COMBINATION AGREEMENT

Exhibit 2.1

COMBINATION AGREEMENT

between

COVALENT GROUP, INC.

(“Covalent”)

and

Kai Lindevall

Jan Lilja

Sven-Erik Nilsson

Vesa Manninen

Seppo Oksanen

Heikki Vapaatalo

Riitta Korpela

Agneta Lindevall

NTGLT Pharma BVBA

(the “Stockholders”)

dated

March 2, 2006

COMBINATION AGREEMENT

THIS COMBINATION AGREEMENT (the “Agreement”), made this 2nd day of March, 2006 (the “Execution Date”), by and between Covalent Group, Inc., a Delaware corporation (“Covalent”) and Kai Lindevall, Jan Lilja, Sven-Erik Nilsson, Vesa Manninen, Seppo Oksanen, Heikki Vapaatalo, Riitta Korpela, NTGLT Pharma BVBA and Agneta Lindevall (each individually, a “Stockholder” and together, the “Stockholders”).

BACKGROUND

WHEREAS, the Board of Directors of Covalent and the Stockholders of Remedium Oy, a corporation organized under the laws of Finland (“Remedium”) desire to combine the businesses of Covalent and Remedium in order to more effectively serve their customers and expand the geographic scope of their respective businesses; and

WHEREAS, the Stockholders own all of the issued and outstanding shares of capital stock of Remedium (the “Shares”), the number of shares owned by each Stockholder being set forth opposite such Stockholder’s name on Schedule 4(a) ; and

WHEREAS, the parties have agreed the most efficient manner of combining their businesses is for Covalent to exchange the consideration described in Section 2 below for all the Shares in accordance with all the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the foregoing premises and the representations, covenants and agreements set forth herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Exchange of Stock . At the Closing (as hereinafter defined), the Stockholders shall contribute, convey, transfer and assign to Covalent the Shares, free and clear of all liens, security interests, pledges, claims and encumbrances of every kind, nature and description.

2. Exchange Price; Adjustment .

(a) In consideration of the contribution, conveyance, transfer and assignment of the Shares to Covalent, Covalent shall pay Stockholders the following consideration for the Shares (collectively, the “Exchange Price”):

(i) at the Closing, the sum of $4,000,000, payable by wire transfer to the Representative (hereinafter defined) of immediately available funds (the “Cash Consideration”), to be allocated among the Stockholders in accordance with Schedule 4(a) .

(ii) at the Closing, Covalent shall issue to Stockholders (to be allocated among the Stockholders in accordance with Schedule 4(a) ) the number of shares of common stock of Covalent, $.001 par value, equal to the quotient obtained by dividing (w) $13,000,000 by (x) $2.32 per share; provided , however that

 

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(A) if the equity weighted average price per share of common stock of Covalent on the Nasdaq Small Cap Market during the period commencing with the Execution Date and ending with the third trading day prior to Closing Date (the “Execution Stock Price”) is greater than one hundred and twenty-two per cent (122%) times $2.32 (the “Upper Collar Range”), or $2.83 per share, the number of shares of common stock of Covalent shall be equal to the quotient obtained by dividing (w) ($13,000,000 by (x) the Upper Collar Range, and

(B) if the Execution Stock Price is less than seventy eight per cent (78%) times USD $2.32 (the “Lower Collar Range”), or $1.81 per share, the number shares of common stock of Covalent shall be equal to the quotient obtained by dividing (w) $13,000,000 by (x) the Lower Collar Range. The shares of Common Stock of Covalent issued pursuant to the Section 2(a)(ii) are referred to herein as the “Consideration Shares”.

The price per share of a Consideration Share calculated pursuant to this Section 2(a)(ii) is referred to herein as the “Combination Price”. No fractional shares of Covalent common stock shall be issued, and any Stockholder that would otherwise be entitled to receive a fractional share of Covalent common stock shall receive an aggregate number of shares of Covalent common stock rounded to the nearest whole number.

(iii) Subject to any amounts due Covalent from the Stockholders under Section 2(b)(ii) hereunder, and promptly after determination of such amounts due Covalent, Covalent shall issue to Stockholders (to be allocated among the Stockholders in accordance with the percentages set forth opposite each Stockholder’s name on Schedule 4(a) ) the number of shares of common stock of Covalent (the “Debt Holdback Shares”) equal to the quotient obtained by dividing (w) $1,000,000 by (y) the Combination Price.

(iv) Subject to any amounts due Covalent from the Stockholders hereunder, on the first anniversary of the Closing, Covalent shall issue to Stockholders (to be allocated among the Stockholders in accordance with the percentages set forth opposite each Stockholder’s name on Schedule 4(a)) the number of shares of common stock of Covalent, (the “Adjustment Holdback Shares” and together with the Debt Holdback Shares, the “Holdback Shares”) equal to the quotient obtained by dividing (w) $2,000,000 by (x) the Combination Price.

(b) (i) It is the intention of the parties that Remedium’s Net Worth (as hereinafter defined) at the Closing (the “Closing Net Worth”) be equal to or greater than $1,527,958 constituting Remedium’s Net Worth at September 30, 2005, based on its financial statements, as reconciled to U.S. GAAP. Solely for purposes of illustration and clarity, calculation of Remedium’s Net Worth as of September 30, 2005 is set forth in Exhibit N to this Agreement If the Closing Net Worth is determined to be less than 1,527,958, any such deficiency shall be paid by Stockholders to Covalent, at each Stockholder’s option, either (A) by wire transfer of immediately available funds to the bank and account designated by Covalent in writing to Representative (as defined herein) or (B) by transfer to Covalent of such number of shares of Covalent common stock equal to the quotient obtained by dividing (x) the amount of such deficiency by (y) the Combination Price. Such payment or transfer of stock shall be as follows: (A) if no amounts or items shown on the Net Worth Statement (as hereinafter defined)

 

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have been disputed as provided herein, within five business days after the expiration of the 60 day review and audit period set forth in subparagraph 2(b)(iii), and (B) if any amounts or items shown on the Net Worth Statement have been disputed, within five business days following the resolution of all such disputed amounts or items as provided herein, provided, however, that a Stockholder may opt by written notice to Covalent to pay such deficiency with Holdback Shares, in which event that portion of such deficiency paid with Adjustment Holdback Shares shall not be due until the Adjustment Holdback Shares are issued to the Stockholder under Section 2(a)(iv). As used in this Agreement, the term “Net Worth” means the amount by which the sum of the book value of the assets of Remedium and the Remedium Subsidiaries (as hereinafter defined) on a consolidated basis exceeds the sum of the book value of the liabilities of Remedium and the Remedium Subsidiaries on a consolidated basis, all as recognized, calculated and determined in accordance with Finnish GAAP consistently applied with prior periods and reconciled to US GAAP. For purposes of determining “Net Worth”, up to $300,000 in fees and expenses incurred by Remedium for legal, accounting and investment banking services directly related to the consummation of the transactions contemplated hereby (“Transaction Expenses”), shall be disregarded, and all Taxes (as hereinafter defined) of Remedium attributable to the period ending on or prior to the Closing Date shall be accrued in full.

(ii) It is the intention of the parties that, at the Closing Date, neither Remedium nor any of the Remedium Subsidiaries shall have any liabilities for borrowed money (“Debt”). In the event there shall be any Debt outstanding at the Closing Date, the amount of such Debt, less up to $150,000 in Transaction Expenses, shall be reduced from the Exchange Price, at the option of each Stockholder, either from (A) the Cash Consideration or (B) by reducing the Debt Holdback Shares by such number of shares of Covalent common stock equal to the quotient obtained by dividing (x) the amount of such Debt by (y) the Combination Price.

(iii) Within 60 days following the Closing Date (as hereinafter defined), Covalent shall prepare and deliver to Representative a balance sheet setting forth the Closing Net Worth (the “Net Worth Statement”), which Net Worth Statement shall set forth in reasonable detail the determination and calculation of the Closing Net Worth. If and to the extent not within the control of Covalent, then for purposes of preparing the Net Worth Statement, Representative shall make reasonably available to Covalent (and Covalent’s accountants, attorneys, agents, and representatives) during normal business hours, the books and records (including any accountants’ work papers) of Remedium and the Remedium Subsidiaries, upon reasonable advance notice to Representative, and shall otherwise cooperate in good faith with Covalent with respect to the preparation of said Net Worth Statement. For a period of 30 days after receipt by Representative of the Net Worth Statement, Stockholders shall have the right to review such Net Worth Statement and, in connection therewith, shall have access during normal business hours, to the books and records (including any accountants work papers) of Remedium and the Remedium Subsidiaries. Unless Covalent shall receive notice from Representative within such 30 day period to the effect that the Stockholders dispute one or more amounts or items shown on the Net Worth Statement, the Net Worth Statement (including the determination and calculation of the Closing Net Worth set forth in the Net Worth Statement) shall be final, conclusive and binding on the parties hereto. Any such notice from Representative to Covalent disputing one or more amounts or items on the Net Worth Statement as aforesaid shall specify in reasonable detail the nature and amount of said dispute or disputes.

 

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(iv) If Covalent receives notice from Representative within the aforementioned 30 day period that Stockholders dispute one or more amounts or items shown on the Net Worth Statement, then Covalent and Stockholders (with the Representative acting as their representative) shall promptly thereafter meet in good faith to attempt to resolve any and all such disputed amounts or items. If and to the extent Covalent and Stockholders resolve any such disputed amount or item, then (x) such resolution shall be set forth in a writing signed by Covalent and Stockholders, and (y) if such resolution would require Stockholders to make a payment to Covalent pursuant to subparagraphs 2(b)(i) or 2(b)(ii), then Stockholders shall make such payment as provided in subparagraphs 2(b)(i) or 2(b)(ii). If and to the extent Covalent and Stockholders are unable to agree upon a resolution of any disputed amount or item within 15 days after receipt by Covalent of Representative’s notice regarding the existence of such disputed amount or item, then such disputed amount or item shall be resolved by an independent nationally recognized accounting firm, selected by mutual written agreement of Covalent and Representative, which is not then providing, and has not provided at any time during the period commencing one-year prior to the Closing Date through the date of their determination pursuant to this subparagraph 2(b)(iv), services to any of (i) Covalent or any of its affiliates or (ii) Remedium or any of its affiliates (“Independent Accountants”). Upon their appointment, the Independent Accountants shall certify to Covalent and Representative in writing that they satisfy the foregoing qualifications. If Covalent and Representative are unable to agree on mutually acceptable Independent Accountants during the aforesaid 15 day period, then such Independent Accountants shall be selected, within ten days thereafter, by mutual agreement of Covalent’s independent public accountant and Remedium’s independent public accountants, joint notice of which appointment shall be provided by such accountants to Covalent and Representative. Unless otherwise agreed by Covalent and Representative, Covalent and Representative, on behalf of the Stockholders, shall each have the opportunity to make a written submission to the Independent Accountants with respect to the disputed amounts or items setting forth their positions and analysis, along with reasonable supporting documentation (which may include this Agreement, the Net Worth Statement and Covalent’s notice disputing the same, and any agreements of Covalent and Stockholders resolving any disputes with respect thereto), provided that such submissions are made within ten business days after either (x) the date on which Covalent and Representative mutually agree to such Independent Accountants, or (y) dates on which Covalent and Representative, respectively, receive the aforesaid joint notice of the appointment of the Independent Accountants, as the case may be. Unless otherwise agreed in writing by Covalent, Stockholders and the Independent Accountant, the Independent Accountants shall resolve the disputes based solely on the written submission or submissions received by the Independent Accountants, and there shall be no oral presentations. Covalent and Representative shall instruct the Independent Accountants to promptly resolve such disputes and provide joint written notice of the resolutions of such disputes (which resolutions shall include a determination of the amounts or remaining amounts, if any, payable by Stockholders under subparagraphs 2(b)(i)) or 2(b)(ii), simultaneously to Covalent and Representative. The resolution of such disputed amounts and items by the Independent Accountants shall be final, conclusive and binding upon all parties. The fees and expenses of the Independent Accountants shall be borne equally by Covalent, on one hand, and the Stockholders, on the other hand.

(c) It is the intention of the parties that Covalent’s Net Worth (as hereinafter defined) at the Closing (the “Covalent’s Closing Net Worth”) be equal or greater than $6,974,689, constituting Covalent’s Net Worth at September 30, 2005, based on its financial

 

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statements. If Covalent’s Closing Net Worth is determined to be less than $6,974,689, any such deficiency shall be paid, at Covalent’s option either (i) by wire transfer to the Representative of immediately available funds, to be allocated among the Stockholders in accordance with the percentages set forth opposite each Stockholder’s name on Schedule 4(a) , or (ii) by issuance to the Stockholders (to be allocated among the Stockholders in accordance with the percentages set forth opposite each Stockholder’s name on Schedule 4(a) ) the number of shares of common stock of Covalent equal to the quotient obtained by dividing (w) the amount of such deficiency by (x) the Combination Price. Such payment or issuance of stock shall be as follows: (A) if no amounts or items shown on the statement of Covalent’s Closing Net Worth have been disputed as provided herein, within five (5) business days after the expiration of the 60 day period referred to below following the Closing Date for preparation of the statement of Covalent’s Closing Net Worth, and (B) if any amounts or items show on the statement of Covalent’s Closing Net Worth have been disputed as provided herein, within five (5) business days following the resolution of all such disputed amounts or items as provided herein. As used in this Agreement, the term “Covalent’s Net Worth” is the amount by which the sum of the book value of the assets of Covalent and Covalent Subsidiaries (as hereinafter defined) on a consolidated basis exceeds the sum of the book value of the liabilities of Covalent and Covalent Subsidiaries on a consolidated basis, all as recognized, calculated and determined in accordance with U.S. GAAP consistently applied with prior periods. For purposes of determining Covalent’s Net Worth, the fees and expenses incurred by Covalent for legal, accounting and investment banking services directly related to the consummation of the transactions contemplated hereby, as well as any applicable transfer and stamp taxes, shall be disregarded. Covalent’s Closing Net Worth shall be calculated by Covalent within 60 days following the Closing Date. Such calculation of Covalent’s Closing Net Worth by Covalent shall be subject to review by the Stockholders for a period of 30 days after receipt by Representative of such calculation, together with access to Covalent (and Covalent’s accountants’, attorneys, agents and representatives) during normal business hours, the books and records (including any accountants work papers) of Covalent and the Covalent Subsidiaries. Unless Covalent shall receive notice from Representative within such 30 day period to the effect that the Representative disputes one or more amounts or items shown on the calculation of Covalent’s Closing Net Worth, such calculation shall be final, conclusive and binding on the parties hereto. Any such notice from Representative to Covalent disputing one or more amounts or items on Covalent’s Closing Net Worth as aforesaid shall specify in reasonable detail the nature and amount of said dispute or disputes. If Covalent receives notice from Representative within the aforementioned 30 day period that Representative disputes the calculation of Covalent’s Closing Net Worth, such dispute shall be resolved in accordance with the proceeding set forth subparagraph 2(b)(iv).

3. Employment Agreements, Agreements Not to Compete, and Options Exchange Agreements . At or prior to Closing, (a) Remedium and Kai Lindevall shall enter into an employment agreement substantially in the form attached hereto as Exhibit “A-1” (the “Management Employment Agreement”), (b) Remedium and certain members of the management of Remedium listed on Schedule 3(a) shall enter into agreements not to compete substantially in the form attached hereto as Exhibit “A-2” (the “Senior Management Agreements Not to Compete”), and (c) Covalent and the holders of options to purchase Remedium shares listed on Schedule 3(c) shall enter into an Option Exchange Agreement in the form attached hereto as Exhibit E.

 

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4. Representations, Warranties and Agreements of Stockholders . As material inducement to Covalent to enter into this Agreement and to close hereunder and except as set forth in the disclosure schedule delivered by the Stockholders to Covalent on the date of this Agreement and attached hereto (the “Remedium Disclosure Schedule”), each Stockholder hereby makes the following representations, warranties and agreements to and with Covalent, which representations, warranties and agreements shall be true and correct as of the date of this Agreement and as of the Closing Date:

(a) Ownership of Remedium . Stockholder is the beneficial and record owner of the Shares listed next to Stockholder’s name on Schedule 4(a) . Stockholder has, and at Closing shall transfer to Covalent, good, marketable and unencumbered title to such Shares, free and clear of all liens, security interests, pledges, claims, options and rights of others. There are no restrictions on Stockholder’s right to transfer such Shares to Covalent at Closing pursuant to this Agreement.

(b) Valid and Binding Agreement . This Agreement and the documents contemplated hereby to be executed and delivered by Stockholder have been duly executed and delivered by Stockholder, or will be duly executed and delivered by Stockholder, as the case may be, and constitute, or will constitute when executed and delivered, the legal, valid and binding obligations of Stockholder, enforceable against Stockholder in accordance with their respective terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity.

(c) Agreement Not in Breach of Other Instruments Affecting Stockholder . The execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof by Stockholder do not and will not, with or without the giving of notice, the lapse of time, or both, result in the breach of any of the terms and provisions of, or constitute a default under, or conflict with, any agreement, governing documents or other instrument by which Stockholder is bound, or any judgment, decree, order, or award of any court, governmental body, or arbitrator, or any applicable law, rule or regulation.

5. Representations, Warranties and Agreements of Stockholders as to Remedium . As material inducement to Covalent to enter into this Agreement and to close hereunder and except as set forth in the disclosure schedule delivered by the Stockholders to Covalent on the date of this Agreement and attached hereto (the “Remedium Disclosure Schedule”), each of the Stockholders makes the following representations, warranties and agreements to and with Covalent, which representations, warranties and agreements shall be true and correct as of the date of this Agreement and as of the Closing Date:

(a) Corporate Status of Remedium, Outstanding Stock . Remedium is a corporation duly organized, validly existing and in good standing under the laws of Finland and has the power and authority to own its properties and to carry on its business as it is now being conducted. Remedium has an authorized capital consisting of a minimum of 8,000.00 euros and a maximum of 80,000.00 euros, with nominal value of 1.70 euros per share (the “Common Stock”), of which 13,400 shares of Common Stock, including options outstanding to purchase 660 shares (which collectively constitute, the Shares), are outstanding and owned by the

 

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Stockholders. All of the Shares are validly issued, fully paid and non-assessable. Except for the aforementioned options to purchase 660 Shares, there are no options, warrants, rights, shareholder agreements or other instruments or agreements outstanding giving any person the right to acquire any shares of capital stock of Remedium, nor are there any commitments to issue or execute any such options, warrants, rights, shareholder agreements, or other instruments or agreements. The minute books and stock records or similar documentation of Remedium are complete and accurate in all material respects and all signatures included therein are the genuine signatures of the persons indicated as signing. Except as set forth on Schedule 5(a) , true, correct and complete copies of Remedium’s minute books and stock records or similar documentation, including Remedium’s yhtiöjärjestys and all amendments thereto (the organizational, charter or similar documents, such as yhtiöjärjestys, certificate of incorporation or bylaws, each as amended, of a party hereto hereinafter referred to as “Organizational Documentation”) to date, have been delivered to, or made available for inspection by, Covalent. Remedium is not in default under or in violation of any provision of its Organizational Documentation.

(b) Subsidiaries and Joint Ventures, Corporate Status and Outstanding Stock of Subsidiaries . Schedule 5(b) hereto lists all of Remedium’s direct and indirect subsidiaries (each a “Remedium Subsidiary” and collectively, the “Remedium Subsidiaries”) and all of Remedium’s direct and indirect partnership interests and other interests of any kind in any corporation, partnership, joint venture, association or other entity. Each Remedium Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its respective country of incorporation, as set forth on Schedule 5(b) , has the power and authority to own its properties and to carry on its business as it is now being conducted. Each Remedium Subsidiary has the authorized capital, with such par value and number of shares outstanding as are set forth on Schedule 5(b) and all of the outstanding shares of capital stock of each Remedium Subsidiary have been duly authorized and validly issued, are fully paid and/or contributed as required by the appropriate Organizational Documentation of the Remedium Subsidiary. No shares of capital stock of any of the Remedium Subsidiaries are reserved for issuance and there are no outstanding or authorized options, warrants, rights, subscriptions, instruments or agreements outstanding giving any person the right to acquire any shares of capital stock of any Remedium Subsidiary, nor are there any commitments to issue or execute any such options, warrants, rights, subscriptions, or other instruments or agreements. Except as set forth on Schedule 5(b) , there are no restrictions of any kind which prevent the payment of dividends by any of the Remedium Subsidiaries. Neither Remedium nor any Remedium Subsidiary owns, directly or indirectly, any capital stock or other equity interest in any person or entity or has any direct or indirect equity or ownership interest in any person or entity, and except as set forth on Schedule 5(b) , neither Remedium nor any Remedium Subsidiary is subject to any obligation or requirement to provide funds for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in any person or entity. The minute books and stock records or similar documentation of each Remedium Subsidiary are complete and accurate in all material respects and all signatures included therein are the genuine signatures of the persons indicated as signing. True, correct and complete copies of the Remedium Subsidiaries’ Organizational Documentation have been delivered to, or made available for inspection by, Covalent. The Remedium Subsidiaries are not in default or in violation of any provision of their Organizational Documentation. Remedium is, and at the Closing shall be, the beneficial and record owner of all of the issued and outstanding shares of capital stock or other interests of each Remedium Subsidiary. Remedium has, and at the Closing shall have, good, marketable and unencumbered title to such shares or interests, free and clear of all liens, security interests, pledges, claims, options and rights of others.

 

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(c) Officers; Directors; Bank Accounts . Set forth on Schedule 5(c) is a correct and complete list of all directors and officers of Remedium and the Remedium Subsidiaries. A complete list of all bank accounts and safe deposit boxes of Remedium and the Remedium Subsidiaries and all persons authorized to sign checks drawn on such accounts and to have access to such safe deposit boxes has been provided to Covalent.

(d) Financial Statements . The audited consolidated balance sheet of Remedium and the Remedium Subsidiaries for the years ended December 31, 2003 and 2004 the related consolidated statements of income (loss) and cash flows for the fiscal years ended on the dates of such balance sheets, and all related schedules and notes to the foregoing, were prepared in accordance with Finnish GAAP, consistently applied throughout the periods reported upon and with past periods and the unaudited management accounts (income statement and balance sheet) for the twelve-month period ended December 31, 2005, and the unaudited reconciliation of net income and equity from Finnish GAAP to US GAAP for the periods ended December 31, 2003 and 2004 and December 31, 2005, copies of all of which constitute Schedule 5(d) , fairly and accurately present in all material respects the consolidated financial position of Remedium and the Remedium Subsidiaries as at the dates of such balance sheets, and the consolidated results of the operations and cash flows of Remedium and the Remedium Subsidiaries for the periods ended on such dates, except that the unaudited information is subject to normal and recurring year-end adjustments and the pending audit thereon.

(e) Real Estate .

(i) Neither Remedium nor any Remedium Subsidiary has any obligation or duty relating to, or any right, title or interest in, any real estate except those properties disclosed on Schedule 5(e)(i) which Remedium or the Remedium Subsidiaries leases or subleases, as tenant or subtenant (the “Leased Properties”). Except as set forth in Schedule 5(e)(i) , all Leased Properties are available to be used without restriction in the conduct and operation of the business of Remedium and the Remedium Subsidiaries. The Leased Properties are in good operating condition and repair and do not require any repairs other than normal routine maintenance to maintain them in good condition and repair.

(ii) Neither Remedium nor any Remedium Subsidiary has received any written notice from any insurance company which has issued a policy with respect to any of the Leased Properties or from any public official or board of fire underwriters (or other body exercising similar functions) claiming any defects or deficiencies in, or suggesting or requesting the performance of any repairs, alterations or other work to, any of the Leased Properties, except for any written notices as to which all defects and suggested repairs, alterations or other work have been fully performed.

(iii) There are no property management, service, equipment, supply, security, maintenance, construction, concession or other agreements with respect to or affecting the Leased Properties that will burden Covalent after the date hereof, except as disclosed on Schedule 5(e)(iii) .

 

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(iv) All certificates of occupancy or similar documentation and all other licenses, permits, authorizations, consents, certificates and approvals required by all governmental authorities having jurisdiction over the Leased Properties to the extent required to be obtained by the tenant or subtenant under the Leases for the Leased Properties and any requisite certificates of the local board of fire underwriters (or other body exercising similar functions) have been issued for the Leased Properties, have been paid for (to the extent applicable), are unconditional, valid and in full force and effect, and will not be invalidated, violated or otherwise adversely affected by the execution or performance of this Agreement or the consummation of any of the transactions contemplated herein. Each of Remedium and any Remedium Subsidiary which is a tenant under any of the Leases and any subtenant of Remedium or any Remedium Subsidiary under any of the Leases is in material compliance with all laws applicable to the use and occupancy by a tenant of the Leased Properties.

(v) (A) All leases or subleases and any and all amendments and supplements thereto (collectively, the “Leases”) of the Leased Properties, whether oral or written, are disclosed on Schedule 5(e)(v) , including for each its date, the name of the landlord (and owner if different from the landlord), the name of the lessee and any sublessee, the location and use of the property, the monthly base rental payment date and the lease expiration date; (B) Remedium has delivered to Covalent true, correct and complete copies of all Leases, and all such non-disturbance agreements; (C) except as disclosed on Schedule 5(e)(v) , Remedium or a Remedium Subsidiary is the holder of the lessee’s or sublessee’s interest, as applicable, in each Lease and neither Remedium nor any Remedium Subsidiary has assigned any Lease or any interest therein or subleased any portion of the Leased Properties; (D) each Lease is in full force and effect; (E) each of Remedium and any Remedium Subsidiary which is a tenant under the Leases is paying its rent currently and has not asserted any claim for set-off against rent which has not been resolved; (F) neither Remedium nor any Remedium Subsidiary is, and, to the knowledge of Stockholders, each landlord under any Lease is not, in default under any Lease, and no event has occurred which, with the giving of notice or passage of time or both, would constitute a default by Remedium or any Remedium Subsidiary or, to the knowledge of Stockholders, any landlord under any Lease; and (G) neither the execution or performance of this Agreement nor the consummation of any of the transactions contemplated herein will result in a breach of or constitute a default under any of the Leases.

(f) Personal Property . Except as disclosed on Schedule 5(f) , (A) Remedium and each Remedium Subsidiary has good, valid and marketable title to all personal property, tangible and intangible (including, but not limited to, Intellectual Property, as defined below) owned by it, free and clear of all liens, mortgages, pledges, security interests, restrictions, prior assignments, licenses to third parties, encumbrances and claims of every kind or character, except for Permitted Encumbrances, (B) Remedium or a Remedium Subsidiary is the owner, lessee or licensee of all the personal property now located in or upon the premises occupied by Remedium or a Remedium Subsidiary and of all personal property that it uses in the operation of its business, and (C) all equipment, furniture and fixtures, and other tangible personal property of Remedium and each Remedium Subsidiary is in good operating condition and repair and does not require any repairs other than normal routine maintenance to maintain such property in good

 

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operating condition and repair. For purposes of this Agreement, “Permitted Encumbrances” means (i) inchoate liens or other encumbrances for Taxes not yet due and payable, and (ii) liens or other encumbrances associated with equipment or inventory financing that were entered into in the ordinary course of a party’s business.

(g) Intellectual Property .

(i) The Intellectual Property listed on Schedule 5(g)(i) (collectively “IP”) is the only IP owned or licensed by Remedium or the Remedium Subsidiaries in the operation of their respective businesses. No claim has been asserted against Remedium nor any Remedium Subsidiary alleging any conflict or claim of conflict of the IP with the Intellectual Property of others or asserting any rights in the IP. Except as set forth on Schedule 5(g) , Remedium or a Remedium Subsidiary is the sole and exclusive owner of the IP listed on Schedule 5(g)(i) and, except as set forth in Schedule 5(g)(i) , has the sole and exclusive right to use such IP. As used herein, “Intellectual Property” shall include trademarks, trade names, logos, service marks, copyrights, patents, pending patent applications, domain names, shoprights, know-how, trade secrets, domain names, computer programs and computer software and the like and other items commonly known as intellectual property. To the knowledge of the Stockholders, there is no infringement of Remedium’s or the Remedium Subsidiaries’ IP that would have a Material Adverse Effect (as hereinafter defined) on Remedium. No trademark owned by Remedium or any of the Remedium Subsidiaries is involved in any opposition, invalidation or cancellation proceeding, and to the knowledge of Stockholders, no such proceeding is threatened.

(ii) Remedium or a Remedium Subsidiary is the registered owner of the United States and foreign patents and trademarks disclosed on Schedule 5(g)(ii) and has applications pending with the U.S. Patent Office and equivalent offices in other countries for the patents and trademarks disclosed on Schedule 5(g)(ii) as being pending. Except as set forth on Schedule 5(g) , Stockholders have no knowledge of any adverse claim of any kind with respect to any of such patents, trademarks or applications therefore and have no knowledge that any such application will not be granted.

(h) Software . Remedium or a Remedium Subsidiary has the right to use, or is indemnified for or otherwise protected from any risk for using, the computer software used by Remedium and the Remedium Subsidiaries in connection with their respective businesses. Stockholders have no knowledge of any claim or proceeding asserted or threatened in which infringement by such software upon the rights of any third parties is alleged. Remedium and the Remedium Subsidiaries have complied in all material respects with all of their software license agreements. Except as set forth on Schedule 5(h) , neither Remedium nor any of the Remedium Subsidiaries shall be in breach of any software license agreement as a result of entering into this Agreement or by consummating any of the transactions contemplated hereunder.

(i) Accounts Receivable . Each of the accounts receivable of Remedium and the Remedium Subsidiaries outstanding as of the Closing Date constitutes on such date a valid claim in the full amount thereof against the debtor charged therewith on the books of Remedium or the Remedium Subsidiaries and was acquired in the ordinary course of Remedium’s or the

 

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Remedium Subsidiaries’ business. No account debtor has any valid set-off, deduction or defense with respect thereto and no account debtor has asserted any such set-off, deduction or defense. Subject to any reserve for doubtful accounts set forth in the Net Worth Statement, such accounts receivable will be fully collected to the extent of the face value thereof.

(j) Insurance . Remedium and the Remedium Subsidiaries maintain insurance policies bearing the numbers, for the terms, with the companies, in the amounts, having the named insureds, providing the general coverage, and with the premiums disclosed on Schedule 5(j) . All of such policies are in full force and effect, neither Remedium nor any Remedium Subsidiary is in default of any provision thereof and all premiums due (without regard to any grace period) with respect to such policies have been paid. Neither Remedium nor any Remedium Subsidiary has been refused any insurance for which it has applied and has not received notice from any issuer of any policy issued to it of the insurer’s intention to cancel or refusal to renew any such policy issued by such insurer. True, correct and complete copies of all such policies have been delivered to Covalent.

(k) Liabilities . At the Closing, neither Remedium nor any Remedium Subsidiary shall have any liabilities, whether fixed, contingent, or otherwise, except as and to the extent reflected on the Net Worth Statement or disclosed on Schedule 5(k).

(l) Contracts, Leases, Agreements and Other Commitments .

(i) All of the Remedium Agreements (as hereinafter defined) are in full force and effect and are valid, binding and enforceable against Remedium or the Remedium Subsidiaries, as the case may be, and against the other respective parties thereto, in accordance with their respective terms. Remedium, the Remedium Subsidiaries and, to the knowledge of the Stockholders, all other parties to all of the Remedium Agreements have performed all obligations required to be performed to date under the Remedium Agreements and none of Remedium, the Remedium Subsidiaries or, to the knowledge of the Stockholders, any such other party is in default or in arrears under the terms thereof, and no condition exists or event has occurred which, with the giving of notice or lapse of time or both, would constitute a default by Remedium or the Remedium Subsidiaries thereunder or otherwise result in any payment obligations on the part of Remedium or the Remedium Subsidiaries not reserved for in the books of Remedium or the Remedium Subsidiaries. Except as set forth on Schedule 5(l) , the execution of this Agreement and the consummation of the transactions contemplated hereby do not and will not, with or without the giving of notice, the lapse of time, or both, result in an impairment or termination of, or result in a breach of any of the terms or provisions of, or constitute a default under, or conflict with, any Remedium Agreement. Neither Remedium nor the Remedium Subsidiaries have received any written notice of any intention by any party to terminate or amend any Remedium Agreement.

(ii) Remedium has made available to Covalent (a) all outstanding written and oral proposals, bids, offers or guaranties made by Remedium or any Remedium Subsidiary, which, if accepted, would result in any or could impose any debts, obligations or liabilities upon Remedium or any Remedium Subsidiary, and (b) unexpired warranties relating to Remedium’s and the Remedium Subsidiaries’ products or services, detailing the products or services covered by each warranty (the “Product Warranties”).

 

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(iii) For purposes of Subparagraph 5(l) the term “Remedium Agreements” means (A) any material written, oral or implied contract or agreement, including but not limited to any contract or agreement for the purchase or sale of merchandise or for the rendition of services, (B) any material written, oral or implied lease, or (C) any written, oral or implied power of attorney, guaranty, surety arrangement or other commitment granted by Remedium and/or any Remedium Subsidiary to or for the benefit of any third party. A “material” agreement, contract or lease shall mean an agreement, contract or lease pursuant to which Remedium or any Remedium Subsidiary is obligated to pay, or provide services valued at, or is entitled to receive, amounts in excess of $25,000 in any 12-month period. Any lease of real property shall be deemed a material lease. Remedium has made available to Covalent a complete list of all Remedium Agreements.

(m) Labor Relations, Employees .

(i) Set forth on Schedule 5(m)(i) is a list of:

(A) all collective bargaining or similar agreements and any written amendments thereto, as well as all arbitration awards decided under any such collective bargaining agreements or similar agreements, and all oral assurances or modifications, past practices, and/or arrangements made in relation thereto, to which Remedium or any Remedium Subsidiary is a party or by which it is bound;

(B) all employment, managerial, or advisory agreements or agreements protecting proprietary or confidential processes to which Remedium or any Remedium Subsidiary is a party or by which it is bound; and

(C) all material independent contractor or consulting agreements to which Remedium or any Remedium Subsidiary is a party or by which it is bound.

(ii) Remedium has delivered to Covalent a true and correct list of all employees of Remedium and each Remedium Subsidiary, broken down by location, together with their rate of compensation, compensation arrangement (including wage or salary increases, bonus or increase in any other direct or indirect compensation), title, union affiliation (if any), original date of hire, accrued severance pay, vacation benefits, sick leave benefits (if payable in cash upon termination of employment) and any severance benefits and other similar benefits, for each employee of Remedium or a Remedium Subsidiary performing services for Remedium or a Remedium Subsidiary.

(iii) Set forth on Schedule 5(m)(iii) is a list of the names and ages of all retired or former employees of Remedium and each Remedium Subsidiary, if any, who are receiving or are entitled to receive (now or in the future) from Remedium or a Remedium Subsidiary any funded or unfunded pensions, funded or unfunded welfare benefits, or any deferred compensation, including their current annual funded or unfunded pension rates, their current annual funded or unfunded welfare costs, and the amounts of such deferred compensation to which they are entitled.

 

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(iv) Remedium has delivered to Covalent true, complete and correct copies of all of the documents referred to in Schedule 5(m)(i) hereof and all of the personnel policies, handbooks, procedures, and forms of employment applications relating to the employees of Remedium or any Remedium Subsidiary.

(v) Except as set forth on Schedule 5(m)(v) :

(A) there is no union representing or purporting to represent any of the employees of Remedium or any Remedium Subsidiary and neither Remedium nor any Remedium Subsidiary is subject to any collective bargaining agreements with any union representing or purporting to represent the employees of Remedium or any Remedium Subsidiary;

(B) in the past five years, there have been no strikes, slowdowns, or other work stoppages, lockouts, grievance proceedings, arbitrations, labor disputes, lawsuits, administrative proceedings or representation questions pending or, to the knowledge of Stockholder, threatened, between Remedium or the Remedium Subsidiaries on the one hand, and any labor union representing or purporting to represent any employees of Remedium or any Remedium Subsidiary, on the other;

(C) Remedium and the Remedium Subsidiaries have complied with all laws relating to the employment of labor, including any provisions thereof relating to wages, overtime, bonuses, severance pay, benefits, occupational safety and health and the and the payment of social security, unemployment compensation and similar taxes, and neither Remedium nor any Remedium Subsidiary is liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing;

(D) there are no charges, suits, actions, administrative proceedings or investigations, and/or claims, instituted by or against, pending, or, to the knowledge of Stockholders, threatened against, affecting, naming and/or involving Remedium or any Remedium Subsidiary, whether domestic or foreign, before any court, governmental agency, department, board of instrumentality, or before any arbitrator (collectively “Actions”), concerning, or in any way related to the employees of Remedium or any Remedium Subsidiary, including, without limitation, Actions involving unfair labor practices, failure to pay wages or overtime, breach of implied or express employment contract, wrongful discharge and/or any other restriction on the right of Remedium or any Remedium Subsidiary to terminate its respective employees, employment discrimination, occupational safety and health, and workers’ compensation; and

(E) there are no post-employment benefits, including but not limited to retiree medical, retiree life and retiree accidental death and disability benefits for current or former employees of Remedium or any Remedium Subsidiary.

(vi) Except as set forth on Schedule 5(m)(vi) , there are no express or implied agreements, policies, practices, or procedures, whether written or verbal, pursuant to

 

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which any employee or agent or contractor of Remedium or any Remedium Subsidiary is not terminable at will. Stockholders have no knowledge of any senior employee of Remedium or any Remedium Subsidiary that will leave the employ of Remedium or any Remedium Subsidiary as a result of the transactions contemplated hereby.

(n) Employee Benefit Plans .

(i) Remedium has made available to Covalent a complete and accurate list of all employee benefit plans (the “Plans”) which Remedium or any Remedium Subsidiary maintain, sponsor, contribute to, are liable for (directly or indirectly) or are bound, legally or otherwise, including, without limitation, any profit-sharing, deferred compensation, bonus, payroll, sick leave, consulting, stock option, stock purchase, stock bonus, employee stock ownership plan, pension, retainer, retirement, vacation, change of control, disability, severance, insurance, welfare or incentive pay policy, agreement, practice or arrangement; any plan, agreement or arrangement if providing for fringe benefits or perquisites to employees, officers, directors or agents of Remedium or any Remedium Subsidiary, including but not limited to benefits relating to employer-supplied automobiles, clubs, medical, dental, hospitalization, life insurance and other types of insurance, retiree medical, retiree life insurance and any other type of benefits for retired and terminated employees.

(ii) True and complete copies of the following documents with respect to any Plan of Remedium or any Remedium Subsidiary, as applicable, have been delivered to Covalent: (A) the most recent Plan document and trust agreement (including any amendments thereto), (B) all summary plan descriptions, (C) a written description of each material non-written Plan, (D) each written communication to employees intended to describe a Plan or any benefit provided by such Plan, (E) the most recent actuarial report, and (F) all correspondence with any governmental agency concerning any Plan. Each report described in clause (E) accurately reflects the funding status of the Plan to which it relates and subsequent to the date of such report there has been no adverse change in the funding status or financial condition of such Plan.

(iii) Each Plan is and has been maintained in compliance in all material respects with applicable law and with any applicable collective bargaining agreements or other contractual obligations.

(iv) There is no unfunded liability with respect to any Plan.

(v) Each of Remedium and the Remedium Subsidiaries has funded each Plan in accordance with the terms of such Plan through the date hereof, including the payment of applicable premiums on insurance contract funding a Plan, for coverage provided through the date hereof.

(vi) Except as contemplated herein or required by law, the execution of this Agreement and the consummation of the transactions contemplated hereby, do not constitute a triggering event under any Plan, policy, arrangement, statement, commitment or agreement which (either alone or upon the occurrence of any additional or subsequent event) will result in any obligation of Remedium or any Remedium Subsidiary to make any payment (whether of

 

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severance pay, including, and not limited to, salary, related vacation pay, pension pay and other similar payments and costs, or otherwise) or to accelerate, vest or increase the amount of benefits payable to any employee or former employee or director of Remedium or any Remedium Subsidiary. No Plan or agreement provides for the payment of severance benefits upon the termination of any employee’s employment.

(vii) The unaudited reconciliation of net income and equity from Finnish GAAP to US GAAP for the periods ended December 31, 2003, 2004 and 2005 (which are included in Schedule 5(d) ), as well as the Net Worth Statement properly and adequately reflect or will reflect, as applicable, in accordance with US GAAP consistently applied with prior periods, any and all liabilities and obligations of Remedium and the Remedium Subsidiaries relating to any period ending on or prior to the date thereof or hereof, as applicable, relating to or in respect of current and former employees of Remedium or the Remedium Subsidiaries, for (A) unpaid compensation, salaries, wages, vacation pay, disability payments and other payroll items (including, without limitation, bonus, incentive or deferred compensation), (B) unpaid contributions, costs and expenses to or in respect of any Plans, and (C) severance or other termination benefits relating to, resulting from or arising in respect of any termination of employment occurring on or prior to the date thereof or hereof, as applicable.

(o) Litigation . Except for the matters set forth on Schedule 5(o) , (A) neither Remedium nor any Remedium Subsidiary, nor any of their assets (including, without limitation, the Remedium Agreements), is a party or is subject to, or to the knowledge of Stockholders, threatened with, any suit, action, arbitration, administrative or other proceeding, either at law or in equity, or governmental investigation by or before any court, governmental department, commission, board, agency or instrumentality, domestic or foreign; (B) there is no judgment, decree, award or order outstanding against Remedium or any Remedium Subsidiary; (C) neither Remedium nor any Remedium Subsidiary is contemplating the institution by it of any suit, action, arbitration, administrative or other proceeding; and (D) to the knowledge of the Stockholders, there is no basis for any suit, action, arbitration or administrative proceeding against Remedium or any Remedium Subsidiary, and there has been no occurrence that may result in a claim for damages against Remedium or any Remedium Subsidiary. The insurance carriers of Remedium or the Remedium Subsidiaries, as applicable, have agreed to defend and indemnify Remedium and any Remedium Subsidiary, whichever is applicable, against any loss resulting to Remedium or any Remedium Subsidiary from all matters set forth on Schedule 5(o) .

(p) Suppliers and Customers . Remedium has made available to Covalent a complete and accurate list of the names of all suppliers and customers of Remedium and the Remedium Subsidiaries which respectively contribute more than 5% of all sales and services to, and orders and use of services from, Remedium and Remedium Subsidiaries taken as a whole (“Suppliers” and “Customers,” respectively). Except as set forth on Schedule 5(p) , (A) no Supplier or Customer of Remedium or the Remedium Subsidiaries has canceled or otherwise terminated, or, to the knowledge of Stockholders, threatened to cancel or otherwise terminate, its relationship with Remedium or any Remedium Subsidiary, or has during the last 12 months decreased materially, or, to the knowledge of Stockholders, threatened to decrease or limit materially, its business with Remedium or any Remedium Subsidiary. To the knowledge of Stockholders, the acquisition of the Shares by Covalent will not adversely affect the relationship of Remedium or a Remedium Subsidiary with any Supplier or Customer.

 

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(q) Conflicting Interests . Except as disclosed on Schedule 5(q) , no director, officer or manager of Remedium or any Remedium Subsidiary (a) has any pecuniary interest in any supplier or customer of Remedium or any Remedium Subsidiary or in any other business enterprise with which Remedium or any Remedium Subsidiary conducts business or with which Remedium or any Remedium Subsidiary is in competition; (b) is indebted to Remedium or any Remedium Subsidiary; (c) is a party to any transaction or agreement with Remedium or any Remedium Subsidiary (apart from such person’s status as a director, officer or manager as such); or (d) has any business or other interest in conflict with the interests of Remedium or any Remedium Subsidiary.

(r) Compliance with Law and Regulations . Remedium and each Remedium Subsidiary is in compliance with, and has at all times during the past six years complied with, all requirements of local and foreign law and all requirements of all governmental, administrative or regulatory bodies or agencies having jurisdiction over it, the conduct of its business, the use of its properties and assets, and all premises occupied by it. Without limiting the foregoing, Remedium and each Remedium Subsidiary has paid all monies to obtain, and has obtained and now holds, all licenses, permits, certificates, and authorizations needed or required for the conduct of its business as currently conducted and the current use of its properties and the premises occupied by it.. Remedium and each Remedium Subsidiary has properly filed all reports and other documents required to be filed within the past six years with any local or foreign government, subdivision or agency thereof. In the past six years, neither Remedium nor any Remedium Subsidiary has received any notice from any government, municipality, administrative or regulatory authority, or any insurance or inspection body that any of its properties, facilities, equipment, or business procedures or practices fails to comply with any applicable law, ordinance, regulation, building or zoning law, or requirement of any public authority or body. All licenses, permits, orders and approvals issued by any governmental body or agency currently in effect and pertaining to the property, assets or business of Remedium and the Remedium Subsidiaries are listed on Schedule 5(r) and, except as noted on Schedule 5(r) , none of the items so listed will lapse or expire as a result of the transactions contemplated hereby. To the knowledge of Stockholders, except as set forth on Schedule 5(r) , there are no regulations or legislation pending before any local or foreign government, government agency, administration body or legislature which, if adopted, would have a Material Adverse Effect on Remedium.

(s) Agreement Not in Breach of Other Instruments Affecting Remedium; Governmental Consent . The execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof: (i) will not result in the imposition of any lien, security interest or encumbrance on any asset of Remedium or any Remedium Subsidiary or in the breach of any of the terms and provisions of, or result in a termination, impairment or modification of or constitute a default under, or conflict with, or cause any acceleration of any obligation of Remedium or any Remedium Subsidiary under, or permit any other party to modify or terminate, any agreement or other instrument by which Remedium or any Remedium Subsidiary is bound, any judgment, decree, order, or award of any court, governmental body, or arbitrator, or any applicable law, rule or regulation; (ii) do not require the consent of any governmental authority or other person; (iii) will not result in any limitation or restriction of any right of Remedium or any Remedium Subsidiary; and (iv) will not contravene Remedium’s or any Remedium Subsidiary’s Organizational Documentation.

 

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(t) Environmental Matters .

(i) Remedium and the Remedium Subsidiaries, and to the knowledge of Stockholders, any predecessor of Remedium or the Remedium Subsidiaries, are and at all times have been in compliance with all Environmental Laws (as hereinafter defined) governing their business, operations, properties and assets, which compliance includes, but is not limited to: (i) the possession by Remedium and the Remedium Subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof, (ii) all requirements relating to the Discharge (as hereinafter defined) and Handling of Regulated Substances (as hereinafter defined) and Wastes (as hereinafter defined); (iii) all requirements relating to notice, record keeping and reporting; and (iv) all applicable writs, orders, judgments, injunctions, governmental communications, decrees, informational requests or demands issued pursuant to, or arising, under, any Environmental Law (“Environmental Demands”). Neither Remedium nor any Remedium Subsidiary has received any communication from any governmental authority, employee, group or third party alleging that it is not in compliance or that it has investigatory or remedial obligations or other liability pursuant to Environmental Law. To the knowledge of Stockholders, there are no circumstances that may prevent or interfere with such full compliance or give rise to investigatory or remedial obligations or other liabilities pursuant to Environmental Law in the future. All permits and other governmental authorizations currently held by Remedium and the Remedium Subsidiaries pursuant to any Environmental Laws and Environmental Demands issued to Remedium and the Remedium Subsidiaries are identified in Schedule 5(t) .

(ii) There are no Environmental Claims (as hereinafter defined) pending or, to the knowledge of Stockholders, threatened against Remedium or any Remedium Subsidiary or, to the knowledge of Stockholders, against a predecessor of Remedium or any Remedium Subsidiary.

(iii) For purposes of this Agreement:

(A) “Discharge” means any manner of spilling, leaking, dumping, discharging, release or emitting, as any of such terms may further be defined in any Environmental Law, into any medium including, without limitation groundwater surface water, soil or air;

(B) “Environmental Claim” means any notice, lien, claim, action, cause of action, order, communication, investigation, or proceeding (written or oral) by any person or entity alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup, removal or remediation costs, governmental response costs, natural resource damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or threatened release into the environment of any Regulated Substance at any location, whether or not owned or operated by Remedium or any Remedium Subsidiary, and (b) circumstances forming the basis of any violation, or alleged violation, of, or liability pursuant to any Environmental Law;

(C) “Environmental Law” means any and all local or foreign laws, regulations, codes, orders, plans, injunctions, decrees, rulings, and judicial or

 

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administrative interpretations thereof, which govern, purport to govern, or relate to pollution, protection of the environment (including, without limitation, ground water, surface water, soil and air) and public health and safety;

(D) “Handling” means any manner of generating, accumulating, storing, treating, disposing of, transporting, transferring, labeling, handling, manufacturing or using, as any such terms may further be defined in any Environmental Law, of any Regulated Substance;

(E) “Regulated Substance” shall be broadly construed to include without limitation any chemical, pollutant, contaminant, material, waste, toxic or hazardous substance, petroleum, petroleum product, asbestos, asbestos containing material, and polychlorinated biphenyl regulated, listed, identified or controlled by, under or pursuant to any Environmental Law; and

(F) “Waste” shall be broadly construed to include bulky wastes, construction and demolition debris, garbage, solid wastes, liquid wastes, recyclable materials, sludge, special wastes, used oils, and plant and yard trash as those terms are defined under any Environmental Law.

(u) Tax Matters .

(i) Definitions . For purposes of this Agreement:

(A) “Return” and “Returns” mean any return, report, declaration, estimate, information statement, claim for refund, notice, form or any other kind of document, including any schedule or attachment thereto, and including amended versions of any of the foregoing, relating to or required to be filed in connection with any Tax.

(B) “Tax” and “Taxes” means any local, foreign or other taxes (whether income, gross receipts, franchise, excise, customs, sales, use, value added, ad valorem, real or personal property, license, transfer, employment, social security or any other kind of tax or payment in lieu of tax no matter how denominated including any amount payable by either Remedium (and any Remedium Subsidiary) or Covalent (or any Covalent Subsidiary), as applicable, pursuant to a tax-sharing or other agreement relating to the sharing or payment of tax), or any assessment, levy, impost, withholding, fee or other governmental charge in the nature of a tax, and shall include all additions to tax, interest, penalties and fines with respect thereto.

(ii) Tax Matters Relating to Remedium and Subsidiaries . Except as set forth on Schedule 5(u) :

(A) Remedium and each Remedium Subsidiary has filed when due in a timely fashion all Returns that are required to be filed on or before the date hereof and will file when due in timely fashion all returns that are required to be filed on or before the

 

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Closing Date by or with respect to Remedium and any Remedium Subsidiary (taking into account in each case all extensions of time within which to file to which they are entitled or which they may have been granted). All such Returns are correct and complete. Neither Remedium nor any Remedium Subsidiary is the current beneficiary of any extension of time within which to file any Return. No claim has been made by a taxing authority in a jurisdiction where Remedium and any Remedium Subsidiary does not file Returns that any of them is or may be subject to or liable for any Tax imposed by that jurisdiction;

(B) All Taxes shown to be due on the returns referred to in clause (A) for which each of Remedium and any Remedium Subsidiary is liable have been paid or will be paid prior to the due date thereof; all Taxes due on or before the date hereof for which no Return is required have been paid when due in a timely fashion; and all such Taxes for which no Return is required due on or before the Closing Date will be paid when due in a timely fashion (in each case taking into account all extensions of time within which to pay to which they are entitled or which they may have been granted). All unpaid Taxes attributable to any period ending on or prior to the Closing Date will be accrued in full on the Net Worth Statement. There are no liens on any assets of Remedium or any Remedium Subsidiary that arose in connection with any failure (or alleged failure) to pay any Tax, other than liens for Taxes not yet due and payable;

(C) Remedium and each Remedium Subsidiary has withheld or collected and paid or deposited all Taxes required to have been withheld or collected and paid or deposited in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, member, partner or other third party;

(D) No taxing authority has asserted, or threatened to assert, any adjustment, deficiency or assessment for any Taxes against Remedium or any Remedium Subsidiary, none of the Returns referred to in clause (A) hereof are under examination or investigation by any taxing authority; and no basis exists for any such adjustment, deficiency or assessment which would result in additional Taxes owed by Remedium or any Remedium Subsidiary for any period for which Returns have been filed since December 31, 2001. Remedium has made available to Covalent correct and complete copies of all local and foreign income tax Returns filed, examination reports issued, and statements of deficiencies assessed against or agreed to by Remedium or any Remedium Subsidiary or statements of deficiencies for which Remedium or any Remedium Subsidiary may be liable since December 31, 2001;

(E) Neither Remedium nor any Remedium Subsidiary have waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax adjustment, assessment or deficiency except for such waivers or extensions which, by their terms, have elapsed as of the date of this Agreement;

(F) Neither Remedium nor any Remedium Subsidiary has any income or gain that may be reportable for a period ending after the date hereof or the Closing Date without the receipt of an equal amount of cash, which is attributable to a transaction occurring in or a change in accounting method made for a period ending on or prior to the date hereof or the Closing Date;

 

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(G) There are no currently outstanding requests made by any of the Stockholders, Remedium or a Remedium Subsidiary for tax rulings, determinations or information that could affect the Taxes of Remedium or any Remedium Subsidiary; and

(H) Neither Remedium nor any Remedium Subsidiary has any liability for taxes of any other person or entity, whether as a result of statutory or regulatory authority, contract or otherwise.

(v) Conduct of Business; No Material Adverse Effect . Except as set forth on Schedule 5(v) , since December 31, 2004, (A) Remedium and each of the Remedium Subsidiaries has conducted its business in the ordinary and usual course, and (B) there has not been a Material Adverse Effect on Remedium.

(w) No Broker or Finder . Except for its obligation to Handelsbanken Capital Markets, neither Remedium nor the Stockholders have taken any action nor have they incurred any obligation, contingent or otherwise, which would give rise to a valid claim against Stockholders and/ or Covalent by a broker, finder, agent or other intermediary for introducing the parties in connection with, or otherwise procuring, this Agreement or the transaction(s) contemplated hereby.

(x) Statements and Other Documents Not Misleading. Neither this Agreement, including all Exhibits and Schedules, nor the closing documents, contains or will contain any untrue statement of any material fact or omits or will omit to state any material fact necessary to be stated in order to make any statement contained therein not false or misleading. There is no fact known to Stockholders which materially adversely affects the business, prospects, financial condition or affairs of Remedium, the Remedium Subsidiaries, or any of their assets or liabilities which has not been set forth in, or referred to in, this Agreement or the Schedules hereto.

6. Representations, Warranties and Agreements of Covalent . As material inducement to Stockholders to enter into this Agreement and to close hereunder and except as set forth in the disclosure schedule delivered by Covalent to the Stockholders on the date of this Agreement and attached hereto (the “Covalent Disclosure Schedule”), Covalent makes the following representations, warranties and agreements to and with Stockholders, which representations, warranties and agreements shall be true and correct as of the date of this Agreement and as of the Closing Date:

(a) Corporate Status . Covalent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the corporate power and authority to execute, deliver and perform this Agreement and the documents contemplated hereby. As of January 31, 2006 (the “Capital Structure Date”), Covalent had authorized capital consisting of 25,000,000 of Common Stock, $.001 par value (the “Covalent Shares”), of which 13,501,333 shares of Common Stock were issued and outstanding and 152,932 shares are held in Covalent’s treasury, all of which are validly issued. In addition, as of the Capital Structure Date, 1,362,873 Covalent Shares were reserved for issuance upon exercise of outstanding options granted pursuant to various stock option and stock award programs of Covalent. Except for the aforementioned options and awards to purchase 1,362,873 Covalent

 

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Shares, there are no options, warrants, rights, shareholder agreements or other instruments or agreements outstanding giving any person the right to acquire any shares of capital stock of Covalent, nor are there any commitments to issue or execute any such options, warrants rights, shareholder agreements, or other instruments or agreements. All Consideration Shares to be issued pursuant to Section 2(a)(ii) and all Holdback Shares issued pursuant to 2(a)(iii) will be, when so issued, duly authorized, validly issued, fully paid and nonassessable, and will not be issued in violation of any preemptive rights. Since the close of business on the Capital Structure Date, no shares of capital stock or other equity securities of Covalent have been issued or reserved for issuance or become outstanding, other than Covalent Shares described in this Section 6(a) that have been issued upon the exercise of outstanding options. The minute books and stock records or similar documentation of Covalent are complete and accurate in all material respects and all signatures included therein are the genuine signatures of the persons indicated as signing. True, correct and complete copies of Covalent’s minute books and stock records or similar documentation, including Covalent’s Organizational Documentation to date, have been delivered to, or made available for inspection by, Covalent. Covalent is not in default under or in violation of any provision of its Organizational Documentation. Set forth on Schedule 6(a) is a correct and complete list of all directors and officers of Covalent and Covalent Subsidiaries.

(b) Authority . Subject to the approval of the stockholders of Covalent of this Agreement and the transactions contemplated herein, including the Covalent Charter Amendment (as hereinafter defined), Covalent has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, to consummate the transactions contemplated hereby. This Agreement and the documents contemplated hereby to be executed and delivered by Covalent have been duly executed and delivered by Covalent, or will be duly executed and delivered by Covalent, as the case may be, and constitute, or will constitute when executed and delivered, the legal, valid and binding obligations of Covalent, enforceable against Covalent in accordance with their respective terms, except as enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity.

(c) Non-Contravention . Subject to the approval of the stockholders of Covalent of this Agreement and the transactions contemplated herein, including the Covalent Charter Amendment, the execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof by Covalent do not and will not, with or without the giving of notice, the lapse of time, or both, result in the breach of any of the terms and provisions of, or constitute a default under, or conflict with, or cause any acceleration of any obligation of Covalent under, any agreement, indenture or other instrument by which Covalent is bound; Covalent’s Organizational Documentation; any judgment, decree, order, or award of any court, governmental body, or arbitrator; or any applicable law, rule, or regulation.

(d) Subsidiaries and Joint Ventures, Corporate Status and Outstanding Stock of Subsidiaries . Schedule 6(d) hereto lists all of Covalent’s direct and indirect subsidiaries (each a “Covalent Subsidiary” and collectively, the “Covalent Subsidiaries”) and all of Covalent’s direct and indirect partnership interests and other interests of any kind in any corporation, partnership, joint venture, association or other entity. Each Covalent Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its respective country of

 

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incorporation, as set forth on Schedule 6(d) , has the power and authority to own its properties and to carry on its business as it is now being conducted. Each Covalent Subsidiary has the authorized capital, with such par value and number of shares outstanding as are set forth on Schedule 6(d) and all of the outstanding shares of capital stock of each Covalent Subsidiary have been duly authorized and validly issued, are fully paid and/or contributed as required by the appropriate Organizational Documentation of the Covalent Subsidiary. No shares of capital stock of any of the Covalent Subsidiaries are reserved for issuance and there are no outstanding or authorized options, warrants, rights, subscriptions, instruments or agreements outstanding giving any person the right to acquire any shares of capital stock of any Covalent Subsidiary, nor are there any commitments to issue or execute any such options, warrants, rights, subscriptions, or other instruments or agreements. There are no restrictions of any kind which prevent the payment of dividends by any of the Covalent Subsidiaries. Neither Covalent nor any Covalent Subsidiary owns, directly or indirectly, any capital stock or other equity interest in any person or entity or has any direct or indirect equity or ownership interest in any person or entity, and neither Covalent nor any Covalent Subsidiary is subject to any obligation or requirement to provide funds for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in any person or entity. The Covalent Subsidiaries are not in default or in violation of any provision of their Organizational Documentation. Covalent is, and at the Closing shall be, the beneficial and record owner of all of the issued and outstanding shares of capital stock or other interests of each Covalent Subsidiary. Covalent has, and at the Closing shall have, good, marketable and unencumbered title to such shares or interests, free and clear of all liens, security interests, pledges, claims, options and rights of others.

(e) SEC Filings; Financial Statements

(i) Covalent has filed all forms, reports, and documents required to be filed by Covalent with the SEC since January 1, 2003 (including all exhibits, notes, and schedules thereto and documents incorporated by reference therein) (collectively, the “Covalent SEC Reports”). The Covalent SEC Reports at the time filed, with respect to all of the Covalent SEC Reports other than registration statements filed under the Securities Act of 1933, as amended (the “Securities Act”), or at the time of their respective effective dates, with respect to registration statements filed under the Securities Act, complied with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case may be. None of the Covalent Subsidiaries is required to file any forms, reports, or other documents with the SEC.

(ii) Financial Statements . The audited consolidated balance sheet of Covalent and the Covalent Subsidiaries for the years ended December 31, 2003 and 2004 and the unaudited consolidated balance sheet for the twelve-month period ended December 31, 2005, and the related consolidated statements of income (loss) and cash flows for the fiscal years or for the twelve-month period, as the case may be, ended on the dates of such balance sheets, and all related schedules and notes to the foregoing, copies of all of which constitute Schedule 6(e), complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. GAAP, consistently applied throughout the periods reported upon and with past periods, and fairly and accurately present in all material respects the consolidated financial position of Covalent and the Remedium Subsidiaries as at the dates of such balance sheets, and the consolidated results of the operations

 

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and cash flows of Covalent and the Covalent Subsidiaries for the periods ended on such dates, except that the unaudited financials are subject to normal and recurring year-end adjustments and the pending audit thereon.

(iii) Covalent has since January 1, 2003 complied in all material respects with the rules and regulations of the National Association of Securities Dealers, Inc. for companies listed on the Nasdaq SmallCap Market.

(f) Real Estate .

(i) Covalent does not have any obligation or duty relating to, or any right, title or interest in, any real estate except those properties disclosed on Schedule 6(f)(i) which Covalent or the Covalent Subsidiaries leases or subleases, as tenant or subtenant (the “Covalent Leased Properties”). Except as set forth in Schedule 6(f)(i) , all Covalent Leased Properties are available to be used without restriction in the conduct and operation of the business of Covalent and the Covalent Subsidiaries. Covalent Leased Properties are in good operating condition and repair and do not require any repairs other than normal routine maintenance to maintain them in good condition and repair.

(ii) Neither Covalent nor any Covalent Subsidiary has received any written notice from any insurance company which has issued a policy with respect to any of the Covalent Leased Properties or from any public official or board of fire underwriters (or other body exercising similar functions) claiming any defects or deficiencies in, or suggesting or requesting the performance of any repairs, alterations or other work to, any of the Covalent Leased Properties, except for any written notices as to which all defects and suggested repairs, alterations or other work have been fully performed.

(iii) There are no property management, service, equipment, supply, security, maintenance, construction, concession or other agreements with respect to or affecting the Covalent Leased Properties that will burden Covalent after the date hereof, except as disclosed on Schedule 6(f)(iii) .

(iv) All certificates of occupancy or similar documentation and all other licenses, permits, authorizations, consents, certificates and approvals required by all governmental authorities having jurisdiction over the Covalent Leased Properties to the extent required to be obtained by the tenant or subtenant under the Leases for the Covalent Leased Properties and any requisite certificates of the local board of fire underwriters (or other body exercising similar functions) have been issued for the Covalent Leased Properties, have been paid for (to the extent applicable), are unconditional, valid and in full force and effect, and will not be invalidated, violated or otherwise adversely affected by the execution or performance of this Agreement or the consummation of any of the transactions contemplated herein. Each of Covalent and any Covalent Subsidiary which is a tenant under any of the Covalent Leases (as hereinafter defined) and any subtenant of Covalent or any Covalent Subsidiary under any of the Covalent Leases is in material compliance with all laws applicable to the use and occupancy by a tenant of the Covalent Leased Properties.

 

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(v) (A) All leases or subleases and any and all amendments and supplements thereto (collectively, the “Covalent Leases”) of the Covalent Leased Properties, whether oral or written, are disclosed on Schedule 6(f)(v) , including for each its date, the name of the landlord (and owner if different from the landlord), the name of the lessee and any sublessee, the location and use of the property, the monthly base rental payment and the lease expiration date; (B) Covalent has delivered to the Representative true, correct and complete copies of all Covalent Leases, and all such non-disturbance agreements; (C) except as disclosed on Schedule 6(f)(v) , Covalent or a Covalent Subsidiary is the holder of the lessee’s or sublessee’s interest, as applicable, in each Covalent Lease and neither Covalent nor any Covalent Subsidiary has assigned any Covalent Lease or any interest therein or subleased any portion of the Covalent Leased Properties; (D) each Covalent Lease is in full force and effect; (E) each of Covalent and any Covalent Subsidiary which is a tenant under the Covalent Leases is paying its rent currently and has not asserted any claim for set-off against rent which has not been resolved; (F) neither Covalent nor any Covalent Subsidiary is, and, to the knowledge of Covalent, each landlord under any Covalent Lease is not, in default under any Lease, and no event has occurred which, with the giving of notice or passage of time or both, would constitute a default by Covalent or any Covalent Subsidiary or, to the knowledge of Covalent, any landlord under any Covalent Lease; and (G) neither the execution or performance of this Agreement nor the consummation of any of the transactions contemplated herein will result in a breach of or constitute a default under any of the Covalent Leases.

(g) Personal Property . Except as disclosed on Schedule 6(g) , (A) Covalent and each Covalent Subsidiary has good, valid and marketable title to all personal property, tangible and intangible (including, but not limited to, Intellectual Property, as defined below) owned by it, free and clear of all liens, mortgages, pledges, security interests, restrictions, prior assignments, licenses to third parties, encumbrances and claims of every kind or character, except for Permitted Encumbrances, (B) Covalent or a Covalent Subsidiary is the owner, lessee or licensee of all the personal property now located in or upon the premises occupied by Covalent or a Covalent Subsidiary and of all personal property that it uses in the operation of its business, and (C) all equipment, furniture and fixtures, and other tangible personal property of Covalent and each Covalent Subsidiary is in good operating condition and repair and does not require any repairs other than normal routine maintenance to maintain such property in good operating condition and repair

(h) Intellectual Property .

(i) The Intellectual Property listed on Schedule 6(h)(i) (collectively “IP”) is the only IP owned or licensed by Covalent and the Covalent Subsidiaries in the operation of their respective businesses. No claim has been asserted against Covalent nor any Covalent Subsidiary alleging any conflict or claim of conflict of the IP with the Intellectual Property of others or asserting any rights in the IP. Covalent or a Covalent Subsidiary is the sole and exclusive owner of the IP listed on Schedule 6(h)(i) and, except as set forth in Schedule 6(h)(i) , has the sole and exclusive right to use such IP. As used herein, “Intellectual Property” shall include trademarks, trade names, logos, service marks, copyrights, patents, pending patent applications, domain names, shoprights, know-how, trade secrets, domain names, computer programs and computer software and the like and other items commonly known as intellectual property. To the knowledge of Covalent, there is no infringement of Covalent’s or the Covalent

 

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Subsidiaries’ IP that would have a Material Adverse Effect on Covalent. No trademark owned by Covalent or any of the Covalent Subsidiaries is involved in any opposition, invalidation or cancellation proceeding, and to the knowledge of Covalent, no such proceeding is threatened.

(ii) Covalent or a Covalent Subsidiary is the registered owner of the United States and foreign patents and trademarks disclosed on Schedule 6(h)(ii) and has applications pending with the U.S. Patent Office and equivalent offices in other countries for the patents and trademarks disclosed on Schedule 6(h)(ii) as being pending. Covalent has no knowledge of any adverse claim of any kind with respect to any of such patents, trademarks or applications therefor and has no knowledge that any such application will not be granted.

(i) Software . Covalent or a Covalent Subsidiary has the right to use, or is indemnified for or otherwise protected from any risk for using, the computer software used by Covalent and the Covalent Subsidiaries in connection with their respective businesses. Covalent has no knowledge of any claim or proceeding asserted or threatened in which infringement by such software upon the rights of any third parties is alleged. Covalent and the Covalent Subsidiaries have complied in all material respects with all of their software license agreements. Neither Covalent nor any of the Covalent Subsidiaries shall be in breach of any software license agreement as a result of entering into this Agreement or by consummating any of the transactions contemplated hereunder.

(j) Accounts Receivable . Each of the accounts receivable of Covalent and the Covalent Subsidiaries outstanding as of the Closing Date constitutes on such date a valid claim in the full amount thereof against the debtor charged therewith on the books of Covalent or the Covalent Subsidiaries and was acquired in the ordinary course of Covalent’s or the Covalent Subsidiaries’ business. No account debtor has any valid set-off, deduction or defense with respect thereto and no account debtor has asserted any such set-off, deduction or defense. Subject to any reserve for doubtful accounts set forth in the statement of Covalent’s Closing Net Worth, such accounts receivable will be fully collected to the extent of the face value thereof.

(k) Insurance . Covalent and the Covalent Subsidiaries maintain insurance policies bearing the numbers, for the terms, with the companies, in the amounts, having the named insureds, providing the general coverage, and with the premiums disclosed on Schedule 6(k) . All of such policies are in full force and effect, neither Covalent nor any Covalent Subsidiary is in default of any provision thereof and all premiums due (without regard to any grace period) with respect to such policies have been paid. Neither Covalent nor any Covalent Subsidiary has been refused any insurance for which it has applied and has not received notice from any issuer of any policy issued to it of the insurer’s intention to cancel or refusal to renew any such policy issued by such insurer. True, correct and complete copies of all such policies have been delivered to Covalent.

(l) Liabilities . At the Closing, neither Covalent nor any Covalent Subsidiary shall have any liabilities, whether fixed, contingent, or otherwise, except as and to the extent reflected on the Net Worth Statement or disclosed on Schedule 6(l).

 

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(m) Contracts, Leases, Agreements and Other Commitments .

(i) All of the Covalent Agreements (as hereinafter defined) are in full force and effect and are valid, binding and enforceable against Covalent or the Covalent Subsidiaries, as the case may be, and against the other respective parties thereto, in accordance with their respective terms. Covalent, the Covalent Subsidiaries and, to the knowledge of Covalent, all other parties to all of the Covalent Agreements have performed all obligations required to be performed to date under the Covalent Agreements and none of Covalent, the Covalent Subsidiaries or, to the knowledge of Covalent, any such other party is in default or in arrears under the terms thereof, and no condition exists or event has occurred which, with the giving of notice or lapse of time or both, would constitute a default by Covalent or the Covalent Subsidiaries thereunder or otherwise result in any payment obligations on the part of Covalent or the Covalent Subsidiaries not reserved for in the books of Covalent or the Covalent Subsidiaries. The execution of this Agreement and the consummation of the transactions contemplated hereby do not and will not, with or without the giving of notice, the lapse of time, or both, result in an impairment or termination of, or result in a breach of any of the terms or provisions of, or constitute a default under, or conflict with, any Covalent Agreement. Neither Covalent nor the Covalent Subsidiaries have received any written notice of any intention by any party to terminate or amend any Covalent Agreement.

(ii) Covalent has made available to Remedium (a) all outstanding written and oral proposals, bids, offers or guaranties made by Covalent or any Covalent Subsidiary, which, if accepted, would result in any or could impose any debts, obligations or liabilities upon Covalent or any Covalent Subsidiary, and (b) unexpired warranties relating to Covalent’s and the Covalent Subsidiaries’ products or services, detailing the products or services covered by each warranty (the “Product Warranties”).

(iii) For purposes of Subparagraph 6(m) the term “Covalent Agreements” means (A) any material written, oral or implied contract or agreement, including but not limited to any contract or agreement for the purchase or sale of merchandise or for the rendition of services, (B) any material written, oral or implied lease, or (C) any written, oral or implied power of attorney, guaranty, surety arrangement or other commitment granted by Covalent and/or any Covalent Subsidiary to or for the benefit of any third party. A “material” agreement, contract or lease shall mean an agreement, contract or lease pursuant to which Covalent or any Covalent Subsidiary is obligated to pay, or provide services valued at, or is entitled to receive, amounts in excess of $25,000 in any 12-month period. Any lease of real property shall be deemed a material lease. Covalent has made available to Remedium a complete list of all Covalent Agreements.

(n) Labor Relations, Employees .

(i) Set forth on Schedule 6(n)(i) is a list of:

(A) all collective bargaining or similar agreements and any written amendments thereto, as well as all arbitration awards decided under any such collective bargaining agreements or similar agreements, and all oral assurances or modifications, past practices, and/or arrangements made in relation thereto, to which Covalent or any Covalent Subsidiary is a party or by which it is bound; and

 

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(B) all employment, managerial, or advisory agreements or agreements protecting proprietary or confidential processes to which Covalent or any Covalent Subsidiary is a party or by which it is bound.

(ii) Covalent has delivered to Remedium a true and correct list of the names and ages of all retired or former employees of Covalent and each Covalent Subsidiary, if any, who are receiving or are entitled to receive (now or in the future) from Covalent or a Covalent Subsidiary any funded or unfunded pensions, funded or unfunded welfare benefits, or any deferred compensation, including their current annual funded or unfunded pension rates, their current annual funded or unfunded welfare costs, and the amounts of such deferred compensation to which they are entitled.

(iii) Covalent has delivered to Remedium true, complete and correct copies of all of the documents referred to in Schedule 6(n)(i) hereof and all of the personnel policies, handbooks, procedures, and forms of employment applications relating to the employees of Covalent or any Covalent Subsidiary.

(iv) Except as set forth on Schedule 6(n)(iv) :

(A) there is no union representing or purporting to represent any of the employees of Covalent or any Covalent Subsidiary and neither Covalent nor any Covalent Subsidiary is subject to any collective bargaining agreements with any union representing or purporting to represent the employees of Covalent or any Covalent Subsidiary;

(B) in the past five years, there have been no strikes, slowdowns, or other work stoppages, lockouts, grievance proceedings, arbitrations, labor disputes, lawsuits, administrative proceedings or representation questions pending or, to the knowledge of Covalent, threatened, between Covalent or the Covalent Subsidiaries on the one hand, and any labor union representing or purporting to represent any employees of Covalent or any Covalent Subsidiary, on the other;

(C) Covalent and the Covalent Subsidiaries have complied with all laws relating to the employment of labor, including any provisions thereof relating to wages, overtime, bonuses, severance pay, benefits, occupational safety and health and the and the payment of social security, unemployment compensation and similar taxes, and neither Covalent nor any Covalent Subsidiary is liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing;

(D) there are no charges, suits, actions, administrative proceedings or investigations, and/or claims, instituted by or against, pending, or, to the knowledge of Covalent, threatened against, affecting, naming and/or involving Covalent or any Covalent Subsidiary, whether domestic or foreign, before any court, governmental agency, department, board of instrumentality, or before any arbitrator (collectively “Actions”), concerning, or in any way related to the employees of Covalent or any Covalent Subsidiary, including, without limitation, Actions involving unfair labor practices, failure to pay wages or overtime, breach of implied or express employment contract, wrongful discharge and/or any other restriction on the right of Covalent or any Covalent Subsidiary to terminate its respective employees, employment discrimination, occupational safety and health, and workers’ compensation; and

 

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(E) there are no post-employment benefits, including but not limited to retiree medical, retiree life and retiree accidental death and disability benefits for current or former employees of Covalent or any Covalent Subsidiary.

(v) There are no express or implied agreements, policies, practices, or procedures, whether written or verbal, pursuant to which any employee or agent or contractor of the Covalent or any Covalent Subsidiary is not terminable at will. Covalent has no knowledge of any senior employee of the Covalent or any Covalent Subsidiary that will leave the employ of the Covalent or any Covalent Subsidiary as a result of the transactions contemplated hereby.

(o) Employee Benefit Plans .

(i) Covalent has made available to Remedium a complete and accurate list of all employee benefit plans (the “Covalent Plans”) which Covalent or any Covalent Subsidiary maintain, sponsor, contribute to, are liable for (directly or indirectly) or are bound, legally or otherwise, including, without limitation, any profit-sharing, deferred compensation, bonus, payroll, sick leave, consulting, stock option, stock purchase, stock bonus, employee stock ownership plan, pension, retainer, retirement, vacation, change of control, disability, severance, insurance, welfare or incentive pay policy, agreement, practice or arrangement; any plan, agreement or arrangement if providing for fringe benefits or perquisites to employees, officers, directors or agents of Covalent or any Covalent Subsidiary, including but not limited to benefits relating to employer-supplied automobiles, clubs, medical, dental, hospitalization, life insurance and other types of insurance, retiree medical, retiree life insurance and any other type of benefits for retired and terminated employees.

(ii) True and complete copies of the following documents with respect to any Covalent Plan of Covalent or any Covalent Subsidiary, as applicable, have been delivered to Covalent: (A) the most recent Covalent Plan document and trust agreement (including any amendments thereto), (B) all summary plan descriptions, (C) a written description of each material non-written Covalent Plan, (D) each written communication to employees intended to describe a Covalent Plan or any benefit provided by such Covalent Plan, (E) the most recent actuarial report, and (F) all correspondence with any governmental agency concerning any Covalent Plan. Each report described in clause (E) accurately reflects the funding status of the Covalent Plan to which it relates and subsequent to the date of such report there has been no adverse change in the funding status or financial condition of such Covalent Plan.

(iii) Each Covalent Plan is and has been maintained in compliance in all material respects with applicable law and with any applicable collective bargaining agreements or other contractual obligations.

(iv) There is no unfunded liability with respect to any Covalent Plan.

(v) Each of Covalent and the Covalent Subsidiaries has funded each Covalent Plan in accordance with the terms of such Covalent Plan through the date hereof, including the payment of applicable premiums on insurance contract funding a Covalent Plan, for coverage provided through the date hereof.

 

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(vi) Except as contemplated herein or required by law, the execution of this Agreement and the consummation of the transactions contemplated hereby, do not constitute a triggering event under any Covalent Plan, policy, arrangement, statement, commitment or agreement which (either alone or upon the occurrence of any additional or subsequent event) will result in any obligation of Covalent or any Covalent Subsidiary to make any payment (whether of severance pay, including, and not limited to, salary, related vacation pay, pension pay and other similar payments and costs, or otherwise) or to accelerate, vest or increase the amount of benefits payable to any employee or former employee or director of Covalent or any Covalent Subsidiary. Except as listed on Schedule 6(o)(vi) , no Covalent Plan or agreement provides for the payment of severance benefits upon the termination of any employee’s employment.

(vii) The audited consolidated balance sheets of Covalent and its Covalent Subsidiaries for the years ended December 31, 2003 and 2004 and the unaudited consolidated balance sheets for the twelve month period ended December 31, 2005, as well as Covalent’s Net Worth Statement properly and adequately reflect or will reflect, as applicable, in accordance with US GAAP consistently applied with prior periods, any and all liabilities and obligations of Covalent and the Covalent Subsidiaries relating to any period ending on or prior to the date hereof relating to or in respect of current and former employees of Covalent or the Covalent Subsidiaries, for (A) unpaid compensation, salaries, wages, vacation pay, disability payments and other payroll items (including, without limitation, bonus, incentive or deferred compensation), (B) unpaid contributions, costs and expenses to or in respect of any Covalent Plans, and (C) severance or other termination benefits relating to, resulting from or arising in respect of any termination of employment occurring on or prior to the date hereof.

(p) Litigation . Except for the matters set forth on Schedule 6(p) , (A) neither Covalent nor any Covalent Subsidiary, nor any of their assets (including, without limitation, the Covalent Agreements), is a party or is subject to, or to the knowledge of Covalent, threatened with, any suit, action, arbitration, administrative or other proceeding, either at law or in equity, or governmental investigation by or before any court, governmental department, commission, board, agency or instrumentality, domestic or foreign; (B) there is no judgment, decree, award or order outstanding against Covalent or any Covalent Subsidiary; (C) neither Covalent nor any Covalent Subsidiary is contemplating the institution by it of any suit, action, arbitration, administrative or other proceeding; and (D) to the knowledge of Covalent, there is no basis for any suit, action, arbitration or administrative proceeding against Covalent or any Covalent Subsidiary, and there has been no occurrence that may result in a claim for damages against Covalent or any Covalent Subsidiary. The insurance carriers of Covalent or the Covalent Subsidiaries, as applicable, have agreed to defend and indemnify Covalent and any Covalent Subsidiary, whichever is applicable, against any loss resulting to Covalent or any Covalent Subsidiary from all matters set forth on Schedule 6(p) .

(q) Suppliers and Customers . Covalent has made available to Remedium a complete and accurate list of the names of all suppliers and customers of Covalent and the Covalent Subsidiaries which respectively contribute more than 5% of all sales and services to, and orders and use of services from, Covalent and Covalent Subsidiaries taken as a whole

 

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(“Suppliers” and “Customers,” respectively). No Supplier or Customer of Covalent or the Covalent Subsidiaries has canceled or otherwise terminated, or, to the knowledge of Covalent, threatened to cancel or otherwise terminate, its relationship with Covalent or any Covalent Subsidiary, or has during the last 12 months decreased materially, or, to the knowledge of Covalent, threatened to decrease or limit materially, its business with Covalent or any Covalent Subsidiary. To the knowledge of Covalent, the acquisition of the Shares by Covalent will not adversely affect the relationship of Covalent or a Covalent Subsidiary with any Supplier or Customer.

(r) Conflicting Interests . Except as disclosed on Schedule 6(r) , no director, officer or manager of Covalent or any Covalent Subsidiary (a) has any pecuniary interest in any supplier or customer of Covalent or any Covalent Subsidiary or in any other business enterprise with which Covalent or any Covalent Subsidiary conducts business or with which Covalent or any Covalent Subsidiary is in competition; (b) is indebted to Covalent or any Covalent Subsidiary; (c) is a party to any transaction or agreement with Covalent or any Covalent Subsidiary (apart from such person’s status as a director, officer or manager as such); or (d) has any business or other interest in conflict with the interests of Covalent or any Covalent Subsidiary.

(s) Compliance with Law and Regulations . Covalent and each Covalent Subsidiary is in compliance with, and has at all times during the past six years complied with, all requirements of local and foreign law and all requirements of all governmental, administrative or regulatory bodies or agencies having jurisdiction over it, the conduct of its business, the use of its properties and assets, and all premises occupied by it. Without limiting the foregoing, Covalent and each Covalent Subsidiary has paid all monies to obtain, and has obtained and now holds, all licenses, permits, certificates, and authorizations needed or required for the conduct of its business as currently conducted and the current use of its properties and the premises occupied by it. Covalent and each Covalent Subsidiary has properly filed all reports and other documents required to be filed within the past six years with any local or foreign government, subdivision or agency thereof. In the past six years, neither Covalent nor any Covalent Subsidiary has received any notice from any government, municipality, administrative or regulatory authority, or any insurance or inspection body that any of its properties, facilities, equipment, or business procedures or practices fails to comply with any applicable law, ordinance, regulation, building or zoning law, or requirement of any public authority or body. All licenses, permits, orders and approvals issued by any governmental body or agency currently in effect and pertaining to the property, assets or business of Covalent and Covalent Subsidiaries are listed on Schedule 6(s) and, except as noted on Schedule 6(s) , none of the items so listed will lapse or expire as a result of the transactions contemplated hereby. To the knowledge of Covalent, except as set forth on Schedule 6(s) , there are no regulations or legislation pending before any local or foreign government, government agency, administration body or legislature which, if adopted, would have a Material Adverse Effect on Covalent.

(t) Environmental Matters .

(i) Covalent and the Covalent Subsidiaries and to the knowledge of Covalent, any predecessor of Covalent or the Covalent Subsidiaries are and at all times have been in compliance with all Environmental Laws governing their business, operations, properties

 

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and assets, which compliance includes, but is not limited to: (i) the possession by Covalent and the Covalent Subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof, (ii) all requirements relating to the Discharge and Handling of Regulated Substances and Wastes (iii) all requirements relating to notice, record keeping and reporting; and (iv) all applicable writs, orders, judgments, injunctions, governmental communications, decrees, informational requests or demands issued pursuant to, or arising, under, any Environmental Law (“Covalent Environmental Demands”). Neither Covalent nor any Covalent Subsidiary has received any communication from any governmental authority, employee, group or third party alleging that it is not in compliance or that it has investigatory or remedial obligations or other liability pursuant to Environmental Law. To the knowledge of Covalent, there are no circumstances that may prevent or interfere with such full compliance or give rise to investigatory or remedial obligations or other liabilities pursuant to Environmental Law in the future. All permits and other governmental authorizations currently held by Covalent and the Covalent Subsidiaries pursuant to any Environmental Laws and Covalent Environmental Demands issued to Covalent and the Covalent Subsidiaries are identified in Schedule 6(t) .

(ii) There are no Covalent Environmental Claims (as hereinafter defined) pending or, to the knowledge of Covalent, threatened against Covalent or any Covalent Subsidiary or, to the knowledge of Covalent, against a predecessor of Covalent or any Covalent Subsidiary.

(iii) For purposes of this Agreement, “Covalent Environmental Claim” means any notice, lien, claim, action, cause of action, order, communication, investigation, or proceeding (written or oral) by any person or entity alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup, removal or remediation costs, governmental response costs, natural resource damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or threatened release into the environment of any Regulated Substance at any location, whether or not owned or operated by Covalent or any Covalent Subsidiary, and (b) circumstances forming the basis of any violation, or alleged violation, of, or liability pursuant to any Environmental Law.

(u) Tax Matters .

(i) Tax Matters Relating to Covalent and Covalent Subsidiaries .

(A) Covalent and each Covalent Subsidiary has filed when due in a timely fashion all Returns that are required to be filed on or before the date hereof and will file when due in timely fashion all returns that are required to be filed on or before the Closing Date by or with respect to Covalent and any Covalent Subsidiary (taking into account in each case all extensions of time within which to file to which they are entitled or which they may have been granted). All such Returns are correct and complete. Neither Covalent nor any Covalent Subsidiary is the current beneficiary of any extension of time within which to file any Return. No claim has been made by a taxing authority in a jurisdiction where Covalent and any Covalent Subsidiary does not file Returns that any of them is or may be subject to or liable for any Tax imposed by that jurisdiction;

 

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(B) All Taxes shown to be due on the returns referred to in clause (A) for which each of Covalent and any Covalent Subsidiary is liable have been paid or will be paid prior to the due date thereof; all Taxes due on or before the date hereof for which no Return is required have been paid when due in a timely fashion; and all such Taxes for which no Return is required due on or before the Closing Date will be paid when due in a timely fashion (in each case taking into account all extensions of time within which to pay to which they are entitled or which they may have been granted). All unpaid Taxes attributable to any period ending on or prior to the Closing Date will be accrued in full on Covalent’s Net Worth Statement. Covalent shall pay when due any transfer and stamp taxes due as a result of the transaction contemplated hereby. There are no liens on any assets of Covalent or any Covalent Subs