consistent
with past
practice;
(k) Any sale, assignment, transfer or license of any patents,
trademarks, copyrights, trade secrets or other intangible assets of
the Company;
(l) Any change in any agreement disclosed in Section 2.10 of
the
Disclosure Schedule which has had or could reasonably be expected
to have a
Material Adverse Effect; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has had or could reasonably be
expected to have a
Material Adverse Effect.
2.13 Compliance with Laws; Permits. The Company is not in violation
in any
material respect of any applicable statute, rule, regulation,
order, judgment,
decree, writ or restriction of any domestic or foreign government
or any
instrumentality or agency thereof in respect of the conduct of its
business or
the ownership of its properties. The Company has all franchises,
permits,
licenses, and any similar authority necessary for the conduct of
its business as
now being conducted by it (the "Permits"). As of the date hereof,
no suspension
or cancellation of any of the Permits is pending or, to the
knowledge of the
Company, threatened. The term Permits shall not include any Company
License as
defined in Section 2.19.
2.14 Environmental; Zoning and Safety Laws. Except as set forth in
Section
2.14 of the Disclosure Schedule, (a) neither the activities carried
on by the
Company at the facilities, offices or properties leased by the
Company, nor such
facilities, offices or properties, are in material violation of any
judgment,
decree, order, law, license, rule or regulation pertaining to
environmental
matters, including those arising under any federal, state or local
statute,
regulation, ordinance, order or decree relating to the environment
or
occupational health and safety (hereinafter "Environmental Laws"),
or to the
knowledge of the Company any other zoning, health or safety law or
regulation;
(b) neither the Company nor, to the knowledge of the Company, any
operator of
its past or present properties, is or has been in material
violation, or alleged
material violation, of, or has any liability or, to the knowledge
of the
Company, threatened liability under, any Environmental Laws; (c) to
the
knowledge of the Company, none of the properties currently or
formerly owned,
leased or operated by the Company (including, without limitation,
soils and
surface and ground waters) are contaminated with any Hazardous
Substance; (d) to
the knowledge of the Company, the Company is not actually,
potentially or
allegedly liable for any off-site contamination by Hazardous
Substances; (e) to
the knowledge of the Company, the Company is not actually,
potentially or
allegedly liable under any Environmental Law (including, without
limitation,
pending or threatened liens); (f) the Company has all permits,
licenses and
other authorizations required under any Environmental Law
("Environmental
Permits") (g) the Company has always been and is in compliance in
all material
respects with its Environmental Permits; and (h) neither the
execution of this
Agreement nor the
17
<PAGE>
consummation of the transactions contemplated hereby will require
any
investigation, remediation or other action with respect to
Hazardous Substances,
or any notice to or consent of Governmental Authorities or third
parties,
pursuant to any applicable Environmental Law or Environmental
Permit.
2.15 Manufacturing and Marketing Rights. Except as set forth in
Section
2.15 of the Disclosure Schedule, the Company has not granted rights
to
manufacture, produce, assemble, license, market, or sell its
products to any
other person and is not bound by any agreement that affects the
Company's
exclusive right to develop, manufacture, assemble, distribute,
market or sell
its products.
2.16 Disclosure. The Company has provided or made available to
the
Purchaser all the information that the Purchaser has requested for
deciding
whether to execute this Agreement. Neither this Agreement
(including all the
exhibits and schedules hereto), the Related Agreements, nor any
other statements
or certificates made or delivered in connection herewith or
therewith contains
any untrue statement of a material fact or omits to state a
material fact
necessary to make the statements herein or therein not misleading
in light of
the circumstances under which they were made.
2.17 Insurance. Since the Company's inception, the Company has not
carried
any form of insurance. The Company has not been denied any form of
insurance and
no policy of insurance has been revoked or rescinded since the
Company's
inception. There are no outstanding claims and, to the knowledge of
the Company,
no facts exists which could lead to such claims, under any such
terminated
insurance policy or that would otherwise be covered by an insurance
policy if
such policy was maintained by the Company.
2.18 Employee Benefit Plans. There are no facts or circumstances
which
could, directly or indirectly, subject the Purchaser or any of its
Affiliates to
any liability of any nature with respect to any pension, welfare,
incentive,
perquisite, paid time off, severance or other benefit plan, policy,
practice or
agreement sponsored, maintained or contributed to by the Company or
any of its
Affiliates, to which the Company or any of its Affiliates is a
party or with
respect to which the Company or any of its Affiliates could have
any liability.
2.19 FDA and Regulatory Matters.
(a) (i) With respect to the Company Products, (1) the Company
has
obtained all necessary and applicable approvals, clearances,
authorizations,
licenses and registrations required by United States or foreign
governments or
government agencies, to permit the design, development,
pre-clinical and
clinical testing, manufacture, labeling, sale, distribution and
promotion of its
Products in jurisdictions where it currently conducts such
activities (the
"Company Activities to Date") with respect to each of its
Products
(collectively, the "Company Licenses"); (2) the Company is in
compliance in all
material respects with the terms and conditions of each Company
License and with
all applicable Laws pertaining to the Company Activities to Date
with respect to
each Company Product which is not required to be the subject of a
Company
License; (3) the Company is in compliance in all material respects
with all
applicable Laws regarding registration, license, certification for
each site at
which a Company Product is manufactured, labeled, sold, or
distributed; and (4)
to the extent any Company Product
18
<PAGE>
has been exported from the United States, the Company has exported
such Company
Product in compliance in all material respects with applicable Law;
(ii) all
manufacturing operations performed by or on behalf of the Company
have been and
are being conducted in all material respects in compliance with the
quality
systems regulations of the FDA and, to the extent applicable to the
Company,
counterpart regulations in the European Union and all other
countries where
compliance is required; (iii) all non-clinical laboratory studies
of Company
Products under development, sponsored by the Company and intended
to be used to
support regulatory clearance or approval, have been and are being
conducted in
compliance in all material respects with the FDA's good laboratory
practice for
non-clinical studies regulations (21 CFR Part 58) in the United
States and, to
the extent applicable to the Company, counterpart regulations in
the European
Union and all other countries; and (iv) the Company is in
compliance in all
material respects with all applicable reporting requirements for
all Company
Licenses or plant registrations described in clause (i) above,
including, but
not limited to, applicable adverse event reporting requirements in
the United
States and outside of the United States under applicable Law.
(b) The Company is in compliance in all material respects with all
FDA
and non-United States equivalent agencies and similar state and
local Laws
applicable to the maintenance, compilation and filing of reports,
including
medical device reports, with regard to the Company Products.
Section 2.19(b) of
the Disclosure Schedule sets forth a list of all applicable adverse
event
reports related to the Company Products, including any Medical
Device Reports
(as defined in 21 CFR 803). Set forth on Section 2.19(b) of the
Disclosure
Schedule are complaint review and analysis reports of the Company
through the
date hereof, including information regarding complaints by product
and root
cause analysis of closed complaints, which reports are correct in
all material
respects.
(c) The Company has not received any written notice or other
written
communication from the FDA or any other Governmental Authority (i)
contesting
the pre-market clearance or approval of, the uses of or the
labeling and
promotion of any of the Company Products or (ii) otherwise alleging
any
violation of any Laws by the Company.
(d) There have been no recalls, field notifications or seizures
ordered or adverse regulatory actions taken (or to the knowledge of
the Company
threatened) by the FDA or any other Governmental Authority with
respect to any
of the Company Products, including any facilities where any such
Company
Products are produced, processed, packaged or stored and the
Company has not
within the last three years, either voluntarily or at the request
of any
Governmental Authority, initiated or participated in a recall of
any Company
Product or provided post-sale warnings regarding any Company
Product.
(e) The Company has conducted all of its clinical trials with
reasonable care and in all material respects in accordance with all
applicable
Laws and the stated protocols for such clinical trials.
(f) All filings with and submissions to the FDA and any
corollary
entity in any other jurisdiction made by the Company with regard to
the Company
Products, whether oral, written or electronically delivered, were
true, accurate
and complete in all material respects as of the date made, and, to
the extent
required to be updated, as so updated remain true, accurate and
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complete in all material respects as of the date hereof, and do not
materially
misstate any of the statements or information included therein, or
omit to state
a material fact necessary to make the statements therein not
misleading.
2.20 Brokers; Expenses. No finder, broker, financial advisor, agent
or
other intermediary has acted for or on behalf of the Company or the
Principal
Shareholders in connection with the negotiation of this Agreement
or the Related
Agreements or the consummation of the transactions contemplated
hereby or
thereby.
2.21 Consents. Except as set forth in Section 2.21 of the
Disclosure
Schedule, no permit, approval, authorization or consent of any
person (excluding
Governmental Authorities) is required in connection with the
execution, delivery
and performance by the Company of this Agreement or the Related
Agreements, or
the consummation of the transactions contemplated hereby or
thereby.
2.22 Taxes. The Company has filed (or caused to be filed) all
Tax
Returns required to be filed by the Company and has paid (or caused
to be paid)
all Taxes properly due in connection therewith, including interest
and
penalties. There are no liens, encumbrances, claims or charges of
any kind for
Taxes on any Assets.
2.23 Minute Book. The Company has made available to the
Purchaser
copies of minutes of all meetings of directors and shareholders
and/or written
consent resolutions of directors and shareholders since the time
of
incorporation, and such minutes reflects all transactions referred
to in such
minutes accurately in all material respects.
2.24 Employees. The Company has no collective bargaining
agreements
with any of its employees. There is no labor union organizing
activity pending
or, to the Company's knowledge, threatened with respect to the
Company. To the
Company's knowledge, no employee of the Company, nor any consultant
with whom
the Company has contracted, is in material violation of any term of
any
employment contract, proprietary information agreement or any other
agreement
relating to the right of any such individual to be employed by, or
to contract
with, the Company because of the nature of the business to be
conducted by the
Company; and to the Company's knowledge the continued employment by
the Company
of its present employees, and the performance of the Company's
contracts with
its independent contractors, will not result in any such violation.
The Company
has not received any notice alleging that any such violation has
occurred. No
employee of the Company has been granted the right to continued
employment by
the Company or to any material compensation following termination
of employment
with the Company.
2.25 Title to Properties and Assets; Liens; Etc. The Company has
good
and marketable title to all of its properties and assets, including
the
properties and assets reflected in the most recent balance sheet
included in the
Financial Statements and the Assets, and good title to its
leasehold estates, in
each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge,
other than (a) those resulting from Taxes which have not yet become
delinquent,
(b) minor liens and encumbrances which do not materially detract
from the value
of the property subject thereto or materially impair the operations
of the
Company, and (c) those that have otherwise arisen in the ordinary
course of
business. Section 2.25 of the Disclosure Schedule sets
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forth a complete list of all facilities, machinery, equipment,
fixtures,
vehicles and other properties owned, leased or used by the Company,
all of which
are in good operating condition and repair and are reasonably fit
and usable for
the purposes for which they are being used. The Company is in
compliance with
all material terms of each lease to which it is a party or is
otherwise bound.
2.26 Inventory. Section 2.26 of the Disclosure Schedule sets forth
a
complete and accurate list of the inventories of the Company. All
inventories of
the Company reflected in the Financial Statements and on the
Disclosure Schedule
(a) consist of items of merchantable quality and quantity usable
and salable at
its carrying value in the ordinary course of business, consistent
with past
practice and (b) conform in all material respects to the
specifications
established therefor.
2.27 Orders; Commitments and Returns. All accepted and unfulfilled
orders
for the sale of products and the performance of services entered
into by the
Company and all outstanding contracts or commitments for the
purchase of
supplies, materials and services by or from the Company were made
in bona fide
transactions in the ordinary course of business. There are no
material claims
against the Company to return products by reason of alleged
over-shipments,
defective products or otherwise, or of products in the hands of
customers,
retailers or distributors under an understanding that such products
would be
returnable.
2.28 Product Liability Claims. The Company has never received a
written
claim, or, to its knowledge, incurred any uninsured or insured
liability, for or
based upon failure to warn, breach of product warranty (other than
warranty
service and repair claims incurred in the ordinary course of
business and
expensed as warranty expense on the Financial Statements for the
period in which
incurred), strict liability in tort, general negligence, negligent
manufacture
of a Company Product, negligent provision of services or any other
allegation of
liability, including or resulting in, but not limited to, product
recalls,
arising from the materials, design, testing, manufacture,
packaging, labeling
(including instructions for use) or sale of its products or from
the provision
of services.
2.29 Warranties. All products manufactured or sold, and all
services
provided, by the Company have materially complied, and are in
material
compliance with all contractual requirements, warranties or
covenants, express
or implied, applicable thereto, and with all applicable
governmental, trade
association or regulatory specifications therefor or applicable
thereto. No
product or service manufactured, sold, delivered or performed by
the Company is
subject to any guaranty, warranty or other indemnity beyond the
applicable
standard terms and conditions set forth in the Disclosure Schedule.
The
Disclosure Schedule sets forth or references the terms of all
standard and all
material non-standard product and service warranties and product
return, sales
credit, discount, warehouse allowance, advertising allowance, demo
sales and
credit policies of the Company. The Company has delivered or made
available to
the Purchaser prior to the date hereof complete and accurate copies
of all such
warranties and policies.
2.30 Relations with Suppliers and Customers. No material current
supplier
of the Company has canceled any contract or order for provision of,
and, to the
knowledge of the Company's officers, there has been no threat by
any such
supplier not to provide, raw materials,
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products, supplies or services to the businesses of the Company
either prior to
or following the Agreement Date. The Company has not received any
information
from any customer that accounted for more than five percent (5%) of
the revenues
of the Company during the last full fiscal year to the effect that
such customer
intends to materially decrease the amount of business it does with
the
businesses of the Company either prior to or following the
Agreement Date.
Section 2.30 of the Disclosure Schedule lists each supplier to the
Company that
is the source of a particular raw material, product, supply or
service with
respect to which locating and qualifying a replacement source
would, to the
Company's knowledge, involve significant cost or delay.
2.31 Absence of Certain Business Practices. Neither the Company nor
any
director, officer, employee of the Company, agent or Principal
Shareholder of
the Company, nor any other person acting on behalf of the Company,
has, directly
or indirectly, given or agreed to give any gift or similar benefit
or agreed to
make or made any payment to any customer, supplier, governmental
employee or
other person who is or may be in a position to help or hinder the
business of
the Company, taken as a whole (or assis
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