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EXECUTION COPY
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
KENSEY NASH CORPORATION,
A DELAWARE CORPORATION,
SOLELY FOR PURPOSES OF SECTION 7.17 HEREOF,
AND
THM ACQUISITION SUB, INC.,
A DELAWARE CORPORATION,
AND
THM BIOMEDICAL, INC., A MINNESOTA CORPORATION,
AND
THE STOCKHOLDERS OF THM BIOMEDICAL, INC.,
SOLELY FOR PURPOSES OF SECTIONS 6.4 AND 7.16 HEREOF
SEPTEMBER 1, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF ASSETS......................................1
1.1 Assets...................................................1
1.2 Assumption of Liabilities................................4
1.3 Conveyance...............................................4
ARTICLE II CONSIDERATION AND MANNER OF PAYMENT.............................4
2.1 Purchase Price...........................................4
2.2 Other Agreements.........................................5
2.3 Purchase Price Allocation................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................5
3.1 Authority................................................6
3.2 Organization and Qualification of the Company............6
3.3 Capital Stock; Title to Shares...........................6
3.4 Subsidiary...............................................7
3.5 Transaction Not a Breach.................................7
3.6 No Consent Required......................................7
3.7 Financial Statements.....................................7
3.8 Absence of Undisclosed Liabilities.......................8
3.9 Assets...................................................8
3.10 Compliance with Laws; Permits............................9
3.11 Real Property............................................9
3.12 Personal Property Leases................................10
3.13 Contracts...............................................10
3.14 Personal Property.......................................11
3.15 Intellectual Property...................................11
3.16 Employee Benefit Plans..................................12
3.17 Employees...............................................14
3.18 Labor and Employment Matters............................14
3.19 Workers Compensation....................................14
3.20 Suppliers...............................................15
3.21 Customers...............................................15
3.22 Distributors and Representatives. .....................15
3.23 Affiliate Transactions..................................15
3.24 Insurance Policies......................................16
3.25 Bank Accounts...........................................16
3.26 Taxes...................................................16
3.27 Litigation..............................................17
3.28 Product Warranties......................................18
3.29 Defects in Products or Designs; Product Safety..........18
3.30 Environmental and Safety Requirements...................18
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3.31 Conduct of the Business.................................20
3.32 Absence of Questionable Payments........................21
3.33 Government Contracts....................................21
3.34 Corporate Name; Business Location.......................21
3.35 Disclosure..............................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................22
4.1 Organization and Good Standing..........................22
4.2 Authorization...........................................22
4.3 No Violation............................................22
4.4 No Consent Required.....................................22
4.5 Disclosure..............................................23
ARTICLE V CLOSING.........................................................23
5.1 Closing.................................................23
5.2 Deliveries by the Company...............................23
5.3 Deliveries by Buyer.....................................24
ARTICLE VI COVENANTS AFTER CLOSING........................................24
6.1 The Company's Access to Information.....................24
6.2 Intentionally Omitted...................................24
6.3 Liability for Taxes; Retention of Records...............24
6.4 Indemnification.........................................25
6.5 Restrictive Covenants...................................29
6.6 Name Change.............................................31
ARTICLE VII MISCELLANEOUS.................................................31
7.1 Notices, Consents, etc..................................31
7.2 Public Announcements....................................32
7.3 Severability............................................32
7.4 Amendment and Waiver....................................32
7.5 Counterparts............................................33
7.6 Expenses................................................33
7.7 Headings................................................33
7.8 Governing Law; Arbitration..............................33
7.9 Assignment..............................................33
7.10 Definitions.............................................33
7.11 Entire Agreement........................................36
7.12 Third Parties...........................................36
7.13 Interpretative Matters..................................36
7.14 Brokers and Transaction Payments........................36
7.15 Further Assurances......................................36
7.16 Stockholder Representative..............................37
7.17 Guaranty................................................38
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Section
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GLOSSARY OF TERMS
"AAA"........................................................................7.8
"Affiliate".................................................................7.10
"Affiliate Transactions"....................................................3.23
"Alternate Stockholders' Representative"....................................7.16
"Assets" ....................................................................1.1
"Assumed Liabilities"........................................................1.2
"Basket Amount"..............................................................6.4
"Beneficiaries".............................................................7.17
"Bill of Sale"...............................................................1.3
"Business"..............................................................Preamble
"Buyer".............................................................Introduction
"Buyer Indemnification Ceiling Amount".......................................6.4
"Buyer Indemnified Party"....................................................6.4
"Buyer Transaction Documents"...............................................7.10
"Ceiling Amount".............................................................6.4
"Change of Control".........................................................7.10
"Claim Notice"...............................................................6.4
"Closing"....................................................................5.1
"Closing Date"...............................................................5.1
"Closing Date Balance Sheet".................................................3.7
"Closing Date Balance Sheet Date"............................................3.7
"COBRA".....................................................................3.16
"Code"......................................................................7.10
"Company"...........................................................Introduction
"Company Indemnified Party"..................................................6.4
"Company Transaction Documents".............................................7.10
"Confidential Information"...................................................6.5
"Defense Counsel"............................................................6.4
"Defense Notice".............................................................6.4
"Direct Claim"...............................................................6.4
"Employment Agreement".......................................................2.2
"Employee Benefit Plans"....................................................3.16
"Environmental and Safety Requirements".....................................3.30
"ERISA".....................................................................7.10
"Excluded Assets"............................................................1.1
"Excluded Liabilities".......................................................1.2
"Financial Statements".......................................................3.7
"GAAP"......................................................................7.10
"Guaranty"..................................................................7.17
"Hazardous Materials".......................................................3.30
"Indemnified Party"..........................................................6.4
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Section
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"Indemnifying Party".........................................................6.4
"Initial Cash Payment".......................................................2.1
"IP Ceiling Amount"..........................................................6.4
"Knowledge".................................................................7.10
"KNSY"..............................................................Introduction
"Leased Improvements".......................................................3.11
"Leased Real Property"......................................................3.11
"Liens"......................................................................1.1
"Losses".....................................................................6.4
"Material Adverse Effect"...................................................7.10
"Material Contracts"........................................................3.13
"Non-Competition Agreements".................................................2.2
"Notes"......................................................................2.1
"Obligations"...............................................................7.17
"Permits"....................................................................1.1
"Permitted Liens"...........................................................7.10
"Person"....................................................................7.10
"Plan Affiliate"............................................................3.19
"Products"..................................................................3.28
"Proprietary Rights".........................................................1.1
"Purchase Price".............................................................2.1
"Quarterly Payments".........................................................2.1
"Restricted Period"..........................................................6.5
"Rules"......................................................................3.5
"Stockholders"......................................................Introduction
"Stockholders' Representative"..............................................7.16
"Tax".......................................................................7.10
"Tax Returns"...............................................................7.10
"Territory"..................................................................6.5
"Third Party Claim"..........................................................6.4
"Transaction Documents".....................................................7.10
"WARN Act"..................................................................3.18
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made on this 1st
day of September, 2000, by and among THM Biomedical, Inc., a Minnesota
corporation (the "COMPANY"), and Kensey Nash Corporation, a Delaware
corporation, solely for purposes of SECTION 7.17 hereof ("KNSY"), and THM
Acquisition Sub, Inc. ("BUYER"), a Delaware corporation and wholly-owned
subsidiary KNSY, and the stockholders of the Company whose names are set forth
on the signature pages hereto (the "STOCKHOLDERS"), solely for purposes of
SECTIONS 6.4 and 7.16 hereof.
WHEREAS, the Company is engaged in the business of developing and
commercializing technology and products based on synthetic polymer porous
materials (the "BUSINESS");
WHEREAS, the Company desires to sell to Buyer, and Buyer desires to
purchase from the Company, all of the assets used in the Business and assume
substantially all of the liabilities of the Business, upon the terms and
conditions set forth below; and
WHEREAS, certain capitalized terms have the meanings respectively
indicated in SECTION 7.10 herein.
NOW THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 ASSETS.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Company shall sell, transfer and deliver to
Buyer, free and clear of all liens, hypothecations, mortgages, charges, security
interests, pledges or other encumbrances or adverse claims or interests of any
nature ("LIENS") other than Permitted Liens and those liabilities being assumed
by Buyer pursuant to this Agreement, and Buyer shall purchase from the Company,
the Business and all the Company's right, title and interest in and to all of
its assets (other than the Excluded Assets), wherever located and whether or not
all or any of said assets appear on or are reflected upon the Company's books,
records or financial statements (collectively, the "ASSETS"), including, but not
limited to, the following (to the extent such categories of assets or properties
are owned by the Company):
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(i) Movable/Tangible Personal Property. All molds, fixtures,
tooling, equipment and machinery, tools, vehicles (whether or not
registered under motor vehicle registration laws), furniture, computer
hardware and software, office furniture and equipment and other similar
personal or movable property of the Company;
(ii) Inventories and Supplies. All inventory of the Company used
in connection with the Business, including, without limitation, raw
materials, work-in-process, finished goods, merchandise for resale,
spare parts, packaging and shipping materials and office, operating and
other supplies, whether or not located at the Company's principal place
of business;
(iii) Receivables. All notes and accounts receivable of the
Company and all notes, bonds and other evidences of indebtedness of any
entity or person held by any of the Company, including, without
limitation, all trade, employee, officer and other accounts and monies
receivable;
(iv) Contracts. All rights and benefits that the Company may
have in connection with the Business under the Material Contracts (as
defined in SECTION 3.13) and any and all other agreements, contracts,
purchase orders, forward commitments for works-in- progress, licenses
and leases, whether written or oral, pertaining to the Business, to
the extent assignable;
(v) Intellectual Property. All intellectual property,
confidential information, and proprietary information in the world
owned or used by the Company in connection with the Business including,
without limitation, (a) the Company's registered corporate names and
assumed names wherever used, including, without limitation, the name
"THM Biomedical"; (b) all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or
not reduced to practice); (c) all trademarks, service marks, trade
dress, trade names and corporate names presently or previously used by
the Company in connection with the Business, whether or not registered
by the Company; (d) all registered and unregistered statutory and
common law copyrights; (e) all registrations, applications, extensions
and renewals for any of the foregoing; (f) all trade secrets,
confidential information, ideas, formulae, compositions, know-how,
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, databases,
internet domain names, documentation and software, financial, business
and marketing plans, and customer and supplier lists and related
information; (g) all agreements, commitments, contracts,
understandings, licenses, assignments or indemnities relating or
pertaining to an asset, property or right of the character described in
the preceding clauses to which the Company is a party; (h) all licenses
or agreements pertaining to mailing lists, know-how, trade secrets,
inventions, disclosures or uses of ideas used in or relating to the
Business to which the Company is a
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party; (i) all correspondence and memoranda between the Company and
its intellectual property counsel relating to Proprietary Rights; and
(j) all other intellectual property, confidential information and
proprietary rights (collectively, "PROPRIETARY RIGHTS");
(vi) Records. Subject to the Company's right to review such
items in accordance with SECTION 6.1 hereof, all records, files, and
papers of the Company (other than those records described in SECTION
1.1(B)), including, but not limited to, sales and purchase
correspondence, past and current insurance policies, customer and
supplier lists, books of account and employment records;
(vii) Licenses, Permits and Approvals. All rights of the Company
in and to permits, licenses, approvals and authorizations by or of
governmental authorities or third parties issued or granted or
otherwise received in connection with the Business, including, without
limitation, FDA approvals, if any ("PERMITS"), to the extent
assignable;
(viii) Claims. All causes of actions, claims, warranties,
guarantees, refunds (other than federal tax refunds) covenants,
indemnities and the like, rights of recovery and set-off of every kind
and character of the Company related to the Business, including,
without limitation, rights and claims against suppliers of inventory
and other Assets transferred hereunder;
(ix) Customer Property. The right to custody of all assets owned
by a customer of the Business or other person and held by the Company
on behalf of such customer or other person, subject to the rights of
such third party with respect to such assets;
(x) Prepaids. All advances, deposits, credits, transferable
insurance policies, prepaid royalties and other prepaid assets and
expenses of the Company in connection with the Business;
(xi) Goodwill. All goodwill associated with the Business, along
with the right of Buyer to hold itself out as the successor of the
Company in the conduct of the Business;
(xiii) Securities. All securities that the Company may have an
interest in, including, without limitation, the capital stock of any
subsidiary of the Company;
(xiv) Cash. All cash and cash equivalents of the Company,
including, but not limited to, lockbox receipts; and
(xvi) Other Assets. All other properties and assets owned or held
by the Company and used in connection with the Business, whether or not
of a type falling within any of the categories of assets or properties
described above, unless specifically forming part of the Excluded
Assets.
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(b) Notwithstanding the foregoing, the following assets of the Company
shall be retained by the Company and are expressly excluded from the purchase
and sale contemplated by this Agreement (collectively, the "EXCLUDED ASSETS"):
(i) Records. The Company's formal records, including its
governing documents, minute books, stock books and other records
having exclusively to do with the corporate organization of the
Company and all of the Company's Tax Returns and financial
records;
(ii) This Agreement. The Company's rights, and the rights of the
Stockholders, pursuant to this Agreement and the Transaction Documents;
(iii) Nonassignable Permits. Any Permits which may not be
transferred without the consent, novation, waiver or approval of a
third person or entity and for which such consent, novation, waiver or
approval has not been obtained; and
(iv) Employee Benefit Plans. All monies, rights and other assets
(including any insurance policy, annuity contract or trust) maintained
under, pursuant to or in direct connection with any Employee Benefit
Plan.
1.2 ASSUMPTION OF LIABILITIES.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing the Buyer shall assume and agree to perform, pay and
discharge all of the liabilities of the Company as of the Closing Date including
liabilities and claims of which the Company does not have knowledge prior to the
Closing Date but which are asserted as liabilities of the Company after the
Closing Date (the "ASSUMED LIABILITIES"), subject to Buyer's right to seek
indemnification in accordance with SECTION 6.4 for alleged breaches of the
Company's representations and warranties set forth in ARTICLE III pertaining to
such liabilities.
(b) Notwithstanding SECTION 1.2(A) hereof, and notwithstanding any
disclosures made to Buyer or its agents in the conduct of their due diligence
investigations of the Company and its business and further notwithstanding any
matters disclosed on any Schedules hereto, Buyer shall not assume any of the
liabilities of the Company, and the Company shall remain unconditionally liable
for those liabilities of the Company set forth on Schedule 1.2(b) of this
Agreement (the "EXCLUDED LIABILITIES").
1.3 CONVEYANCE. At the Closing, the Company and Buyer shall execute
and deliver a Bill of Sale, Assignment and Assumption Agreement substantially in
the form attached hereto as Exhibit 1.3 (the "BILL OF SALE"), pursuant to which
the Company shall convey to the Buyer the Assets and the Buyer shall assume the
Assumed Liabilities.
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ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE
PRICE") to be paid by Buyer for the Assets, and the rights and benefits
conferred hereunder, is payable as follows:
(a) The Company hereby assigns its right to receive the Purchase
Price to the Stockholders pro-rata based upon their percentage ownership of
common stock of the Company (as set forth on Schedule 3.3). Buyer shall pay to
the Stockholders at Closing, by wire transfer of immediately available funds to
the bank accounts of the Stockholders as designated on Schedule 2.1 attached
hereto, an aggregate of $6,600,000 (the "INITIAL CASH PAYMENT").
(b) Buyer shall pay to the Stockholders an aggregate of
$4,500,000, payable in equal quarterly installments of $281,250 on the last
business day of each of the first sixteen (16) calendar quarters following the
Closing Date, with the first payment being made on December 31, 2000, by wire
transfer of immediately available funds to the Payees' designated bank accounts
(the "QUARTERLY PAYMENTS"). At Closing, Buyer shall evidence its obligation to
pay the Quarterly Payments by issuing to each of the Payees a promissory note,
substantially in the form attached hereto as Exhibit 2.1(b) (the "NOTES"), in
the amount set forth on Schedule 2.1 for each such Payee, payable in sixteen
(16) equal quarterly installments. The Notes may be prepaid by Buyer, in whole
or part, without penalty. In the event of a Change of Control (as defined in
SECTION 7.10) of Buyer prior to September 30, 2004, the outstanding principal
balance under the Notes shall immediately accelerate, and such outstanding
amounts shall be payable concurrently with the closing of such Change of Control
transaction.
2.2 OTHER AGREEMENTS. At the Closing, KNSY shall enter into the
following agreements:
(a) Non-competition agreements, to be executed by each of Thomas
Maas and William Maas, substantially in the forms of Exhibit 2.2(a)(i) and
Exhibit 2.2(a)(ii) attached hereto (the "NON-COMPETITION AGREEMENTS"); and
(b) Employment agreement, to be executed by John Brekke, having a
three (3) year term, substantially in the form of Exhibit 2.2(b) attached hereto
(the "EMPLOYMENT AGREEMENT").
2.3 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
for tax purposes amongst the Assets and the other consideration provided by the
Company as set forth on Schedule 2.3. The parties shall file their respective
tax returns in accordance with such allocation and shall not take any position
or action inconsistent with such allocation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to Buyer to enter into this Agreement, the
Company makes to Buyer the representations and warranties set forth in this
ARTICLE III, which representations and warranties are made and shall be true and
correct as of the date hereof. On the date of this Agreement, the Company has
delivered schedules to certain of the following representations and warranties
listing any exceptions to the representations and warranties in this ARTICLE III
in order to make the representations and warranties in this ARTICLE III accurate
and complete. The schedules pertaining to this ARTICLE III describe any such
required exceptions in reasonable detail and are arranged according to the
sections contained in this ARTICLE III, provided that any exceptions described
in response to any section of this Agreement shall be deemed to be exceptions to
all relevant sections of this Agreement, to the extent a reasonable person could
infer that such exception should be deemed to be an exception to the relevant
section of this Agreement.
3.1 AUTHORITY. The Company has full power, right and authority to
enter into and perform its obligations under this Agreement and each of the
Company Transaction Documents. The execution, delivery and performance of this
Agreement and each of the Company Transaction Documents and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all requisite action, and no other proceedings are necessary to authorize the
execution, delivery and performance of this Agreement and each of the Company
Transaction Documents. This Agreement and each of the Company Transaction
Documents have been duly executed and delivered by the Company and constitute
the valid and binding obligations of the Company and are enforceable against the
Company in accordance with their respective terms. Complete and correct copies
of the Company's charter documents and bylaws, and all amendments thereof to
date, have previously been delivered to Buyer.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is duly
organized, validly existing, and in good standing under the laws of the State of
Minnesota. The Company has full power and authority to carry on its business as
it is now being conducted and to own or hold under lease the properties and
assets it now owns or holds under lease. The Company is not required to be
qualified to do business as a foreign corporation in any other jurisdiction.
3.3 CAPITAL STOCK; TITLE TO SHARES. Schedule 3.3 sets forth the entire
authorized capital stock and the total number of issued and outstanding shares
of capital stock of the Company. All of the outstanding shares of capital stock
of the Company are validly issued, fully paid and non-assessable and owned,
beneficially and of record, in the amounts listed on Schedule 3.3 and no shares
of capital stock of the Company are subject to, nor have been issued in
violation of preemptive or similar rights. Except as set forth on Schedule 3.3,
the Company has no outstanding stock or other securities convertible into or
exchangeable for shares of its capital stock or containing profit participation
features, and the Company has no outstanding options, warrants
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or rights to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for capital stock. The Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock. All issuances, sales and
repurchases by the Company of its capital stock have been effected in compliance
with all applicable laws, including, without limitation, applicable federal and
state securities laws.
3.4 SUBSIDIARY. The Company has no subsidiaries and the Company does
not own, directly or indirectly, any stock, partnership interest, joint venture
interest or other equity interest in any other corporation, trust, partnership,
joint venture or other entity.
3.5 TRANSACTION NOT A BREACH. Neither the execution and delivery of
this Agreement or any Company Transaction Document by the Company nor the
performance by the Company of the transactions contemplated hereby or thereby
will:
(a) violate or conflict with or result in a breach of any
provision of any law, statute, rule, regulation, requirement, order, permit,
judgment, injunction, decree or other decision (collectively, "RULES") of any
court or other tribunal or any governmental entity or agency binding on the
Company or its properties, or conflict with or result in the breach of any of
the terms, conditions or provisions thereof;
(b) constitute a default under the governing documents of the
Company or of any Material Contract (as defined below) or any agreements in
connection with the Leased Real Property;
(c) constitute an event which would permit any party to terminate,
modify, or accelerate the maturity of any indebtedness or other obligation
under, any Material Contract; or
(d) result in the creation or imposition of any Lien upon the
Assets.
3.6 NO CONSENT REQUIRED. Except as set forth on Schedule 3.6, no
consent, approval, order or authorization of, or declaration, filing or
registration with, any person, entity or governmental authority is required to
be made or obtained by the Company in connection with the authorization,
execution, delivery, performance or lawful completion of this Agreement, the
other Company Transaction Documents or the transaction contemplated hereby.
3.7 FINANCIAL STATEMENTS. Schedule 3.7 contains the following
consolidated financial statements of the Company (the "FINANCIAL STATEMENTS"):
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(a) the audited balance sheets as of December 31, 1999 and
December 31, 1998, and the related audited statements of income and cash flows
for the twelve (12) month periods then ended;
(b) the unaudited balance sheet as of June 30, 2000, and the
related unaudited statement of income and cash flows for the six (6) month
period then ended; and
(c) the unaudited statement of income and cash flows for the
twelve (12) month period ended June 30, 2000.
Schedule 3.7 includes an unaudited balance sheet as of August 31, 2000
(the "CLOSING DATE BALANCE SHEET"). Except as set forth on Schedule 3.7, each of
the Financial Statements and the Closing Date Balance Sheet is complete and
correct in all material respects, is consistent with the books and records of
the Company and fairly and accurately presents the Company's financial
condition, assets and liabilities as of the respective dates and the results of
operations and cash flows for the periods related thereto in accordance with
GAAP consistently applied throughout the periods covered thereby, except that
the Financial Statements and the Closing Date Balance Sheet lack the footnote
disclosure otherwise required by GAAP which, if provided, would not reflect a
Material Adverse Effect on the Company.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no debts,
liabilities or obligations of any nature affecting the Business or the Assets
(whether accrued, absolute, contingent, direct, indirect, perfected, inchoate,
unliquidated or otherwise and whether due or to become due) arising out of
transactions entered into on or prior to the date hereof, or any transaction,
series of transactions, action or inaction occurring on or prior to the date
hereof, or any state of facts or condition existing on or prior to the date
hereof (regardless of when such liability or obligation is asserted), including,
but not limited to, liabilities or obligations on account of Taxes or
governmental charges or penalties, interest or fines thereon or in respect
thereof, except (a) as and to the extent clearly and accurately reflected and
accrued for or reserved against in the Closing Date Balance Sheet of the
Company, (b) for liabilities specifically delineated on Schedule 3.8, and (c)
for liabilities and obligations which have arisen in connection with the
Business after August 31, 2000 (the "CLOSING DATE BALANCE SHEET DATE") in the
ordinary course of business consistent with past custom and practice.
3.9 ASSETS.
(a) Title. The Company has the exclusive right to possess and
convey, and upon the consummation of the transactions contemplated by this
Agreement, the Company will have conveyed and Buyer will be vested with, good
and marketable title and interest in and to the Assets, free and clear of all
Liens (other than Permitted Liens). The Company owns all assets reflected as
being owned by it on the Closing Date Balance Sheet or purchased by it after the
Closing Date Balance Sheet Date except for those assets which were disposed of
by the Company
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after the Closing Date Balance Sheet Date in the ordinary course of business
consistent with past custom and practice. The Assets constitute all of the
assets and properties used in connection with the conduct of the Business and
are sufficient to operate the Business as presently operated.
(b) Inventories. The inventories of the Company consist of items
of a quality and quantity useable or saleable in the ordinary course of
business, except for items of obsolete material or materials below standard
quality, all of which have been determined and written down to net realizable
value in the Financial Statements.
(c) Accounts Receivable. The Company's accounts receivable have
arisen in bona fide arm's-length transactions in the ordinary course of
business. Except to the extent of any reserves for bad debts set forth in the
Financial Statements, all such receivables are valid and binding obligations of
the account debtors without any counterclaims, set-offs or other defenses
thereto and are collectible in the ordinary course of business.
(d) Condition and Location. Except as set forth on Schedule 3.9,
all of the tangible assets of the Company which are part of the Assets have been
properly maintained in accordance with industry standards, are in good operating
condition and repair and are useable in the ordinary course of business. Except
as set forth on Schedule 3.9, none of the tangible assets of the Company
requires any material repair or replacement, except for maintenance in the
ordinary course of business. Except as set forth on Schedule 3.9, none of the
personal or movable property owned or leased by the Company is located other
than at the Leased Real Property.
3.10 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any material Rules applicable to it, its assets, any Employee Benefit Plans or
the operation of the Business and the Company has received no written notice of
any violation or alleged or potential violation; provided, that to the extent
the representations contained in other sections of this Agreement address
compliance with specific Rules (including without limitation, representations
contained in SECTIONS 3.11, 3.16 and 3.26), any representations contained in
this SECTION 3.10 are qualified to the extent set forth in such other sections
of this Agreement. The Company holds and at all times has held all of the
material Permits necessary, desirable or useful for the current use, occupancy
or operation of the Business or ownership of the Assets, all of which are set
forth on Schedule 3.10. The Company is and at all times has been in full
compliance with each of such Permits, all of which are in full force and effect.
3.11 REAL PROPERTY.
(a) The Company does not own any real property. Schedule 3.11(a)
contains a complete and correct list of all the real property that is leased by
the Company or that the Company has agreed (or has an option) to lease, or may
be obligated to lease in connection with the conduct of the Business, as well as
a correct and complete description of each lease pursuant to which such real
property is leased. Such real property is hereinafter referred to as "LEASED
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REAL PROPERTY," and the improvements and fixtures thereon are hereinafter
referred to as the "LEASED IMPROVEMENTS."
(b) Except as set forth on Schedule 3.11(a), the Company is the
sole legal and equitable owner of the leasehold interests in the Leased Real
Property and the Leased Improvements, free and clear of all Liens (other than
Permitted Liens) that could impair the ability of the Company to realize the
benefits of the rights provided to it under its lease of the Leased Real
Property and the Leased Improvements. The lease applicable to the Leased Real
Property is valid and in full force and effect and no event has occurred which
with the giving of notice or the passage of time or both could constitute a
default under such lease.
(c) There are no adverse or other parties in possession of the
Leased Real Property, the Leased Improvements, or any portion or portions
thereof, and the leasehold interests in the Leased Real Property and the Leased
Improvements are free and clear of any and all lessees, licensees, occupants or
tenants except as set forth on Schedule 3.11(a). To the knowledge of the
Company, there are no pending or threatened condemnation, eminent domain or
similar proceedings, or litigation or other proceedings affecting the Leased
Real Property, the Leased Improvements or any portion or portions thereof. To
the knowledge of the Company, there are no pending or threatened requests,
applications or proceedings to alter or restrict any zoning or other use
restrictions applicable to the Leased Real Property or the Leased Improvements
that would interfere with the conduct of the Business, which interference would
have a Material Adverse Effect. Except as set forth on Schedule 3.11(a), all
water, sewer, gas, electric, telephone, drainage and other utility equipment,
facilities and services required by law or necessary for the operation of the
Leased Improvements are installed and connected, and no notice has been received
by the Company regarding the termination or material impairment of any such
service. All equipment and fixtures associated with the Leased Improvements have
been properly maintained in accordance with industry standards and are in good
operating condition and repair. To the knowledge of the Company, all necessary
easements exist and are in full force and effect. The Leased Real Property has
access, in accordance with past practice, to and from a public right of way or
road dedicated for public use and no notice has been received by the Company
relating to the termination or impairment of such access (including applicable
parking requirements).
3.12 PERSONAL PROPERTY LEASES. The Company is not a party to any lease
of personal or movable property.
3.13 CONTRACTS. Schedule 3.13 is a correct and complete list of every
Material Contract, correct and complete copies of which previously have been
furnished to Buyer (except for oral contracts, written descriptions in detail of
which have been previously furnished to Buyer). Each Material Contract is
enforceable against the Company and against any third parties in accordance with
its terms. The Company is not in default, and no event has occurred which with
the giving of notice or the passage of time or both would constitute a default
by the Company, under any Material Contract. The Company has performed all
obligations required to
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be performed by it under the Material Contracts and, to the knowledge of the
Company, no other party to the Material Contracts is in default, and no event
has occurred which with the giving of notice or the passage of time or both
could constitute a default by any other party to any such Material Contract
under any of such Material Contracts. The Company is not a party to any Material
Contract containing late penalties or loss provisions. For purposes of this
Agreement, the term "MATERIAL CONTRACTS" shall mean all contracts, agreements,
instruments, purchase orders, relationships or commitments, written or oral,
arising out of or related to the Business, to which the Company is a party or by
which the Company or any of the Assets are bound, including, without limitation,
those which (i) have or are reasonably expected to require aggregate payments to
or by the Company in excess of $25,000, (ii) have a term or effective period
longer than one (1) year in duration, (iii) incur or guaranty any obligation for
borrowed money or otherwise (other than endorsements made for collection in the
ordinary course of business), (iv) are license or royalty agreements, (v) are
non- disclosure or confidentiality agreements, (vi) are agreements relating to
the ownership of or investments in any business or enterprise, including
investments in joint ventures and minority equity investments, (vii) are powers
of attorney or other similar agreements or grant of agency or (viii) are
contracts or agreements prohibiting the Company from freely engaging in any
business or competing anywhere in the world.
3.14 PERSONAL PROPERTY. Schedule 3.14 is a true and complete list of
all trucks, automobiles, machinery, equipment, furniture, supplies, tools, dies,
fixtures, patterns, drawings, test equipment and all other tangible or
intangible personal property, rights and assets owned or leased by, in the
possession of, or used by the Company in connection with the Business (other
than Excluded Assets) with a current fair market value in excess of $25,000
individually and, with respect to similar or related properties or assets,
$25,000 in the aggregate, which list indicates the location of such items, and
any Liens imposed thereon.
3.15 INTELLECTUAL PROPERTY.
(a) Schedule 3.15 sets forth a list and a description of all
Proprietary Rights of the Company other than trade secrets and, in each
instance, immaterial Proprietary Rights arising in the ordinary course of
business. Except as set forth on Schedule 3.15, all of the Proprietary Rights
are valid, in good standing and in full force and effect, and all applications
for registrations or patents are pending and in good standing, and to the
knowledge of the Company are all without challenge of any kind. The Company is
not aware of any facts or circumstances adversely impacting the patentability,
validity, registerability or enforceability of any of the Proprietary Rights.
Except as set forth on Schedule 3.15, the Company owns the entire right, title
and interest in and to the Proprietary Rights without qualification, limitation,
burden or encumbrance of any kind.
(b) Complete and accurate copies of all Proprietary Rights other
than trade secrets and, in each instance, immaterial Proprietary Rights arising
in the ordinary course of
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business, including, but not limited to, patents, patent rights, trademarks,
trade names, service marks and copyrights and registrations, applications or
deposits therefor, registered assumed name filings and licenses set forth on
Schedule 3.15 have been delivered to Buyer by the Company.
(c) Except as set forth on Schedule 3.15, the Company owns all of
the Proprietary Rights or has under valid agreement, the royalty-free, perpetual
right to make, use and sell, and to sublicense others to make, use and sell any
items, products or processes covered by any of the Proprietary Rights without
restriction. Except as set forth on Schedule 3.15: (i) the Company's operation
of the Business prior to the Closing (other than possibly in research and
development activities) does not give rise to and has not given rise to any
infringement of the intellectual property rights of any third party; (ii) no
claim or, to the Company's knowledge, threat of any infringement has been made
or implied in respect of the representations set forth in subparagraph (i)
above; (iii) no proceedings are pending or, to the Company's knowledge,
threatened against the Company which challenges the validity or ownership of any
patent, patent right, trademark, trade name, service mark or copyright or the
ownership of any of the Proprietary Rights; and (iv) there is no infringing
commercial use of any Proprietary Rights by any third parties. Copies of all
legal opinions, if any, (i) questioning the validity of any of the Company's
Proprietary Rights or commenting adversely upon the patentability, validity,
registerability, or enforceability of any to the Proprietary Rights or (ii)
commenting upon the infringement or possible infringement of any intellectual
property rights of any third parties by the Company have been delivered to
Buyer, along with written summaries of any oral opinions received by the Company
relating to the Proprietary Rights. After the Closing, the Company shall make
available to Buyer all other correspondence and memoranda between the Company
and its intellectual property counsel relating to Proprietary Rights and any
potential infringement of intellectual property rights of third parties after
the Closing and shall not remove such materials from their current location at
the Company's offices. The Company has not licensed, attempted to license,
collected royalties on or attempted to collect royalties on any patent beyond
such patent's expiration date.
3.16 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 3.16, the Company has not
maintained, sponsored, adopted, made contributions to or obligated itself to
make contributions to or to pay any benefits or grant rights under or with
respect to any "Employee Pension Benefit Plan" (as defined in Section 3(2) of
ERISA), "Employee Welfare Benefit Plan" (as defined in Section 3(1) of ERISA),
"Multi-Employer Plan" (as defined in Section 3(37) of ERISA), pension plan, plan
of deferred compensation, medical plan, life insurance plan, long-term
disability plan, dental plan or other plan providing for the welfare of any of
the employees or former employees or beneficiaries thereof of the Company,
personnel policy (including, but not limited to, vacation time, holiday pay,
bonus programs, moving expense reimbursement programs and sick leave), excess
benefit plan, bonus or incentive plan (including, but not limited to, stock
options, restricted stock, stock bonus and deferred bonus plans), salary
reduction agreement, change-of-control
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agreement, employment agreement, consulting agreement or any other benefit,
program or contract (collectively, "EMPLOYEE BENEFIT PLANS"), whether or not
written or pursuant to a collective bargaining agreement, which could give rise
to or result in the Company having any material debt, liability, claim or
obligation of any kind or nature, whether accrued, absolute, contingent, direct,
indirect, known or unknown, perfected or inchoate or otherwise and whether or
not due or to become due unless properly recorded on the Financial Statements or
unless such obligation or liability arose after the Closing Date Balance Sheet
Date in the ordinary course of business.
(b) There has been no waiver (or application for a waiver) of the
minimum funding standards imposed by Section 412 of the Code with respect to any
Employee Benefit Plan other than any multi-employer plans, and there are no
facts or circumstances that would materially change the funded status of any
such Employee Benefit Plan other than any multi-employer plans. No asset of the
Company is subject to any lien under ERISA or the Code. The Company (i) has not
incurred any liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203, respectively, of
ERISA) from any Employee Benefit Plan subject to Title IV of ERISA which is a
"multi-employer plan" (as such term is defined in Section 3(37) of ERISA), and
no such liability has been asserted; and (ii) is not bound by any contract or
agreement or has any obligation or liability described in Section 4204 of ERISA.
(c) Each Employee Benefit Plan other than any multi-employer plan
that is intended to be qualified under Section 401(a) of the Code has received a
determination from the Internal Revenue Service that such Employee Benefit Plan
is so qualified, and nothing has occurred since the date of such determination
that could adversely affect the qualified status of such Employee Benefit Plan.
No Employee Benefit Plan is a multi-employer plan or is subject to Title IV of
ERISA.
(d) Each of the Employee Benefit Plans other than any
multi-employer plan and all related trusts, insurance contracts and funds have
been maintained, funded and administered in material compliance with their terms
and the terms of any applicable collective bargaining agreement, and in
compliance with the applicable provisions of ERISA, the Code, and any other
applicable laws. With respect to each Employee Benefit Plan, all required
payments, premiums, contributions, distributions, or reimbursements for all
periods ending prior to or as of the date hereof have been made or properly
accrued.
(e) Neither the Company nor any other "disqualified person"
(within the meaning of Section 4975 of the Code) or any "party in interest"
(within the meaning of Section 3(14) of ERISA) has engaged in any "prohibited
transaction" (within the meaning of Section 4975 of the Code or Section 406 of
ERISA) with respect to any of the Employee Benefit Plans other than any
multi-employer plans which could subject any such Employee Benefit Plans, the
Company or any officer, director or employee of the Company to a penalty or tax
under Section 502(i) of ERISA or Section 4975 of the Code.
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(f) To the knowledge of the Company, other than any multi-employer
plan, each Employee Benefit Plan which is subject to the health care
continuation requirements of Part 6 of Subtitle B of Title I of ERISA or Section
4980B of the Code ("COBRA") has been administered in material compliance with
such requirements. No Employee Benefit Plan provides medical or life or other
welfare benefits to any current or future retired or terminated employee (or any
dependent thereof) of the Company other than as required pursuant to COBRA or
applicable state law.
(g) With respect to each Employee Benefit Plan other than any
multi-employer plans, the Company has provided Buyer with true, complete and
correct copies of (to the extent applicable): (i) all documents pursuant to
which the Employee Benefit Plan is maintained, funded and administered
(including the plan and trust documents, any amendments thereto, the summary
plan descriptions, and any insurance contracts or service provider agreements);
(ii) the three most recent annual reports (IRS Form 5500 series) filed with the
Internal Revenue Service (with applicable attachments); and (iii) the most
recent determination letter, if any, received from the Internal Revenue Service.
(h) The Company does not have any liability (or potential
liability, including potential liability under, because of another entity's
participation in a defined benefit plan or multi- employer plan) with respect to
any "employee benefit plan" (as defined in Section 3(3) of ERISA) solely by
reason of being treated as a single employer under Section 414 of the Code with
any trade, business or entity other than the Company.
3.17 EMPLOYEES. Schedule 3.17 is a complete and correct list setting
forth (i) the names and current compensation rate and compensation of all
individuals presently employed by the Company on a salaried basis whose current
annual compensation is in excess of $25,000 and (ii) the names and total annual
compensation for all independent contractors who render services on a regular or
seasonal basis to the Company whose current annual compensation is in excess of
$25,000. Except as set forth on Schedule 3.17, no person listed thereon has
received any bonus or increase in compensation since and there has been no
"general increase" in the compensation or rate of compensation payable to any
such employees since the Closing Date Balance Sheet Date nor since such date has
there been any promise to the employees listed on Schedule 3.17, orally or in
writing, of any bonus or increase in compensation, whether or not legally
binding.
3.18 LABOR AND EMPLOYMENT MATTERS. Except as set forth on Schedule
3.18: (i) the Company is not party to or bound by any collective bargaining
agreement; (ii) to the knowledge of the Company, no executive or manager of the
Company is a party to any confidentiality, non- competition, proprietary rights
or other such agreement between such employee and any other person other than
the Company that would be material to the performance of such employee's
employment duties, or the ability of the Company to conduct its business in the
ordinary course of business; (iii) no labor organization or group of employees
has filed any representation petition
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or made any written demand for recognition; (iv) no organizing or
decertification efforts are underway or, to the knowledge of the Company,
threatened; (v) since January 1, 1994, no labor strike, work stoppage, slowdown,
or other material labor dispute has occurred, and none is underway or, to the
knowledge of the Company, threatened; (vi) there is no employment-related charge
(including, but not limited to, an unfair labor practice charge), complaint,
grievance, investigation, inquiry or obligation of any kind, pending or, to the
knowledge of the Company, threatened, in any forum, relating to an alleged
violation or breach by the Company (or its officers or directors) of any law,
regulation or contract; (vii) all amounts due or accrued for all salary, wages,
bonuses, commissions, vacation with pay, pension benefits or other employee
benefits as of the Closing Date Balance Sheet Date are reflected in the Closing
Date Balance Sheet; (viii) no employee of the Company has any agreement as to
length of notice or severance payment required to terminate his or her
employment, other than such as results by law from the employment of an employee
without an agreement as to notice or severance; and (ix) the Company will not
have any material liability under any benefit or severance policy, practice,
agreement, plan, or program which exists or arises, or may be deemed to exist or
arise, under any applicable law or otherwise, as a result of the transactions
contemplated hereunder. With respect to the transactions contemplated herein,
any notice required under any law or collective bargaining agreement has been,
or prior to Closing will be, given, and all bargaining obligations with any
employee representative have been, or prior to the Closing will be, satisfied.
Within the past three (3) years, the Company has not implemented any plant
closing or mass layoff of employees as those terms are defined in the Worker
Adjustment and Retraining Notification Act of 1988, as amended, or any similar
foreign, state or local law, regulation or ordinance ("WARN ACT").
3.19 WORKERS COMPENSATION. There have been no expenses, obligations,
duties or liabilities relating to any claims by employees and former employees
(including dependents and spouses) of the Company or any Person with whom the
Company constitutes all or part of a controlled group (as defined in Section
4.14 of the Code) ("PLAN AFFILIATE") (or predecessors) since the Closing Date
Balance Sheet Date for (a) costs, expenses and other liabilities under any
workers compensation laws in the United States, regulations, requirements or
programs and (b) any other medical costs and expenses. Except as set forth on
Schedule 3.19, to the Company's knowledge no claims, injuries, fact, event or
condition exists which would give rise to a material claim (individually or in
the aggregate) by employees and former employees (including dependents and
spouses) of the Company or Plan Affiliate under any United States workers
compensation laws, regulations, requirements or programs.
3.20 SUPPLIERS. Schedule 3.20 is a complete and correct list of the ten
(10) largest suppliers to the Company (in terms of the Company's purchases from
such suppliers during the two (2) most recently completed fiscal years) of key
materials and services and commodities, exclusive of utility services. In the
last twelve (12) months, no such supplier has canceled or otherwise terminated,
or threatened to cancel or terminate, its relationship with the Company. The
Company has received no written notice, nor does the Company have knowledge that
any
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such supplier intends to cancel or otherwise adversely modify its relationship
with the Company on account of the acquisition of the Assets by Buyer or
otherwise.
3.21 CUSTOMERS. Schedule 3.21 is a complete list by dollar volume of
sales made or services provided during the two (2) most recently completed
fiscal years, to the ten (10) largest customers of the Company. Except as set
forth on Schedule 3.21, in the last twelve (12) months, no customer has canceled
or otherwise terminated, or threatened to cancel or otherwise terminate, its
relationship with the Company, or reduced, or threatened to reduce, its business
with the Company. The Company has received no written notice nor does the
Company have any knowledge that any such customer intends to cancel or otherwise
adversely modify its relationship with the Company.
3.22 DISTRIBUTORS AND REPRESENTATIVES. Schedule 3.22 is a complete list
of all distributors, representatives and agents for the sale of the products of
the Business made during the two (2) most recently completed fiscal years and
all distributors, representatives and agents to whom the Company has given any
exclusive rights with respect to territories or products in connection with the
Business, indicating in each case the existing contractual arrangements, if any,
with such distributor, representative or agent. Except as set forth on Schedule
3.22, in the last twelve (12) months, there has been no termination of any
independent distributor, wholesaler, sales representative or agent relationship,
nor has any present independent distributor, wholesaler, sales representative or
agent indicated any intention to terminate or materially change the terms of its
relationship with the Company or reduce future purchases from the Company.
3.23 AFFILIATE TRANSACTIONS. Schedule 3.23 sets forth the parties to
and the date, nature and amount of each transaction involving the transfer of
any cash, property or rights to or from the Company from, to or for the direct
or indirect benefit of any Affiliate or former Affiliate of the Company
("AFFILIATE TRANSACTIONS") since January 1, 1998. Except as set forth on
Schedule 3.23, no officer, director, employee, stockholder or Affiliate or any
entity in which any such Person or individual is an officer, director or the
owner of fifteen percent (15%) or more of the beneficial ownership interests, is
a party to any agreement, contract, commitment or transaction with the Company
or has any interests in any property used by the Company. Each Affiliate
Transaction was effected on terms equivalent to those which would have been
established in an arms-length negotiation, except as disclosed on Schedule 3.23.
Except as set forth in Schedule 3.23, neither the Company nor any of its
Affiliates has any direct or indirect interest in any competitor.
3.24 INSURANCE POLICIES. Schedule 3.24 contains a correct and complete
list and description of all present insurance policies owned by the Company
pertaining to the Business or its assets. The present insurance policies are in
full force and effect, and the Company is not in default under any of them. The
Company has received no written notice of cancellation or intent to cancel or
increase premiums with respect to present insurance policies nor, to the
knowledge of the Company, is there any basis for any such action.
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3.25 BANK ACCOUNTS. Schedule 3.25 is a complete and correct list of
each bank in which the Company has an account, safe deposit box, or lockbox
pertaining to the Business, the number of each such account or box and the names
of all persons authorized to draw thereon or to have access thereto.
3.26 TAXES.
(a) The Company has filed all Tax Returns that it is required to
have filed prior to the date hereof, including any extension of time for the
filing thereof, and such returns are true and correct in all material respects
and have been prepared in a manner consistent with prior periods. All Taxes owed
as of the Closing Date Balance Sheet Date by the Company (whether or not shown
on any Tax Return) have been paid or are accrued for on the Closing Date Balance
Sheet in accordance with GAAP consistent with past practice. All Taxes owed by
the Company will be paid or accrued on the Company's books and records (in
accordance with GAAP and the past custom and practice of the Company) for the
ordinary course transactions of the Company through the Closing Date.
(b) There are no security interests on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax.
(c) There are no agreements, waivers or other arrangements
providing for extension of filing with respect to any Tax Return. There are no
unexpired waivers of any statute of limitations with respect to any Taxes.
(d) No claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(e) Except for amounts which have been withheld and not paid, but
which have been accrued on the Company's books in the ordinary course of
business, the Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(f) The Company is not a party to any action or proceedings by any
governmental authority for the collection or assessment of Taxes.
(g) There is no dispute or claim concerning any Tax liability of
the Company either (i) claimed or raised by any authority in writing or (ii) as
to which any of the stockholders and the directors and officers (and employees
responsible for Tax matters) of the Company has knowledge based upon personal
contact with any agent of such authority.
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(h) The Company has delivered to Buyer correct and complete copies of
all federal and state income and sales Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Company since
December 31, 1997.
(i) The Company has not made any payments, is not obligated to make
any payments, nor is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
ss.280G. The Company is not a party to any Tax allocation or sharing agreement.
The Company has no liability for the Taxes of any Person under Reg. ss.1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. The Company has not been a United States
real property holding corporation within the meaning of Code ss.897(c)(2) during
the applicable period specified in Code ss.897(c)(1)(A)(ii).
(j) The Company has not made any change in any method of accounting
which could give rise to the recognition of income or to Tax liability following
the date hereof. The Company has not made any closing adjustment in connection
with an audit which could give rise to the recognition of income or to Tax
liability following the date hereof. The Company has not entered into any
installment sale transaction which could give rise to the recognition of income
or to Tax liability following the date hereof.
(k) The unpaid Taxes of the Company did not, as of the Closing Date
Balance Sheet, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Closing Date Balance Sheet, and do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing its Tax
Returns.
3.27 LITIGATION. Except as set forth on Schedule 3.27, there are no claims,
counter- claims, actions, suits, grievances, arbitrations, orders, proceedings
or, to the knowledge of the Company, investigations pending or, to the knowledge
of the Company, threatened, against or involving the Company (or pending or, to
the knowledge of the Company, threatened against any of the officers, directors
or key employees of the Company with respect to their business activities on
behalf of the Company), the Assets, any Employee Benefit Plan, or relating to
the transactions contemplated hereby, before any court, agency, arbitrator or
other governmental body; nor, to the knowledge of the Company, is there any
reasonable basis for any such claim, action, suit, proceeding or governmental
investigation. Except as set forth in Schedule 3.27, the Company is not directly
subject to or affected by any order, judgment, decree or ruling of, or
settlement enforceable in, any court or governmental agency. Except as set forth
on Schedule 3.27, the Company is not engaged in any legal action to recover
monies due it or for damages sustained by it.
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3.28 PRODUCT WARRANTIES. Except as set forth on Schedule 3.28, all products
designed, manufactured, sold, serviced, leased or distributed by the Company
(the "PRODUCTS") at any time on or prior to the date hereof have been in
conformance with all applicable contractual commitments and all express or
implied warranties of the Company, and no liability exists for replacement
thereof, recall or other damages in connection with such sales or deliveries at
any time prior to the date hereof (except as may be reflected or reserved for in
the Financial Statements). Except as set forth on Schedule 3.28, the Company has
not been notified in writing of any claims for and, to the knowledge of the
Company, there are no threatened claims for any product returns, recalls,
warranty obligations or product services relating to any of its Products
(including, without limitation, information products) or services.
3.29 DEFECTS IN PRODUCTS OR DESIGNS; PRODUCT SAFETY.
(a) There has been no pattern of defects in the design, construction,
manufacturing or installation of any Product by the Company or its employees or
agents in connection with the Business that would adversely affect the
performance or quality of such Product. Each Product has been designed,
manufactured, packaged and labeled in compliance with all regulatory,
engineering, industrial and other codes applicable thereto and the Company has
received no written notice of any alleged noncompliance with any such code. Each
Product advertised or represented as being rated or approved by a rating
organization, such as Underwriters' Laboratories or other similar organizations,
complies with all conditions of such rating or approval. The amounts reflected
as product liability reserves in the Financial Statements are sufficient to
satisfy any claims, whether known or unknown, fixed or contingent, which have
been or may be made against the Company with respect to product liability
claims.
(b) The Company has not been required to file, nor has it filed, a
notification or other report with the United States Consumer Product Safety
Commission or any other governmental agency concerning actual or potential
hazards with respect to any Product.
3.30 ENVIRONMENTAL AND SAFETY REQUIREMENTS. Except as set forth on Schedule
3.30:
(a) To the knowledge of the Company, the Company has complied and is
in compliance with all applicable Environmental and Safety Requirements, and the
Company possesses all required Permits and has filed all notices or
applications, required thereby.
(b) (i) The Company has never generated, transported, treated, stored,
disposed of, arranged for the disposal of or otherwise handled any Hazardous
Materials at any site, location or facility owned or operated or used by the
Company in the Business or at any offsite location and (ii) no Hazardous
Materials are present on, in, under or emanating from the Leased Real Property,
and the Leased Real Property contains no Hazardous Materials except as, for
either (i) or (ii), would not result in a condition in violation of, or any
liability under, any applicable
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Environmental and Safety Requirements. To the knowledge of the Company, there
are no underground storage tanks on the Leased Real Property.
(c) The Company has not been subject to, nor has the Company received
any notice (written or oral) of, any private, administrative or judicial action,
order, or investigation or any notice (written or oral) of any intended private,
administrative, or judicial action, order or investigation relating to any
violation of Environmental and Safety Requirements or the presence or alleged
presence of Hazardous Materials in, under, upon, or emanating from any real or
immovable property now or previously owned or used by the Company in the
Business or any offsite location, and, to the knowledge of the Company, there is
no reasonable basis in fact or law for any such notice or action; and there are
no pending or threatened actions, investigations or, to the knowledge of the
Company, orders or proceedings (or notices of potential actions or proceedings)
from any governmental agency or any other entity regarding any matter relating
to Environmental and Safety Requirements.
(d) To the knowledge of the Company, no facts, events or conditions
with respect to the past or present operations or facilities of the Company, its
assets or the Business exist which would reasonably be expected to interfere
with or prevent continued compliance with, or would give rise to any common law
or statutory liability or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation against or involving its assets or the
Business under any Environmental and Safety Requirement based on any such fact,
event or circumstance, including, without limitation, liability for cleanup
costs, personal injury or property damage.
(e) There are no engineering or environmental studies with respect to
the Company, the Leased Real Property or the Business of which the Company has
possession or control.
(f) For purposes of this Agreement, "ENVIRONMENTAL AND SAFETY
REQUIREMENTS" means all federal, state and local or municipal laws, rules,
regulations, ordinances, orders, statutes and requirements, and all common law,
relating to public health and safety, worker health and safety, pollution or
protection of the environment, all as amended or hereafter amended. For purposes
of this Agreement, "HAZARDOUS MATERIALS" means (A) hazardous materials,
hazardous substances, extremely hazardous substances or hazardous wastes, as
those terms are defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq., and any other
Environmental and Safety Requirements; (B) petroleum, including, without
limitation, crude oil or any fraction thereof which is liquid at standard
conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds
per square inch absolute); (C) any radioactive material, including, without
limitation, any source, special nuclear, or by-product material as defined in 42
U.S.C. ss.2011 et seq.; (D) asbestos in any form or
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condition; and (E) any other material, substance or waste to which liability or
standards of conduct may be imposed under any Environmental and Safety
Requirements.
3.31 CONDUCT OF THE BUSINESS. Except as set forth on Schedule 3.31, since
the Closing Date Balance Sheet Date, the Company has conducted the Business only
in the ordinary course of business consistent with past custom and practice, and
has incurred no liabilities other than in the ordinary course of business
consistent with past custom and practice and there has been no Material Adverse
Change. Without limitation of the foregoing and except as set forth on Schedule
3.31, since the Closing Date Balance Sheet Date, the Company has not:
(a) accelerated or delayed the manufacture, shipment or sale of any
product in a manner inconsistent with past practices;
(b) sold, assigned or transferred any asset or property right (other
than inventory in the ordinary course of business), or mortgaged, pledged or
subjected such asset or property right to any Lien, charge or other restriction,
except for Liens for current property taxes not yet due and payable;
(c) sold, assigned, transferred, abandoned or permitted to lapse any
licenses or permits which are required for the operation of the Company, or any
of the Proprietary Rights or other intangible assets, or disclosed any material
proprietary confidential information to any person, granted any license or
sublicense of any rights under or with respect to any Proprietary Rights or
other intangible assets;
(d) made or granted any increase in, or amended (except as may be
required by law) or terminated, any existing plan, program, policy or
arrangement, including, without limitation, any Employee Benefit Plan or
arrangement or adopted any new Employee Benefit Plan or arrangement, or entered
into, modified or terminated any new collective bargaining agreement or
multiemployer plan;
(e) undertaken any employee layoffs that could implicate the WARN Act,
as defined in SECTION 3.18 hereof;
(f) conducted the cash management customs and practices (including the
timing of collection of receivables and payment of payables and other current
liabilities) or maintained the books and records of the Company other than in
the usual and ordinary course of business consistent with past custom and
practice;
(g) made any loans or advances to, or guarantees for the benefit of,
or entered into any transaction with any stockholder, employee, officer or
director of the Company other than ordinary course advances for travel and
entertainment;
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(h) suffered any extraordinary loss, damage, destruction or casualty
loss to the Business or waived any rights of value in excess of $25,000, whether
or not covered by insurance and whether or not in the ordinary course of
business;
(i) received notification that any customer or supplier will stop or
decrease in any material respect the rate of business done with the Company;
(j) issued any security of the Company or granted any rights to
purchase any securities of the Company;
(k) declared, set aside or paid any dividend or distribution of cash
or other property or purchased, redeemed or otherwise acquired any shares of the
Company's capital stock, or made any other payments to any stockholder;
(l) amended or authorized the amendment of the governing documents of
the Company;
(m) entered into any other material transaction, other than in the
ordinary course of business consistent with past custom and practice; or
(n) committed to any of the foregoing.
3.32 ABSENCE OF QUESTIONABLE PAYMENTS. Neither the Company nor, to the
knowledge of the Company, any manager, officer, agent, employee or other Person
acting on behalf of the Company has (a) used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 104 of the Foreign Corrupt Practices Act of 1977 (15 U.S.C. ss.79dd-2),
as amended, or any other applicable foreign, federal or state law; or (b)
accepted or received any unlawful contributions, payments, expenditures or
gifts.
3.33 GOVERNMENT CONTRACTS. Except as set forth on Schedule 3.33, the
Company is not party to, or bound by the provisions of, any contract (including
purchase orders, blanket purchase orders and agreements and delivery orders)
with the United States government or any department, agency, or instrumentality
thereof or any state or local governmental agency or authority.
3.34 CORPORATE NAME; BUSINESS LOCATION. During the past ten (10) years,
except as set forth on Schedule 3.34, the Company has not been known as or used
any corporate, fictitious or trade name except "THM Biomedical, Inc." Except as
set forth on Schedule 3.34, the Company has not been the surviving corporation
of a merger or consolidation nor has it acquired
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all or substantially all of the assets of any Person. During the past ten (10)
years, the Company has not had an office or place of business other than as
listed on Schedule 3.34.
3.35 DISCLOSURE. This Agreement, the Company Transaction Documents, the
schedules and exhibits hereto, and the financial statements and other materials
referred to herein as having been delivered to Buyer, do not contain any untrue
statement of a material fact and do not omit to state a material fact necessary
in order to make the statements contained therein or herein not misleading in
light of the circumstances under which they were made. There is no fact known to
the Company, Thomas Maas, William Maas and/or John Brekke relating to the
business, affairs, assets, prospects, operations, employee relations or
condition, financial or otherwise, of the Company that may materially adversely
affect the same which has not been disclosed in writing to Buyer by the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has full power and authority to execute and deliver this Agreement and the
other Buyer Transaction Documents, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
4.2 AUTHORIZATION. The execution and delivery of this Agreement and the
Buyer Transaction Documents, and the performance by Buyer of its obligations
hereunder and thereunder, have been duly authorized by all necessary corporate
action. This Agreement and the other Buyer Transaction Documents constitute the
legal, valid and binding obligations of Buyer enforceable against Buyer in
accordance with their respective terms.
4.3 NO VIOLATION. The execution, delivery and performance by Buyer of this
Agreement and the other Buyer Transaction Documents and the consummation of the
transactions contemplated herein and therein will not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under, or in any manner release any party thereto from any
obligation under, any mortgage, note, bond, contract, indenture, agreement,
license or other instrument or obligation of any kind or nature to which Buyer
is now a party or by which any of its properties or assets may be bound;
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(b) violate any order, writ, injunction regulation, statute or decree
of any court, administrative agency or governmental body specifically applicable
to Buyer; or
(c) violate any provision of the governing documents of Buyer.
4.4 NO CONSENT REQUIRED. No consent, approval, order or authorization of,
or declaration, filing or registration with, any person or governmental
authority is required to be made or obtained by Buyer in connection with the
authorization, execution, delivery or performance of this Agreement, the other
Buyer Transaction Documents or the transactions contemplated hereby and thereby.
4.5 DISCLOSURE. This Agreement, the Buyer Transaction Documents, the
schedules and exhibits hereto, and the financial statements and other materials
referred to herein as having been delivered to the Company, do not contain any
untrue statement of a material fact and do not omit to state a material fact
necessary in order to make the statements contained therein or herein not
misleading in light of the circumstances under which they were made. There is no
fact known to Buyer relating to the business, affairs, assets, prospects,
operations, employee relations or condition, financial or otherwise, of Buyer
that may materially adversely affect the same which has not been disclosed in
writing to the Company by Buyer.
ARTICLE V
CLOSING
5.1 CLOSING. The transactions that are the subject of this Agreement shall
be consummated at a closing (the "CLOSING") which shall be held at the offices
of Katten Muchin Zavis, 525 West Monroe Street, Chicago, Illinois 60661 (or at
such other place as the parties may mutually agree), on a date reasonably
designated by the Buyer (the "CLOSING DATE"). Notwithstanding the foregoing, the
transactions that are the subject of this Agreement shall be deemed to have
occurred as of the close of business on August 31, 2000.
5.2 DELIVERIES BY THE COMPANY. At the Closing, the Company shall execute
and deliver to Buyer:
(a) Instruments of Conveyance. The Bill of Sale in the form attached
hereto as Exhibit 1.3(a).
(b) Opinion of Counsel. An opinion of counsel of the Company, dated as
of the Closing Date, in the form of Exhibit 5.2(b) attached hereto.
(c) Certificate of Thomas Maas, William Maas and John Brekke;
Resolutions. A certificate of Thomas Maas, William Maas and John Brekke
certifying as to (i) the accuracy
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and completeness of the representations and warranties of the Company set forth
herein; (ii) resolutions of the Board of Directors and Stockholders of the
Company authorizing the execution and delivery of this Agreement and the Company
Transaction Documents and the performance of the transactions contemplated
hereby and thereby; (iii) a certificate of good standing of the Company, dated
as of a date not more than fifteen (15) days prior to the Closing Date, issued
by the Secretary of State of Minnesota; (iv) its By-laws and (v) its Articles of
Incorporation, certified by the Secretary of State of the State of Minnesota.
(d) Third Party Consents. Third party consents in the form attached
hereto as Exhibit 5.2(d) for those contracts identified on Schedule 3.6.
(e) Non-Competition Agreements. The Non-Competition Agreements,
executed by each of Thomas Maas and William Maas.
(f) Employment Agreement. The Employment Agreement, executed by John
Brekke.
5.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to the
Company:
(a) Instruments of Assumption. The Bill of Sale, executed by Buyer.
(b) Initial Cash Payment. The Initial Cash Payment wired to the bank
account(s) designated by the Company.
(c) Notes. The Notes, executed by Buyer.
(d) Resolutions. Resolutions of Buyer authorizing the execution and
delivery of this Agreement and the Buyer Transaction Documents and the
performance of the transactions contemplated hereby and thereby certified by the
Secretary of Buyer.
(e) Other Agreements. The Non-Competition Agreements and the
Employment Agreement, each executed by KNSY.
ARTICLE VI
COVENANTS AFTER CLOSING
6.1 THE COMPANY'S ACCESS TO INFORMATION. After the Closing Date, Buyer
will give, or cause to be given, to the Company, its officers, directors and
stockholders and their representatives, during normal business hours, such
reasonable access to the personnel, properties, titles, contracts, books,
records, files and documents and at the Company's expense copies of titles,
contracts, books, records, files and documents as is necessary to allow the
Company and
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its officers, directors and stockholders to obtain information in connection
with the preparation and any audit of the Company's Tax Returns and any claims,
demands, other audits, suits, actions or proceedings by or against the Company
as the previous owners and operators of the Business. Buyer agrees to cooperate
fully with the Company after the Closing Date, at the Company's expense, with
respect to any claims, demands, tax or other audits, suits, actions and
proceedings by or against the Company as the previous owners and operators of
the Business.
6.2 INTENTIONALLY OMITTED.
6.3 LIABILITY FOR TAXES; RETENTION OF RECORDS. In accordance with SECTION
6.4, the Company shall indemnify and hold Buyer harmless from and against all
liabilities for Taxes imposed upon, or incurred by, the Company at any time or
attributable to the operation of the Business prior to the Closing Date. Buyer
and the Company shall retain all books, records and other data pertaining to Tax
matters for all open periods through the Closing Date. In particular, Buyer and
the Company shall retain all Tax Returns, schedules and work papers, and all
material records and other documents relating thereto with respect to the
operation of the Company prior to the Closing Date, until the expiration of the
statute of limitations (and, to the extent notified by Buyer or the Company, any
extensions thereof) of the respective Tax periods.
6.4 INDEMNIFICATION.
(a) Indemnification by the Company and the Stockholders. Subject to
the indemnification limits described under subparagraph 6.4(h) below, from and
after the Closing, the Company and the Stockholders, severally (based upon their
proportionate ownership of Company common stock set forth on Schedule 3.3) and
not jointly, agree to indemnify, defend and save Buyer, KNSY and their
Affiliates and Plan Affiliates, and each of their respective officers,
directors, employees, attorneys, agents, Employee Benefit Plans and fiduciaries,
plan administrators or other parties dealing with such plans (each, a "BUYER
INDEMNIFIED PARTY"), forever harmless from and against, and to promptly pay to a
Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any and all
liabilities, obligations, deficiencies, demands, claims, suits, actions, or
causes of action, assessments, losses, costs, expenses, interest, fines,
penalties, actual or punitive damages or costs or expense of any and all
investigations, proceedings, judgments, environmental analysis, remediations,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants and other experts) (individually and collectively, the
"LOSSES") sustained or incurred by any Buyer Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of the following:
(i) any misrepresentation or breach of a representation or
warranty made herein or in the Company Transaction Documents by the
Company;
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(ii) any non-compliance with or breach by the Company of any of
the covenants or agreements contained in this Agreement or the Company
Transaction Documents to be performed by the Company;
(iii) any liability or obligation of the Company or any assertion
against a Buyer Indemnified Party, arising out of or relating, directly or
indirectly, to any of the Excluded Liabilities; and
(iv) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon an alleged agreement between
claimant and the Company or any of its Affiliates.
(b) Indemnification by Buyer. From and after the Closing, Buyer agrees
to indemnify, defend and save the Company, its Affiliates, the Stockholders, and
the Company's officers, directors, employees, attorneys, agents and fiduciaries
(each, a "COMPANY INDEMNIFIED PARTY") forever harmless from and against, and to
promptly pay to a Company Indemnified Party or reimburse a Company Indemnified
Party for, any and all Losses sustained or incurred by any Company Indemnified
Party relating to, resulting from, arising out of or otherwise by virtue of any
of the following:
(i) any misrepresentation or breach of a representation or
warranty made herein or in the Transaction Documents by Buyer;
(ii) non-compliance with or breach by Buyer of any of the
covenants or agreements contained in this Agreement or the Buyer
Transaction Documents to be performed by Buyer;
(iii) any liability or obligation of Buyer or any assertion
against a Company Indemnified Party, arising out of or relating, directly
or indirectly, to any of the Assumed Liabilities;
(iv) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon any alleged agreement between the
claimant and Buyer; and
(v) any obligation of Buyer arising out of the conduct of the
Business after the Closing Date.
(c) Indemnification Procedure for Third Party Claims. In the event
that subsequent to the Closing any person or entity entitled to indemnification
under this Agreement (an "INDEMNIFIED PARTY") receives notice of the assertion
of any claim or of the commencement
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of any action or proceeding by any person or entity who is not a party to this
Agreement or an Affiliate of a party to this Agreement (including, but not
limited to, any domestic or foreign court or governmental authority, federal,
state or local) (a "THIRD PARTY CLAIM") against such Indemnified Party, against
which a party to this Agreement is required to provide indemnification under
this Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice together with a statement of any available information regarding
such claim (and attaching a copy of all papers served with respect to such
claim) to the Indemnifying Party within fifteen (15) days after learning of such
claim (or within such shorter time as may be necessary to give the Indemnifying
Party a reasonable opportunity to respond to such claim) (the "CLAIM NOTICE").
The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "DEFENSE NOTICE") within fifteen (15) days after receipt
from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("DEFENSE COUNSEL"), to conduct at its expense the defense against such
claim in its own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, and in the event the Indemnifying Party and the Indemnified
Party cannot agree upon such counsel within ten (10) days after the Defense
Notice is provided, then the Indemnifying Party shall propose an alternate
Defense Counsel, which shall be subject again to the Indemnified Party's
approval, provided that the Indemnifying Party shall be entitled to take such
action as is reasonable under the circumstances to protect its rights pending
agreement upon the selection of Defense Counsel. Notwithstanding the foregoing,
the Indemnifying Party shall not be entitled to assume control of a Third Party
Claim and shall pay the reasonable fees and expenses of counsel retained by the
Indemnified Party if the Third Party Claim seeks injunctive or other equitable
relief or if the Indemnified Party, in the Claim Notice, states that, based on
advice of counsel, it believes that its interests in the Third Party Claims are
or can reasonably be expected to be adverse to the interests of Indemnifying
Party.
(i) In the event that the Indemnifying Party shall fail to give
the Defense Notice within the time period described above, it shall be
deemed to have elected not to conduct the defense of the subject claim, and
in such event the Indemnified Party shall have the right to conduct such
defense in good faith and to compromise and settle the claim without prior
consent of the Indemnifying Party and such Indemnifying Party will be
liable for all costs, expenses, settlement amounts or other Losses paid or
incurred in connection therewith. If the Indemnifying Party is not entitled
to assume the defense of a Third Party Claim because of reasons set forth
in the last sentence of the preceding paragraph, the Indemnified Party may
not settle the Third Party Claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld, if
such settlement would lead to any liability or create any other obligation
of the Indemnifying Party.
(ii) In the event that the Indemnifying Party does deliver a
Defense Notice within the time period described above and thereby elects to
conduct the defense of the subject claim, the Indemnifying Party shall
diligently conduct such defense and the Indemnified Party will cooperate
with and make available to the Indemnifying Party such
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assistance and materials as it may reasonably request, all at the expense
of the Indemnifying Party, and the Indemnified Party shall have the right
at its expense to participate in the defense assisted by counsel of its own
choosing.
(iii) The Indemnifying Party may enter into any settlement of any
Third Party Claim or cease to defend against such claim; provided, however,
the Indemnifying Party may not enter into any settlement of any Third Party
Claim or cease to defend against such claim without the prior written
consent of the Indemnified Party if pursuant to or as a result of such
settlement or cessation, (A) injunctive or other equitable relief would be
imposed against the Indemnified Party, or (B) such settlement or cessation
would lead to liability or create any financial or other obligation on the
part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder.
(iv) Any final judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
It is understood and agreed that if the Indemnifying Party is the Company and/or
the Stockholders collectively for purposes of this paragraph (c) the
Stockholders' Representative shall be the agent of such persons respect to the
matters arising hereunder in accordance with the provisions of SECTION 7.16.
(d) Direct Claims. It is the intent of the parties hereto that all
direct claims by an Indemnified Party against a party hereto not arising out of
Third Party Claims shall be subject to and benefit from the terms of this
SECTION 6.4. Any claim under this SECTION 6.4 by an Indemnified Party for
indemnification other than indemnification against a Third Party Claim (a
"DIRECT CLAIM") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
thirty (30) calendar days within which to satisfy such Direct Claims, which
satisfaction shall, in the case of the Indemnifying Party being the Company and
the Stockholders, be in accordance with the offset provisions of SECTION 6.4(H).
If the Indemnifying Party disputes the Direct Claim asserted by the Indemnified
Party, such dispute shall be resolved in accordance with the provisions of
SECTION 7.8 herein. If the Indemnifying Party does not so respond within such
thirty (30) calendar day period, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnified Party will be free to pursue
such remedies as may be available to the Indemnified Party under this SECTION
6.4 or otherwise.
(e) Failure to Give Timely Notice. A failure by an Indemnified Party
to give timely, complete or accurate notice as provided in SECTION 6.4(C) will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under
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its applicable insurance coverage or was otherwise damaged as a result of such
failure to give timely notice.
(f) Survival of Representations and Warranties: Time Limits on
Indemnification Obligations. All of the representations and warranties set forth
in this Agreement or in any of the other Transaction Documents shall survive the
execution and delivery of this Agreement and the consummation of the
transactions until they expire and terminate on the fourth (4th) anniversary of
this Agreement, except the representations and warranties contained in (i)
SECTION 3.1 (AUTHORITY), SECTION 3.2 (ORGANIZATION AND QUALIFICATION) and
SECTION 3.9(A) (TITLE TO ASSETS) shall survive indefinitely, (ii) SECTION 3.26
(TAXES) shall survive until thirty (30) days after the expiration of all
applicable statutes of limitations (including extensions of said statutes) and
(iii) SECTION 3.15 (INTELLECTUAL PROPERTY) shall survive until the third (3rd)
anniversary of the date of this Agreement. In the event Buyer incurs a Loss (or
asserts that a Loss may result from a contingent or unliquidated claim) and a
claim is filed, prior to the end of such applicable period, the termination date
shall be extended until such claim is fully resolved and Buyer appropriately
indemnified for such Loss.
(g) Adjustment to Purchase Price. Any indemnification received under
SECTION 6.3 or this SECTION 6.4 shall be, to the extent permitted by law, an
adjustment to the Purchase Price.
(h) Indemnification Limits. The foregoing provisions of this SECTION
6.4 notwithstanding:
(i) the Company and the Stockholders shall not be liable under
the indemnification obligations set forth in SECTION 6.4(A)(I) of this
Agreement until, and then only to the extent that, the aggregate amount of
such indemnification obligation of the Company and the Stockholders exceeds
$110,000 (the "BASKET AMOUNT"); provided, however, that the Basket Amount
shall not apply to any indemnification arising under SECTION 6.4(A)(I) as a
direct or indirect result of any fraudulent acts committed by the Company,
or arising as a result of a breach of SECTION 3.7 (with regard to breaches
relating to the Closing Date Balance Sheet), SECTION 3.9(A) (TITLE TO
ASSETS), or SECTION 3.26 (TAXES);
(ii) with respect to all indemnification obligations of the
Company and the Stockholders other than for fraudulent acts committed by
the Company or arising as a result of a breach of SECTION 3.1 (AUTHORITY),
SECTION 3.2 (ORGANIZATION), SECTION 3.9(A) (TITLE TO ASSETS) and SECTION
3.26 (TAXES) the aggregate indemnification obligation of the Company and
the Stockholders shall not be greater than the remaining aggregate
Quarterly Payments owed the Stockholders pursuant to SECTION 2.1(B) (the
"CEILING AMOUNT") and the only source of recovery for such indemnification
obligations shall be to withhold payment of and offset amounts due under
the Notes severally payable to the
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Stockholders, which Buyer is hereby authorized to do, subject to the
provisions of SECTION 7.8;
(iii) the Ceiling Amount with respect to a breach of SECTION 3.15
shall be, notwithstanding the provisions of subparagraph (ii) above,
$4,500,000 (the "IP CEILING AMOUNT"), at all times during the three year
period ending on the third anniversary date of the Closing Date except that
the IP Ceiling Amount shall not apply with respect to a breach of SECTION
3.15 resulting, directly or indirectly, from any fraudulent acts committed
by the Company; and
(iv) Buyer shall not be liable under the indemnification
obligations set forth in SECTION 6.4(B)(I) of this Agreement after the
aggregate amount of such indemnification obligation of Buyer exceeds
$4,500,000 (the "BUYER INDEMNIFICATION CEILING AMOUNT"); provided, however,
that the Buyer Indemnification Ceiling Amount shall not apply to any
indemnification arising under SECTION 6.4(B)(I) as a direct or indirect
result of any fraudulent acts committed by Buyer.
6.5 RESTRICTIVE COVENANTS.
(a) Company's Acknowledgment. The Company agrees and acknowledges that
it is necessary that the Company undertake not to utilize its special knowledge
of the Business and its relationships with customers and suppliers of the
Company to compete with Buyer and the Company.
(b) Non-Compete. The Company hereby agrees that for a period
commencing on the Closing Date and ending five (5) years from the Closing Date
(the "RESTRICTED PERIOD"), the Company will not, directly or indirectly, as
agent, consultant, stockholder, manager, partner or in any other capacity, own,
operate, manage, control, engage in, invest in or participate in any manner in,
act as a consultant or advisor to, render services for (alone or in association
with any Person), or otherwise assist any Person that engages in or owns,
invests in, operates, manages or controls any venture or enterprise that
directly or indirectly engages or proposes to engage in the Business anywhere in
the world (the "TERRITORY").
(c) Non-Solicitation. Without limiting the generality of the
provisions of SECTION 6.5(B) above, the Company hereby agrees that during the
Restricted Period they will not, directly or indirectly, solicit, or participate
as agent, consultant, stockholder, manager, partner or in any other capacity in
any business which solicits, business from any Person which is or was a customer
or supplier of the Business during the three (3) year period preceding the date
of such solicitation, or from any successor in interest to any such Person for
the purpose of securing business or contracts related to the Business. In
addition, the Company hereby agrees that during the Restricted Period they will
not directly or indirectly buy or engage in any discussions with any acquisition
candidate with which the Company has engaged in discussions in the two (2) year
period preceding the Closing.
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(d) Confidential Information. During the term of this Agreement and
thereafter, the Company shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of Buyer, furnish, make
available or disclose to any third party or use for the benefit of the Company
or any third party, any Confidential Information. As used in this SECTION
6.5(D), "CONFIDENTIAL INFORMATION" shall mean any information relating to the
business or affairs of Buyer or the Business, and information relating to
financial statements, customer identities, potential customers, employees,
suppliers, servicing methods, equipment, programs, strategies and information,
analyses, profit margins or other proprietary information used by the Company or
the Buyer in connection with the Business; provided, however, that Confidential
Information shall not include any information which is in the public domain or
enters the public domain through no wrongful act on the part of the Company.
(e) Interference with Relationships. During the Restricted Period, the
Company shall not, directly or indirectly, as agent, consultant, stockholder,
manager, partner or in any other capacity without the prior written consent of
Buyer employ, or engage, recruit or solicit for employment or engagement, any
person who is employed or engaged by the Company on the date hereof and who is
employed by the Buyer following the Closing, or otherwise seek to influence or
alter any such person's relationship with Buyer.
(f) Blue-Pencil. If any court of competent jurisdiction shall at any
time deem the term of any particular restrictive covenant contained in this
SECTION 6.5 too lengthy or the Territory too extensive, the other provisions of
this SECTION 6.5 shall nevertheless stand, the Restricted Period shall be deemed
to be the longest period permissible by law under the circumstances and the
Territory shall be deemed to comprise the largest territory permissible by law
under the circumstances. The court in each case shall reduce the Restricted
Period and/or Territory to permissible duration or size.
(g) Property of the Business. All memoranda, notes, lists, records and
other documentation or papers (and all copies thereof), including such items
stored in computer memories, or microfiche or by any other means, which will
become Buyer's property (after the consummation of transactions contemplated by
this Agreement), shall become Buyer's property and shall be delivered to Buyer
promptly on the request of Buyer.
(h) Remedies. The Company acknowledges and agrees that the covenants
set forth in this SECTION 6.5 hereof are reasonable and necessary for the
protection of Buyer's business interests, that irreparable injury will result to
Buyer if the Company breaches any of the terms of this SECTION 6.5, and that in
the event of the Company's actual or threatened breach of any of the provisions
contained in this SECTION 6.5, Buyer will have no adequate remedy at law. The
Company accordingly agrees that in the event of any actual or threatened breach
by it of any of the provisions contained in this SECTION 6.5, Buyer shall be
entitled to such injunctive and other equitable relief, without the necessity of
showing actual monetary damages or posting of a bond, as may be deemed necessary
or appropriate by a court of competent jurisdiction. Nothing contained herein
shall be construed as prohibiting Buyer from pursuing any other remedies
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available to them for such breach or threatened breach, including the recovery
of any damages which it is able to prove.
6.6 NAME CHANGE. The Company shall, as soon as practicable after the
Closing, either (i) cease to use the name "THM Biomedical" and commence
dissolution proceedings, or (ii) change its legal name to a name dissimilar to
"THM Biomedical".
ARTICLE VII
MISCELLANEOUS
7.1 NOTICES, CONSENTS, ETC. Any notices, consents or other communication
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission with a
confirmation copy sent by overnight courier, in each case, to the parties at the
addresses as set forth below or at such other addresses as may be furnished in
writing.
(a) If to Buyer:
THM Acquisition Sub, Inc.
c/o Kensey Nash Corporation
55 East Uwchlan Avenue
Exton, Pennsylvania 19341
Fax No.: (610) 524-0265
Attention: Holly C. Harrity
with a copy to:
Katten Muchin Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Fax No.: (312) 902-1061
Attention: David R. Shevitz, Esq.
(b) If to the Company:
THM Biomedical, Inc.
c/o Lakeside Mills
325 Lake Avenue South
Suite 612
Duluth, Minnesota 55802-2397
Fax No.: (218) 723-1539
Attention: Thomas H. Maas
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with copies to:
Lindquist & Vennum, P.L.L.P.
4200 IDS Center
Minneapolis, Minnesota 55402
Fax No.: (612) 371-3207
Attention: Richard A. Primuth, Esq.
(c) If to the Stockholders:
Thomas H. Maas
Stockholders' Representative
2900 London Road
Duluth, Minnesota 55804
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three (3) days after the date of mailing if sent by certified or
registered mail, (y) one (1) day after date of delivery to the overnight courier
if sent by overnight courier or (z) the next succeeding business day after
transmission by facsimile.
7.2 PUBLIC ANNOUNCEMENTS. The Company shall not make any public
announcement or filing with respect to the transactions provided for herein
without the prior consent of Buyer. Any press release or other announcement or
notice regarding the transactions contemplated by this Agreement shall be made
by Buyer, subject to prior review by the Company, if practical.
7.3 SEVERABILITY. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision.
7.4 AMENDMENT AND WAIVER. This Agreement may be amended, or any provision
of this Agreement may be waived, provided, that, any such amendment or waiver
will be binding on Buyer only if such amendment or waiver is set forth in a
writing executed by Buyer, and provided, that, any such amendment or waiver will
be binding upon the Company only if such amendment or waiver is set forth in a
writing executed by the Company. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any other breach.
7.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other.
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7.6 EXPENSES. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement.
7.7 HEADINGS. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
7.8 GOVERNING LAW; ARBITRATION. This Agreement shall be construed and
governed in accordance with the internal laws of the State of Minnesota without
regard to the principles of conflicting laws. The parties shall negotiate in
good faith to resolve any controversy, dispute or disagreement arising out of or
relating to this Agreement or the breach of any provision of this Agreement. Any
matter not resolved by negotiation shall be settled (a) first, by the parties
trying in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the American Arbitration Association ("AAA") (such mediation
session to be held in Chicago, Illinois and to commence within thirty (30) days
of the appointment of the mediator by the AAA), and (b) if the controversy,
claim or dispute cannot be settled by mediation, then by arbitration
administered by the AAA under its Commercial Arbitration Rules (such arbitration
to be held in Chicago, Illinois before a single arbitrator and to commence
within thirty (30) days of the appointment of the arbitrator by the AAA or such
later date as is reasonable under the circumstances), and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Nothing in this SECTION 7.8 shall be construed to prevent Buyer from
seeking equitable relief through a court of law for violations of SECTION 6.5 of
this Agreement.
7.9 ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other party, provided, however, that Buyer shall be
allowed to assign its rights and benefits hereto to (a) an Affiliate so long as
the Affiliate assumes Buyer's obligations hereunder, (b) in connection with a
sale of all or substantially all of Buyer's assets so long as the assignee
assumes Buyer's obligations hereunder and (c) to Buyer's lenders as collateral
for security purposes.
7.10 DEFINITIONS. For purposes of this Agreement, the following terms have
the meaning set forth below:
"AFFILIATE" means a person or entity that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, another person or body corporate and shall also include,
for individuals, any spouse, sibling, direct ancestor, child or grandchild, or
any spouse of a sibling, direct ancestor, child or grandchild.
"BUYER TRANSACTION DOCUMENTS" means the Bill of Sale, the Note, the
Non-Competition Agreements and the Employment Agreement, and any other
agreement, document,
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certificate or instrument to which the Buyer is a party and which is being
delivered pursuant to this Agreement.
"CHANGE OF CONTROL" means a change in control which would be required
to be reported in response to item 6(e) on Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the company is then subject to such reporting requirement,
including, without limitation, if:
(a) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
the company representing 50% or more of the combined voting power
of the company's then outstanding securities;
(b) The company consummates a merger, consolidation, share exchange,
division or other reorganization of the company with any
corporation or entity, unless the shareholders of the company
immediately prior to such transaction beneficially own, directly
or indirectly (A) if the company's is the surviving corporation
in such transaction, 50% or more of the combined voting power of
the company's outstanding voting securities as well as 50% or
more of the total market value of the company's outstanding
equity securities, or (B) if the company is not the surviving
corporation, 51% of the combined voting power of the surviving
entity's outstanding voting securities as well as 51% or more of
the total market value of such entity's outstanding equity
securities; or
(c) Any sale or transfer of all or substantially all of the assets of
the company to another person.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY TRANSACTION DOCUMENTS" means the Bill of Sale, and any other
agreement, document, certificate or instrument signed by Thomas H. Maas on
behalf of the Company to which the Company is a party and which is being
delivered pursuant to this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards
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Board (or any successor authority) that are applicable as the date of
determination, consistently applied.
"KNOWLEDGE" means, with respect to (i) the Company, knowledge that is
actually possessed by Thomas Maas, William Maas and/or John Brekke, and (ii) any
other Person, knowledge that is actually possessed by such Person.
"MATERIAL ADVERSE EFFECT" means any change or effect that (i)
individually or when taken together with all other changes or effects that have
occurred during any relevant period of time prior to the date of determination
of the occurrence of the Material Adverse Effect, is materially adverse to the
business, assets (including intangible assets), condition (financial or
otherwise), results of operation or prospects of the Company taken as a whole,
or (ii) materially adversely affects the ability of the Company to perform their
obligations under this Agreement or to consummate the transactions contemplated
hereby, or (iii) materially adversely affects the ability of Buyer to conduct
the Business after the Closing Date substantially as such Business is being
conducted as of the date hereof.
"PERMITTED LIENS" means (i) liens for Taxes not yet due and payable or
delinquent, (ii) minor imperfections of title, easements, restrictions and
encumbrances of record, (iii) liens in respect of pledges or deposits under
workmans' compensation laws or similar legislation and (iv) carrier's,
warehouseman's mechanics, laborers' and materialmen's and similar liens, if the
obligations secured by such liens are not then delinquent or are being contested
in good faith by appropriate proceedings disclosed on Schedule 3.28 which, in
the case of all of the foregoing (i)- (iv), could not be reasonably expected to,
individually or in the aggregate, materially interfere with the present use of
or materially impair the value of such assets or properties or otherwise have a
Material Adverse Effect.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity or government
(whether federal, provincial, state, county, city or otherwise, including,
without limitation, any instrumentality, division, agency or department
thereof).
"TAX" means any federal, provincial, state, local or foreign income,
profits, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, place of business,
excise, natural resources, capital, severance, stamp, occupation, premium,
windfall profit, environmental, customs, (or similar) duties, real or immovable
property, personal or movable property, intangible property, capital stock,
social security, employment, unemployment, disability, payroll, license,
deductions at source employee or other withholding, or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing; whether disputed or not.
"TAX RETURNS" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements
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or information and any amendment thereof) filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"TRANSACTION DOCUMENTS" means the Buyer Transaction Documents and the
Company Transaction Documents.
7.11 ENTIRE AGREEMENT. This Agreement, the Preamble and all the Schedules
and Exhibits attached to this Agreement (all of which shall be deemed
incorporated in the Agreement and made a part hereof) and the Transaction
Documents set forth the entire understanding of the parties, and supersede and
preempt all prior oral or written understandings and agreements with respect to
the subject matter hereof (including, without limitation, the term sheet), and
shall not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in connection with the
negotiation of the terms hereof, and may be modified only by instruments signed
by all of the parties hereto.
7.12 THIRD PARTIES. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.
7.13 INTERPRETATIVE MATTERS. Unless the context otherwise requires, (a) all
references to Articles, Sections or Schedules are to Articles, Sections or
Schedules in this Agreement, (b) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP, (c) words
in the singular or plural include the singular and plural, pronouns stated in
either the masculine, the feminine or neuter gender shall include the masculine,
feminine and neuter and (d) the term "including" shall mean by way of example
and not by way of limitation. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. If an ambiguity or questions of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring any party by virtue of the authorship of any of the provisions of this
Agreement.
7.14 BROKERS AND TRANSACTION PAYMENTS. Except as set forth on Schedule
7.14, each party warrants to the other that it has not employed or used the
services of or incurred any liability to any broker, finder or other third party
in connection with the transaction contemplated by this Agreement. The Company
and the Stockholders shall indemnify Buyer for any claims made by those Persons
set forth on Schedule 7.14 in accordance with SECTION 6.4(A)(IV) of this
Agreement.
7.15 FURTHER ASSURANCES. The Company will execute and deliver such further
instruments of conveyance and transfer and take such additional action as Buyer
may reasonably request to effect, consummate, confirm, or evidence the
transactions contemplated hereby. The Company and Buyer will also do such acts
as are necessary to perform their representations, warranties, covenants and
agreements herein.
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7.16 APPOINTMENT OF STOCKHOLDERS' REPRESENTATIVE. Each of the Stockholders
signing this Agreement hereby appoints Thomas H. Maas (the "STOCKHOLDERS'
REPRESENTATIVE") with full power and authority to act as the representative,
agent and attorney-in-fact of each such Stockholder in connection with
fulfilling the obligations of such Stockholders under this Agreement and to
perform all acts required hereunder, including, but not limited to, (i) making
all decisions relating to the resolution and settlement of any disputes under
this Agreement, whether relating to such Stockholders' indemnification
obligations hereunder or otherwise, and, in connection therewith, without
limitation, receiving and delivering all notices, giving all approvals and
waivers, signing and entering into all agreements, releases, certificates and
instruments and exercising all rights of each such Stockholder in regard to his
rights and obligations under this Agreement, (ii) directing Buyer to pay funds
otherwise payable pursuant to the Notes delivered under SECTION 2.1, paragraph
(b) to the Stockholders' Representative to enable Stockholders' Representative
to have funds available to pay expenses incurred in the performance of his
duties hereunder; and (iii) taking in general all action which the Stockholders'
Representative, in his sole discretion, considers necessary or proper in
connection with or to carry out the transactions contemplated herein. Each of
the Stockholders signing this Agreement acknowledges and agrees that any payment
made to the Stockholders' Representative pursuant to clause (ii) of the
preceding sentence shall be deemed payment of such amount to the Stockholder for
purposes of discharging Buyer's obligation to such Stockholder. If the
Stockholders' Representative shall die, become totally incapacitated, shall
otherwise be unable to perform his or her duties or shall resign from such
position, the Stockholders holding a majority of the Company's stock on the date
hereof shall appoint the new Stockholders' Representative to fill such vacancy
("ALTERNATE STOCKHOLDERS' REPRESENTATIVE") and shall notify Buyer concurrent
with making such appointment. All decisions and actions of the Stockholders'
Representative or the Alternate Stockholders' Representative shall be binding
upon all of the Stockholders and no Stockholder shall have the right to object,
dissent from, protest or otherwise contest the same. The Buyer shall be
permitted to rely upon any written instrument or document executed by the
Stockholders' Representative or Alternative Stockholders' Representative. Buyer
agrees and acknowledges that the Stockholders' Representative, the Alternate
Stockholders' Representative and their respective affiliates shall have no
liability to Buyer for any act or omission in their capacity as the
Stockholders' Representative and the Alternate Stockholders' Representative.
Each Stockholder agrees and acknowledges that the Stockholders' Representative,
the Alternate Stockholders' Representative and their respective affiliates shall
have no liability to such Stockholder for any act or omission in their capacity
as the Stockholders' Representative and the Alternate Stockholders'
Representative except acts or omissions of the Stockholders' Representative or
the Alternate Stockholders' Representative which constitute gross negligence,
fraud or willful violation of law. To the extent Stockholders' Representative
requires funds to fulfill his obligations under this SECTION 7.16 in addition to
funds derived from Buyer's payment obligations under the Notes, each Stockholder
severally covenants to reimburse the Stockholders' Representative or the
Alternate Stockholders' Representative on demand for such Stockholder's pro rata
share (determined in proportion to the percentage of Company shares owned as
shown on Schedule 3.3) of all expenses incurred by the Stockholders'
Representative or the Alternate
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Stockholders' Representative in the performance of his duties hereunder. The
Stockholders' Representative, the Alternate Stockholders' Representative and
their affiliates shall be and hereby are indemnified and held harmless by each
Stockholder from and against any and all claims, demands, liabilities, costs,
expenses, damages, losses, suits, proceedings and actions, whether judicial,
administrative, investigative or otherwise, of any nature whatsoever known or
unknown, liquidated or unliquidated, that may be asserted against the
Stockholders' Representative, the Alternate Stockholders' Representative or any
of their affiliates or in which any of such persons may become involved, as a
party or otherwise, arising out of the performance of the duties set forth in
this SECTION 7.16; provided, that, the maximum liability of any Stockholder
pursuant to this SECTION 7.16 to the Stockholders' Representative shall be
limited to and not exceed the portion of the Purchase Price payable to such
Stockholder less the amount paid to Buyer to fulfill the indemnification
obligation of such Stockholder pursuant to this Agreement (it being understood
that nothing in this SECTION 7.16 shall affect or diminish any Stockholder's
indemnification obligation to Buyer pursuant to this Agreement), provided
further, that, neither the Stockholders' Representatives, the Alternate
Stockholders' Representative nor any of their affiliates shall be entitled to
indemnification hereunder if it shall have been determined by a court of
competent jurisdiction or as part of a settlement that such person acted so as
to be liable for gross negligence, fraud or willful violation of law.
7.17 GUARANTY. KNSY hereby unconditionally guarantees (the "GUARANTY") to
the Company and the Stockholders (collectively, the "BENEFICIARIES") the full
and complete performance and observance by Buyer of all covenants, conditions
and agreements contained in this Agreement to be performed and/or observed by
Buyer hereunder, including, without limitation, the obligations of Buyer to make
the Quarterly Payments pursuant to SECTION 2.1(B) (the "OBLIGATIONS"). The
undersigned further covenants and agrees that this Guaranty shall remain and
continue in full force and effect as to any amendment or modification of this
Agreement.
KNSY hereby agrees that its liability under this Guaranty shall not be
affected or reduced by any agreement between the Beneficiaries and Buyer in
regard to the compromise, settlement, surrender, release, discharge, renewal,
extension, modification, amendment, alteration, subordination, or indulgence
with respect to or failure, neglect or omission to collect or enforce the
Obligations. KNSY hereby expressly waives diligence in collection or
prosecution, presentment, demand or protest or in giving notice to anyone of
protest, dishonor, default, or nonpayment or of the creation or existence of any
Obligation or of the acceptance of this Guaranty or any other matters or things
whatsoever relating to the Obligations. In their discretion, Beneficiaries may
proceed to collect any and all Obligations directly from KNSY without first
making demand upon Buyer.
This is a continuing Guaranty and shall not be revoked by dissolution,
merger, bankruptcy or insolvency of KNSY with respect to all Obligations arising
prior to any such event. In the event that this Guaranty is revoked by KNSY,
said revocation shall have no effect on the continuing liability of KNSY to
guarantee unconditionally the prompt payment of all Obligations
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which arose before the revocation became effective, including such prior
Obligations which were subsequently renewed, modified, or extended after the
revocation became effective. If KNSY shall become the subject of any bankruptcy
or insolvency proceedings, KNSY's liability hereunder to pay the Obligations
shall become immediately due and payable whether or not the Obligations are then
due and payable by the Buyer.
This Guaranty shall inure to the benefit of the Beneficiaries, their
successors and assigns and shall be binding on the administrators, successors
and assigns of KNSY.
Upon request, KNSY shall deliver a guaranty, substantially the same as the
foregoing, specifically applicable to each of the Notes.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY:
THM Biomedical, Inc., a Minnesota corporation
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
BUYER:
THM Acquisition Sub, Inc., a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
KNSY:
Kensey Nash Corporation, a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
THE STOCKHOLDERS:
Thomas Maas
James Rhude
Edward Szachowicz
John Brekke
William Maas
Randall Maas
Michael Maas
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SCHEDULES
Schedule 1.2(b) - Excluded Liabilities
Schedule 2.1 - Allocation of Payments
Schedule 2.3 - Purchase Price Allocation
Schedule 3.3 - Capital Stock
Schedule 3.6 - Consents
Schedule 3.7 - Financial Statements
Schedule 3.8 - Liabilities
Schedule 3.9 - Condition & Location of Assets
Schedule 3.10 - Compliance with Laws; Permits
Schedule 3.11(a) - Leased Real Property
Schedule 3.13 - Material Contracts
Schedule 3.14 - Personal Property
Schedule 3.15 - Intellectual Property
Schedule 3.16 - Employee Benefit Plans
Schedule 3.17 - Employees
Schedule 3.18 - Labor and Employment Matters
Schedule 3.19 - Workers Compensation
Schedule 3.20 - Suppliers
Schedule 3.21 - Customers
Schedule 3.22 - Distributors and Representatives
Schedule 3.23 - Affiliate Transactions
Schedule 3.24 - Insurance
Schedule 3.25 - Bank Accounts
Schedule 3.27 - Litigation
Schedule 3.28 - Product Warranties
Schedule 3.30 - Environmental
Schedule 3.31 - Conduct of Business
Schedule 3.33 - Government Contracts
Schedule 3.34 - Corporate Name; Business Location
Schedule 7.14 - Brokers
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EXHIBITS
Exhibit 1.3 - Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit 2.1(b) - Form of Promissory Note
Exhibit 2.2(a)(i) - Form of Non-Competition Agreement for Thomas Maas
Exhibit 2.2(a)(ii) - Form of Non-Competition Agreement for William Maas
Exhibit 2.2(b) - Form of Employment Agreement
Exhibit 5.2(b) - Form of the Company's Counsel Opinion
Exhibit 5.2(d) - Form of Third Party Consent