Exhibit 10.1
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ASSET PURCHASE AGREEMENT
BY AND AMONG
SPAN-AMERICA MEDICAL SYSTEMS, INC.,
VADUS, INC.
AND
CERTAIN STOCKHOLDERS OF VADUS, INC.
FEBRUARY 1, 2002
SCHEDULES
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3.1 Assets
3.5 Purchase Price Allocation
3.6 Prorations
VADUS:
5.1 Exceptions to Incorporation, Powers and Qualification
5.5 Exceptions to Title of Assets
5.8 Pending Litigation
5.10 Undisclosed Liabilities
5.11 Material Changes
5.12 Officers, Directors and Shareholders
5.14 Tax Returns
5.15 Material Contracts
5.18 Benefit Plans
5.19 Liens, Mortgages and Encumbrances
5.22 Leases and Licenses
5.24(2) Intellectual Property Ownership
5.24(3) Intellectual Property Licenses
5.27 Broker
7.10 Outstanding Obligations
SPAN:
6.1 Exceptions to Incorporation, Powers and Qualification
EXHIBITS
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Exhibit A Financial Statements of VADUS
Exhibit B Production, Marketing and Product Development Support
Agreement between Span and VADUS
Exhibit C Assignment Agreement between Span and VADUS
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this Asset Purchase Agreement, together
with the exhibits and schedules attached hereto being hereinafter referred to as
this "Agreement") is made and entered into this 1st day of February, 2002, by
and among Span-America Medical Systems, Inc., a South Carolina corporation
("Span"), VADUS, Inc., a Delaware corporation ("VADUS"), and certain of the
stockholders of VADUS set forth on the signature page hereof (such stockholders
being hereinafter referred to collectively as the "Sellers").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, VADUS is or has been engaged in the medical device design and
manufacturing business; and
WHEREAS, Span desires to purchase, and VADUS desire to sell certain of
the assets of VADUS related to VADUS' business;
NOW THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants herein contained, Span and VADUS hereby
agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS
As used in this Agreement, the following terms have the following
meanings:
"Affiliate" shall mean, with respect to a particular Person, a Person
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that directly or indirectly controls or is controlled by, or is under common
control with, the particular Person.
"Agreement" shall mean this Asset Purchase Agreement, together with the
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exhibits and schedules attached hereto.
"Assets" shall have the meaning set forth in Section 3.1.
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"Benefit Plan" shall have the meaning set forth in Section 5.18.
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"Business" shall have the meaning set forth in Section 5.13.
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"Buyout Payment" shall have the meaning set forth in Section 4.4.
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"CERCLA" the Comprehensive Environmental Response, Compensation, and
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Liability Act, 42 U.S.C. 9601 et seq.
"Closing" shall have the meaning set forth in Section 3.4.
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"Closing Date" shall have the meaning set forth in Section 3.4.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
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time to time, or any successor legislation.
"Compete" shall have the meaning set forth in Section 7.11.
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"Confidential Information" shall mean all information of any kind
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concerning a party hereto that is furnished by such party or on its behalf
pursuant to Section 7.1 hereof, except information (i) ascertainable or obtained
from public or published information, (ii) received from a third party not known
to the recipient of Confidential Information to be under an obligation to keep
such information confidential, (iii) which is or becomes known to the public
(other than through a breach of this Agreement), (iv) of which the recipient was
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in possession prior to disclosure thereof in connection with the transactions
contemplated herein, or (v) which was independently developed by the recipient
without the benefit of Confidential Information.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
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as amended.
"Expiration Date" shall mean the date that the last to expire of the
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Patents expires.
"Field" shall mean peripheral intravenous catheter products for human
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and veterinary use, including peripherally inserted central catheter lines and
arterial lines.
"First Option Payment" shall have the meaning set forth in Section 2.2.
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"GAAP" shall mean generally accepted accounting principles.
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"Gross Margin" shall mean the Net Revenue minus the cost of the goods
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sold, calculated in accordance with GAAP, but for purposes of this definition
and this Agreement, in no event shall the cost of goods sold include the
Royalties due VADUS for such sales.
"Intellectual Property" means (i) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (iii) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (v) all computer software (including data and related
documentation), (vi) all other proprietary rights, and (vii) all copies and
tangible embodiments thereof (in whatever form or medium), which are part of the
Assets provided in Schedule 3.1.
"Investigation Period" shall have the meaning set forth in Section 2.1
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hereof.
"Loans" shall have the meaning set forth in Section 2.2.
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"Material or Materially Adverse" shall mean an item or matter which
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either (i) reasonably could result in the payment of more than $5,000 or (ii)
(if an obligation) has a term that extends one year or more beyond the Closing
Date.
"Net Revenue" shall mean the aggregate of the invoices issued by Span or
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its Affiliates for the sale of each Patent Product, regardless of receipt of
payment for such invoices, after deduction of (i) shipping and handling, (ii)
regular trade and quantity discounts, allowances and cash discounts, if any,
(iii) amounts credited to customers based on Patent Products that are returned
and with respect to which Royalties have been paid to VADUS, and (iv) any
amounts uncollected from a customer 120 days after invoice date, but before
deduction of any other items, including but not limited to any agent's
commissions.
"Option" shall have the meaning set forth in Section 2.1 hereof.
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"Option Payment" shall have the meaning set forth in Section 2.2 hereof.
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"Patent Products" shall mean all products incorporating one or more
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claims of one or more Patents.
"Patents" shall mean the United States granted, European granted, and
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Japanese granted patents identified in Schedule 5.24(2), provided further that
new patents, including continuations, arising from patents pending, disclosures
and concepts in existence at the execution of this Agreement, all of which shall
be disclosed at such time in Schedule 5.24(2), shall upon issuance be
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reclassified as a registered patent on Schedule 5.24(2).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
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"Person" shall mean any individual, corporation, partnership, limited
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liability company or other legal entity recognized by law.
"Purchase Price" shall have the meaning set forth in Section 3.2 hereof.
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"Regulatory Approvals" shall mean all regulatory approvals that are
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legally necessary to the sale of the Patent Product to the medical and
veterinary trade.
"Restricted Area" shall have the meaning set forth in Section 7.11.
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"Royalties" shall mean monies due VADUS based on either the sale of
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Patent Products or the licensing of the Patents, as more fully set forth in
Section 4.1.
"Royalties Payment Period" shall mean that period of time from the
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Closing Date through the Expiration Date during which Royalties shall be paid as
set forth in Section 4.
"Secure IV" shall mean that certain short peripheral intravenous
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catheter system manufactured and marketed by VADUS bearing the same name and
based upon one or more claims of one or more of the Patents.
"Sellers" shall mean the stockholders set forth on the signature page
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hereof, which stockholders constitute the principal stockholders of VADUS.
"Span" shall mean Span-America Medical Systems, Inc., a South Carolina
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corporation.
"Startup Period" shall have the meaning set forth in Section 4.1.
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"Three-Year Restricted Period" shall have the meaning set forth in
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Section 7.11.
"VADUS" shall mean VADUS, Inc., a Delaware corporation.
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"VADUS Common Stock" shall mean the common stock of VADUS, par value of
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$0.0001 per share.
1.2 OTHER DEFINITIONAL PROVISIONS.
All terms defined in this Agreement shall have their defined meanings
when used in any schedule, exhibit, certificate or other document made or
delivered pursuant hereto, and section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified.
SECTION 2. THE OPTION
2.1 SPAN'S OPTION TO ACQUIRE THE ASSETS
Upon the execution of this Agreement, the Sellers and VADUS grant to
Span an irrevocable right to acquire all of the Assets, subject to the
obligations set forth in this Section 2 (the "Option"). The Option shall remain
open and effective for 60 days from the day of the delivery of the last of the
Secure IV units to Span by VADUS as required in Section 2.3(4) below. During
this 60 day period, Span shall conduct due diligence and further investigate the
market potential and viability of the Patent Products (the "Investigation
Period"). Upon completion of the Investigation Period, or at any time prior
thereto, Span shall notify VADUS of its decision either to exercise or not
exercise the Option. If Span elects to exercise the Option, the Closing shall
occur as set forth in Section 3.4 below. If Span elects not to exercise the
Option, which election shall be in the sole discretion of Span, the Option and
this Agreement shall be terminated as provided in Section 2.4 below.
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2.2 SPAN'S OBLIGATIONS
(1) In consideration of the grant of the Option, Span shall deliver
to VADUS cash in the amount of $265,000.00 (the "Option
Payment") by check or wire transfer to the account designated by
VADUS, $132,500.00 being paid upon execution of this Agreement
(the "First Option Payment") and the remaining $132,500.00 being
paid upon receipt of all 2,500 units of the Secure IV, as
provided in Section 2.3(4). If Span loans, advances or otherwise
provides VADUS any money or funds prior to paying the First
Option Payment (collectively, the "Loans"), including all Loans
that may have been made prior to execution of this Agreement,
then (i) the amount to be paid as the First Option Payment shall
be reduced by the amount of all such Loans, (ii) any VADUS
obligation to repay such Loans shall be forgiven by Span and any
required documentation, filings, or other agreements to evidence
such forgiveness shall be executed by Span, and (iii) Span shall
be treated under this Agreement as having made the First Option
Payment in the amount of $132,500.00.
(2) Span shall itemize and deliver to VADUS all requests for VADUS
information, VADUS documents and VADUS records Span deems
necessary to properly investigate VADUS to determine if Span
wishes to exercise the Option.
(3) Span shall evaluate the Secure IV product and conduct such
follow up investigations to validate the marketability and
market potential of the Secure IV.
2.3 VADUS' OBLIGATIONS
VADUS' obligations in this Section 2.3 are not in lieu of, but rather
in conjunction with, those obligations set forth elsewhere in this Agreement. As
specifically related to the Option, VADUS agrees that:
(1) VADUS shall assist Span in conducting any due diligence and
market evaluations Span deems necessary during the Investigation
Period.
(2) VADUS shall, at its expense, make available John Marano to Span
during the Investigation Period to (i) train Span employees and
agents involved in the due diligence review; (ii) visit
clinicians with Span personnel; (iii) provide instruction on the
manufacturing process; and (iv) any other activities Span may
reasonably request relating to the due diligence and market
investigation.
(3) VADUS shall, at its expense, make available Robert H. Dick
during the Investigation Period to assist in the due diligence
effort.
(4) VADUS shall deliver 2,500 units of the Secure IV upon execution
of this Agreement, or as quickly thereafter as practicable, for
no additional consideration beyond the Option Payment, which
units shall be used by Span in its investigation under this
Section 2.
2.4 TERMINATION OF THE OPTION
If Span elects not to exercise the Option, the Option and this
Agreement shall terminate simultaneously with Span giving VADUS written notice
of its election. Upon termination of the Option, (i) Span shall deliver to VADUS
the remaining Secure IV, if any, in Span's possession, and (ii) VADUS shall
issue and cause to be delivered to Span a certificate representing shares of
VADUS Common Stock, where the number of such shares is determined by dividing by
1.5 the aggregate total of all portions of the Option Payment paid to VADUS plus
any additional payments made to VADUS by Span after the Option Payment and prior
to termination of the Option. Span shall be vested with all the rights of every
other shareholder of VADUS Common Stock. Such termination shall not be
considered a breach or other violation of any provision of this Agreement, and
shall not give rise to any claim against Span by VADUS or any one of the
Sellers.
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SECTION 3. CLOSING; PURCHASE AND DELIVERY OF THE ASSETS
3.1 ASSETS CONVEYED
Following exercise of the Option, on the terms and subject to the
conditions of this Agreement, VADUS shall on the Closing Date transfer, assign,
convey and sell to Span, free from any and all liabilities, liens and
encumbrances of any type, certain tangible and intangible assets, including, but
not limited to, Intellectual Property, used in connection with or related to the
Business, which assets are listed with designation of physical location of each
such asset on Schedule 3.1 attached hereto (the "Assets"). The Assets shall
exclude any assets of VADUS not set forth in Schedule 3.1. On the terms and
subject to the conditions of this Agreement, Span shall on the Closing Date
purchase the Assets.
3.2 PURCHASE PRICE.
The total consideration for the Assets (the "Purchase Price") shall be
the Option Payment plus ongoing Royalties to be paid in such amounts and at such
times as indicated in Section 4.
3.3 NO ASSUMPTION OF LIABILITIES.
Span shall not assume and shall not be liable in any way for any
liabilities or obligations of VADUS or any Seller incurred prior to, on or after
the Closing Date. All profits derived from and liabilities and expenses incurred
by Span in connection with the ownership and operation of the Assets after the
Closing Date shall belong to and shall be the responsibility of Span. All
profits derived from and liabilities and expenses incurred by VADUS' Business
before the Closing Date shall belong to and shall be the responsibility of
VADUS.
3.4 THE CLOSING.
The closing of the purchase and sale of the Assets (the "Closing")
provided for in this Section 3 shall take place at the offices of Wyche,
Burgess, Freeman & Parham, P.A. or at such other place as the parties hereto may
mutually agree at 10:00 A.M., Eastern Standard Time. The Closing shall be held
10 days after Span gives written notice of its election to exercise the Option
as provided in Section 2.1 above or as soon as reasonably practicable after
fulfillment of all conditions set forth in Sections 10 and 11 hereof (the
"Closing Date"); provided, however, that in the event that Closing has not
occurred by June 30, 2002, either party hereto shall have the right to terminate
this Agreement, except that if such failure to close is the result of the breach
or nonperformance of a representation, warranty or covenant hereunder, only the
aggrieved party shall have the right to terminate this Agreement.
3.5 ALLOCATION OF PURCHASE PRICE.
VADUS and Span agree that the Assets have the fair market value set
forth on Schedule 3.5 attached hereto and that the Purchase Price shall be
allocated according to such fair market values for purposes of VADUS' and Span's
respective reporting obligations under Section 1060 of the Internal Revenue Code
of 1986, as amended.
3.6 PRORATIONS.
The following items shall be apportioned and prorated as of the Closing
Date and the Purchase Price adjusted accordingly:
(1) personal property taxes related to any of the Assets; and
(2) any other proratable items mutually agreed to by Span and VADUS.
A description and the amounts of such pro-rated items shall be prepared
at closing and set forth on Schedule 3.6 attached hereto as though such schedule
had been completed on the date this Agreement was executed. The Purchase Price
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shall be adjusted by the prorated portion of the personal property taxes related
to the Assets, and Span shall be responsible for paying, prior to the time such
taxes become delinquent, all property taxes due with respect to the Assets.
SECTION 4. ROYALTIES
4.1 ROYALTIES
During the Royalties Payment Period, VADUS shall be entitled to receive
a portion of the revenues paid to Span or its Affiliates in connection with its
sale of the Patent Products or license of the Patents to other Persons.
(1) The parties agree that startup of production and marketing of
the Secure IV shall take time (the "Startup Period"), and during
the Startup Period the production costs are likely to exceed
those estimated production costs when the production process
reaches capacity. In recognizing that the Gross Margin during
the Startup Period will necessarily be lower than the sustained
Gross Margin projected upon operating at capacity, Span or its
Affiliates shall pay VADUS Royalties of 7.5% of the Net Revenues
received by Span or its Affiliates from the sale of the Secure
IV during the first eighteen months following the Closing Date.
(2) For all Patent Products (except for Secure IV for the first
eighteen months following the Closing Date, but beginning on the
first day of the nineteenth month thereafter), VADUS shall have
the right to receive a percentage of the Net Revenues received
by Span or its Affiliates based upon the Gross Margin realized
by Span or its Affiliates from the sale of the Patent Products
(the "Royalty Percentage") as set forth in the following table:
GROSS MARGIN ROYALTY PERCENTAGE
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70.1% and above 10%
50.0% - 70.0% 9%
40.0 - 49.9% 8%
35.0 - 39.9% 7%
30.0 - 34.9% 6%
25.0 - 29.9% 5%
22.5 - 24.9% 4%
20.0 - 22.4% 3%
19.9% and below 2%
(3) VADUS shall have the right to receive 50% of the royalties, fees
or other payments received by Span or its Affiliates from
another Person for grant of a license of one or more of the
Patents, which includes the right to manufacture, distribute and
sell a Patent Product.
4.2 PAYMENT OF ROYALTIES
The Royalties shall be earned in connection with the sale of the Patent
Products or the licensing of the Patents during the Royalties Payment Period and
paid to VADUS within 30 business days following the end of each Span fiscal
quarter.
4.3 REPORTS AND AUDITING
In connection with the payment of the Royalties, Span or its Affiliates
shall make written reports to VADUS quarterly within 30 days after the end of
each fiscal quarter in which Royalties are required to be paid, which reports
shall state in reasonable detail the information necessary for confirming the
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amount of Royalties which were payable during such quarter. Span or its
Affiliates shall keep records showing the Patent Products sold and monies
received from licensing of the Patents in such reasonable detail as may be
necessary to compute and confirm the calculation of the Royalties. Span or its
Affiliates shall permit its books and records to be examined by a third-party,
licensed certified public accountant, reasonably acceptable to Span, from time
to time upon reasonable notice (but not more than once per quarter); provided
that such third-party, licensed certified public accountant shall undertake (i)
to keep all information reviewed in strict confidence and (ii) not to disclose
VADUS any such information other than whether or not, in its opinion, the
Royalties have been properly calculated and paid. Upon expiration or termination
hereof, VADUS shall have the right to have a final examination conducted in
accordance with the terms set forth above. The expense of such examinations
shall be borne entirely by VADUS, unless a deficiency in excess of $25,000 shall
have been determined to have occurred, in which case the expense of such
examination shall be borne completely by Span or its Affiliates.
4.4 BUYOUT OF ROYALTY PAYMENTS
At any time after seven years from the Closing Date, and with written
notice to VADUS, Span shall have the right to terminate the ongoing obligation
to pay the Royalties under this Agreement by making a final one-time payment
(the "Buyout Payment") to VADUS. The Buyout Payment shall be in the amount equal
to five times the Royalties earned during the most recent proceeding 12 months.
Span shall deliver the Buyout Payment in cash, unregistered common stock of Span
at its then fair market value, or any combination of cash and common stock of
Span, as selected by Span in its sole discretion.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
VADUS and each of the Sellers jointly and severally warrants and
represents as follows to Span. The representations and warranties of VADUS and
the Sellers contained in this Section 5 shall survive to the extent set forth in
Section 8 hereof.
5.1 INCORPORATION, POWERS AND QUALIFICATION.
Except as disclosed on Schedule 5.1, VADUS is a corporation duly
organized, existing and in good standing under the laws of the State of Delaware
and is entitled to own its properties and assets and has all requisite corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. VADUS has the
requisite corporate right, power and authority to own or lease its properties
and assets and to conduct its business as presently conducted. VADUS is not
licensed or qualified as a foreign corporation under the laws of any state other
than the state of its principal place of business and neither the character nor
location of its properties nor the nature of its business makes licensing or
qualification in any foreign jurisdiction necessary.
5.2 AUTHORITY RELATIVE TO AGREEMENT.
The execution, delivery and performance of this Agreement by the
Sellers and VADUS and the consummation by the Sellers and VADUS of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action (with respect to VADUS and non-individual Sellers), and this
Agreement constitutes a legal, valid and binding obligation of VADUS and the
Sellers which is enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights generally and by general equity principles.
5.3 AUTHORIZATION AND EXECUTION OF DOCUMENTS.
The execution, delivery and performance of this Agreement by the
Sellers and by VADUS and the consummation of the transactions hereunder do not
(i) require the consent, waiver, approval, license or authorization of any
public authority, (ii) violate, with or without the giving of notice and/or the
passage of time, (A) any provision of law applicable to the Sellers or VADUS,
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(B) the corporate charter or bylaws of VADUS, or (C) any existing order, writ,
injunction or decree of any court, administrative agency or governmental body to
which the Sellers or VADUS are subject, (iii) conflict with or result in a
breach or termination of or constitute a default under any mortgage, deed of
trust, indenture, or other agreement or instrument to which the Sellers or VADUS
is a party or by which it is bound or to which any of their or its respective
assets or properties are subject or (iv) result in the creation of any lien or
encumbrance upon the Assets of VADUS, except for the transactions specifically
contemplated herein.
5.4 SOLVENCY.
Each of the Sellers and VADUS is solvent and has not made a general
assignment for the benefit of creditors nor been adjudicated bankrupt or
insolvent, nor has a receiver, liquidator, or trustee for any of VADUS' or
Sellers' properties (including the Assets) been appointed or a petition filed by
or against any Seller or VADUS for bankruptcy, reorganization, or arrangement
pursuant to the Federal Bankruptcy Act or any similar federal or state statute,
or any proceeding instituted for the dissolution or liquidation of VADUS.
5.5 TITLE TO ASSETS.
Except as disclosed on Schedule 5.5, VADUS has good and indefeasible
title to all and each of the Assets, which title is on the Closing Date free and
clear of all conditional sales agreements, leases, liens, pledges, encumbrances,
charges or claims. The Assets shall be conveyed free and clear of any lien,
claim, charge, encumbrance, or rental, management, service, maintenance,
employment or other contracts, whether oral or written, and Span shall have no
liability whatsoever in connection therewith.
5.6 CONDITION OF ASSETS.
The Assets shall be transferred in good working condition without
excessive wear and tear, and are fit for their intended purposes.
5.7 CORPORATE DOCUMENTS.
The copy of VADUS' Articles of Incorporation and all Amendments
thereto, certified by the Secretary of State of Delaware, and the copy of VADUS'
Bylaws as amended to date, certified by VADUS' secretary, which have been
delivered to Span, are complete and correct as of the date of this Agreement.
Subject to preexisting confidentiality obligations to independent third parties,
VADUS shall make available to Span for inspection the minute books of VADUS upon
execution of this Agreement and in keeping with the obligations set forth in
Section 2. Those books accurately reflect and record all corporate action that
has been taken by the stockholders (including the Sellers) and directors of
VADUS.
5.8 PENDING LITIGATION.
Except as disclosed on Schedule 5.8, there are no proceedings or
actions of any type pending that would limit or impair the power or authority of
VADUS or the Sellers to enter into this Agreement. There is no pending action,
proceeding or claim of any type, or to the knowledge of the Sellers or VADUS,
threatened against VADUS, its properties or business. Furthermore, VADUS and the
Sellers do not know or have reasonable grounds to know of any basis for any
action, or of any governmental investigation or proceeding relative to VADUS,
its properties or business. VADUS is not in default with respect to any order,
writ, injunction or decree of any court, or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
5.9 FINANCIAL STATEMENTS
Set forth on Exhibit A attached hereto are balance sheet, statement of
income and retained earnings and statement of cash flows for VADUS as of and for
the years ended December 31, 1999 and 2000 that were prepared by VADUS
management, compiled and reviewed by a member of the VADUS board of directors,
and reviewed and approved by the VADUS board of directors; and no later than
four calendar weeks after execution of this Agreement, a balance sheet,
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statement of income and retained earnings and statement of cash flows for VADUS
as of and for the nine months ended September 30, 2001, all as prepared by VADUS
management and reviewed and approved by the VADUS board of directors will be
added to Exhibit A (collectively, the "Financial Statements"). The Financial
Statements may be audited, reviewed or unaudited, and such status of each
Financial Statement shall be clearly indicated on each page of each Financial
Statement. Each of the Financial Statements set forth on Exhibit A has been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated, except as disclosed therein, and the balance sheets present
fairly the financial condition of VADUS as of the date thereof and the
statements of income and retained earnings and statements of cash flows present
fairly the results of operations and cash flows of VADUS for the periods set
forth therein. The books and records of VADUS from which such financial
statements were prepared fully and fairly reflect all transactions of VADUS and
are complete and correct in all material respects.
5.10 ABSENCE OF UNDISCLOSED LIABILITIES.
Except to the extent (i) set forth in Exhibit A, (ii) disclosed on
Schedule 5.10, or (iii) expressly disclosed otherwise in this Agreement, VADUS
has no liabilities of any nature (including unpaid federal, state or local
taxes), whether accrued, absolute, known or unknown, contingent or otherwise.
5.11 ABSENCE OF CERTAIN CHANGES.
Since the year ending December 31, 2000 and the nine months ending
September 30, 2001, and except as disclosed on Schedule 5.11 or elsewhere in
this Agreement, there has not been any change in the condition (financial or
otherwise), properties, assets, liabilities or business prospects of VADUS,
which has been adverse or has occurred outside of the ordinary course of
business, including but not limited to, the following:
(1) Any engagement on the part of VADUS in any unusual
transactions affecting its business or properties.
(2) Any damage, destruction or loss (whether or not covered by
insurance) affecting the properties, assets, business or
prospects of VADUS.
(3) Any debts, obligations or liabilities incurred by VADUS, except
current liabilities incurred and obligations under agreements
entered into in the ordinary course of business and except as to
matters set out in other portions of this Agreement.
(4) Any sale, lease, abandonment or other disposition by VADUS of
any real property, or, other than in the ordinary course of
business, of any equipment, furniture, fixtures or other
properties.
5.12 OFFICERS, DIRECTORS AND SHAREHOLDERS.
Schedule 5.12 sets forth a true and complete list of the name of all
VADUS' directors, officers, and shareholders and the number of shares owned by
each shareholder.
5.13 BUSINESS OF VADUS.
VADUS is engaged in the business of designing and manufacturing
medical devices and related matters (the "Business") and no other business.
5.14 TAX RETURNS.
Except as disclosed in Schedule 5.14, VADUS has filed in correct form
all tax returns and estimates (federal, state and local) required to be filed by
it and has paid all taxes shown to be due and payable on the returns or on any
assessment received by VADUS as well as all other taxes (federal, state and
local) due and payable by it on or before the date hereof, other than state and
local realty taxes which are payable but which are not yet due. The Internal
Revenue Service has not conducted an examination of any income tax returns of
VADUS.
9
5.15 CONTRACTS.
Schedule 5.15 contains a complete and accurate list setting forth as of
a recent date all oral or written contracts, commitments, agreements or
obligations, to which VADUS is a party as obligor, or to which it or any of its
owned assets or properties is subject, which either (i) potentially involve the
payment by VADUS of more than $10,000 with respect to any one contract or
commitment or $20,000 in the aggregate or (ii) has a term that extends one year
or more beyond the Closing Date.
True and complete copies of all documents specifically and reasonably
requested by Span and referred to in such list will be provided or made
available to Span and its counsel upon request. Except as disclosed on Schedule
5.15, to the best knowledge of VADUS, each of the contracts set forth on
Schedule 5.15 is binding and enforceable against the respective parties thereto
in accordance with its terms, and, to the best knowledge of VADUS, no party to
any of such contracts is in default under such contract.
5.16 [RESERVED].
5.17 INSURANCE.
All of the Assets to be transferred that are of an insurable character
are insured now and will be insured through the date of Closing by financially
sound and reputable insurance companies, authorized to do business in any state
where such Assets may be located, against loss or damage by fire and other risks
in the amounts and in the manner customary for property and assets of that
nature.
5.18 BENEFIT PLANS.
(1) Schedule 5.18 lists all "employee benefit plans" (as defined in
ERISA Section 3(3)) and all other pension, retirement, deferred
compensation, profit sharing, bonus, severance, stock,
stock-option, stock purchase, stock appreciation, phantom stock,
medical, vacation, disability, life insurance, cafeteria,
dependent care, welfare benefit, fringe benefit, or other
benefit or compensation (except salary and wages) plans,
programs, agreements, funds, commitments, understandings,
practices or other arrangements (whether formal or informal,
written or unwritten) maintained, sponsored or contributed to by
VADUS, or under which VADUS may be obligated, for the benefit of
any officers, directors, employees or independent contractors of
VADUS (all of the foregoing together, "Benefit Plans"). Schedule
5.18 includes any Benefit Plans that have been terminated or
"frozen" but that continue to have any obligations to any
current or former participants or beneficiaries. Schedule 5.18
specifically indicates which Benefit Plans are funded through
insurance; which are self-insured (and lists any policies of
re-insurance in effect with respect to such self-insured
Benefits Plans) and which provide severance benefits of any
nature to current or former employees or any other persons.
(2) VADUS has delivered to Span accurate and complete copies of (i)
each Benefit Plan (or a complete description of all of the
material terms of any unwritten Benefit Plan), including all
amendments; (ii) the summary plan description and all summaries
of material modifications for each Benefit Plan for which a
summary plan description is required under ERISA; (iii) the most
recent annual report on Form 5500 (or any version thereof) filed
with respect to each Benefit Plan for which a Form 5500 is
required to be filed under ERISA or the Code; (iv) the most
recent determination letter received from the IRS with respect
to each Benefit Plan intended to meet the requirements of
Section 401(a) of the Code and (v) any and all trust agreements,
insurance contracts (including annuity contracts), other
material documents related to any funding arrangements and
administrative services contracts related to any Benefit Plan.
(3) VADUS is not, and never has been, (i) required to be treated as
a single employer with any other person or entity pursuant to
10
Code Sections 414(b), (c), (m) and (o) or (ii) subject to
potential liability under Title IV of ERISA as a member of a
"controlled group" (as defined in ERISA Section 4001(a)(14)).
(4) VADUS does not, and has not ever, maintained or contributed to a
"welfare benefit fund" (as defined in Section 419 of the Code).
Neither VADUS nor it employees have ever maintained or
participated in any "voluntary employees' beneficiary
association" (within the meaning of Section 501(c)(9)).
(5) Except as set forth on Schedule 5.18, each Benefit Plan (i) has
been administered in all respects in accordance with its terms
and (ii) is in compliance (with respect to both the form and
operation of the Benefit Plan) with the applicable requirements
of ERISA, the Code and other applicable federal, state or other
law. Each Benefit Plan that is intended to qualify for favorable
tax treatment (with respect to contributions, benefits or
otherwise) under any of Sections 401, 501, 408, 129, 125, 105,
106, 79, 421 through 424 or any other Section of the Code is in
compliance with the relevant Section(s) of the Code under which
favorable tax treatment is intended.
(6) Other than with respect to contributions not yet due and
payable, VADUS has made all contributions required under the
Benefit Plans, including the payment of any insurance premiums
for Benefit Plans that are funded or provide benefits through
insurance or for re-insurance policies in effect for Benefit
Plans that are self-insured.
(7) Each Benefit Plan intended to be qualified under Section 401(a)
of the Code is in receipt of a current favorable determination
letter from the U.S. Internal Revenue Service that has not been
revoked. To the knowledge of VADUS and the Sellers, nothing has
occurred since the date of any such determination letter that is
reasonably likely to affect adversely such qualification or
result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect
to any Benefit Plan.
(8) VADUS has never established, maintained, sponsored or
contributed to a Benefit Plan (i) subject to Title IV or Title
I, Subtitle B, Part 3 of ERISA or Section 412 of the Code or
(ii) that is or was a "multiemployer plan" (as defined in any of
ERISA Section 3(37), ERISA Section 4001(a)(3) or Section 414(f)
of the Code). To the knowledge of VADUS and the Sellers, no
condition exists, and no event has occurred or could reasonably
be anticipated to occur in connection with the transactions
contemplated by this Agreement, that reasonably could result in
liability to VADUS under Title IV of ERISA pursuant to Section
4069 or Section 4212(c) of ERISA.
(9) VADUS does not and has not ever established, maintained,
sponsored or contributed to a Benefit Plan that is an "employee
welfare benefit plan" (as defined in ERISA Section 3(1)) that
provides or provided at any time for continuing benefits or
coverage for any participant or beneficiary of the participant
after such participant's termination of employment, except to
the extent required by law. VADUS has the right to amend or
terminate each Benefit Plan that is an "employee welfare benefit
plan" at any time.
(10) No nonexempt prohibited transaction (within the meaning of ERISA
Sections 406 and 408 or Section 4975 of the Code) or breach of
fiduciary duty has occurred with respect to a Benefit Plan that
has subjected or could reasonably be expected to subject VADUS
to any tax or other liability under ERISA or the Code (other
than liabilities fully satisfied prior to the date of the oldest
financial statements provided by VADUS to Span) or under any
agreement or other arrangement whereby VADUS or the Benefit Plan
is required or has agreed to indemnify or reimburse any person
in connection with liability under ERISA or the Code for breach
of fiduciary duty or participation in a prohibited transaction.
(11) Each Benefit Plan subject to ERISA Section 601 et seq. or Section
11
4980B of the Code has been administered in compliance with such
sections.
(12) There are no pending, or to the best of VADUS' or the Sellers'
knowledge threatened, claims, actions, suits, proceedings,
hearings, audits or investigations with respect to any Benefit
Plan or its operation, other than claims for benefits made by
participants or beneficiaries in the ordinary course pursuant to
the terms of the relevant Benefit Plan. To the best of VADUS' or
the Sellers' knowledge, no events have occurred and no
circumstances exist that could reasonably provide the basis for
such a claim, action, suit, etc.
(13) VADUS has no liability with respect to any "employee benefit
plans" (as defined in ERISA Section 3(3)) or any other pension,
retirement, deferred compensation, profit sharing, bonus,
severance, stock, stock-option, stock purchase, stock
appreciation, phantom stock, medical, vacation, disability, life
insurance, cafeteria, dependent care, welfare benefit, fringe
benefit, or other benefit or compensation (except salary and
wages) plans, programs, agreements, funds, commitments,
understandings, practices or other arrangements (whether formal
or informal, written or unwritten) that provide, or at any time
provided, benefits for any officers, directors, employees or
independent contractors of any entity or organization, other
than the Benefit Plans listed on Schedule 5.18.
5.19 LIENS, MORTGAGES, CHARGES AND ENCUMBRANCES.
All Assets in the Business are owned by VADUS free and clear of all
liens, encumbrances, security interests, leases and claims of others, including
all Intellectual Property, except as set forth on Schedule 5.19 or Schedule
5.22. The transactions herein will not give rise to a lien on any of VADUS'
Assets, as such Assets are identified in Schedule 3.1, or a cause of action by
any party against Span or VADUS.
5.20 [RESERVED].
5.21 [RESERVED].
5.22 LEASES AND LICENSES.
Except as disclosed on Schedule 5.22, there are no leases or licenses with
respect to any of the Assets.
5.23 [RESERVED].
5.24 INTELLECTUAL PROPERTY.
The following representations are made with respect to Intellectual
Property matters:
(1) To the knowledge of VADUS and the Sellers, VADUS has not
interfered with, infringed upon, misappropriated, or violated
any intellectual property rights of third parties, and none of
the Sellers and the directors and officers of VADUS has ever
received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation,
or violation (including any claim that VADUS must license or
refrain from using any intellectual property rights of any third
party). To the knowledge of any of the Sellers and VADUS, no
third party has interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights of
VADUS.
(2) Schedule 5.24(2) identifies each patent or registration which
has been issued to VADUS with respect to any of its Intellectual
Property, identifies each pending patent application or
application for registration (including continuations arising
from patents pending, disclosures and concepts in existence at
the execution of this Agreement) which VADUS has made with
respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which VADUS has granted
12
to any third party with respect to any of its Intellectual
Property (together with any exceptions). VADUS has delivered to
Span correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and
permissions (as amended to date). Schedule 5.24(2) also
identifies each trademark, trade name or unregistered trademark
used by VADUS in connection with any of its businesses. With
respect to each item of Intellectual Property required to be
identified in Schedule 5.24(2):
(A) VADUS possess all right, title, and interest in and
to the item, free and clear of any security interest, license,
or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the knowledge of any of the Sellers or VADUS, is
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) VADUS has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(3) Schedule 5.24(3) identifies each item of Intellectual Property
that any third party owns and that VADUS uses pursuant to
license, sublicense, agreement, or permission. VADUS has
delivered to Span correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended
to date). With respect to each item of Intellectual Property
required to be identified in Schedule 5.24(3):
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in
full force and effect;
(B) to the knowledge of VADUS and the Sellers, no party
to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(C) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof; and
(D) VADUS has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
5.25 COMPLIANCE WITH LAWS, REGULATIONS AND OBLIGATIONS.
VADUS has complied with all laws, regulations and orders applicable to
it or its business. Except for routine business licenses and regulatory permits
and/or certificates required by local or state jurisdictions or sales tax
permits, and except for the Regulatory Approvals required for the Patent
Products, VADUS does not need any governmental permits or licenses in connection
with the transaction of its business as presently conducted. No notice or
warning from any governmental authority with respect to any failure or alleged
failure of VADUS to comply with any law, regulation or order has been issued or
given and is currently in effect, nor is any such notice or warning proposed or
threatened so far as is known to VADUS or the Sellers. The business of VADUS is
not currently being conducted pursuant to an exemption to or exception from any
law, governmental regulation, or permit or license. VADUS is not in default
regarding any obligation to any entity to the extent that it will be affected
adversely under any license, permit, order, authorization, grant, contract,
agreement, lease or other document, order or regulations to which it is a party
or by which it is bound.
5.26 ENVIRONMENTAL MATTERS.
VADUS is in compliance with all local, state and federal environmental
13
statutes, laws, rules, regulations and permits, including but not limited to
CERCLA. VADUS has not, nor to VADUS' knowledge have other parties, used, stored,
disposed of or permitted any "hazardous substance" (as defined in CERCLA),
petroleum hydrocarbon, polychlorinated biphenyl, asbestos or radioactive
material (collectively, "Hazardous Substances") to remain at, on, in or under
any of the property covered by any of the real property leases set forth on
Schedule 5.22. VADUS has not installed, used, or disposed of any asbestos or
asbestos-containing material on, in or under any of the property covered by any
of the real property leases set forth on Schedule 5.22.
5.27 BROKERS
Except as disclosed in Schedule 5.27, neither the Sellers nor VADUS has
taken any action relating to any broker, finder, consultant or other expert
which could result in the imposition on Span or VADUS of any obligation to pay a
fee to any broker, finder, consultant or other similar expert in connection
herewith. Should any fees or other payments be owed to any person disclosed in
Schedule 5.27, such fees or payments shall be the responsibility of VADUS only
and shall not be an obligation of Span.
5.28 DISCLOSURE
No representation or warranty by VADUS or the Sellers in this
Agreement, or any statement or certificate furnished to or to be furnished to
Span pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain at Closing any untrue statement of a fact, or
omits or will omit to state a fact necessary to make the statements contained
therein not misleading.
5.29 RELIANCE.
The foregoing representations and warranties are made by the Sellers
and VADUS with the knowledge and expectation of Span's reliance thereon.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SPAN
Span warrants and represents to VADUS and the Sellers as set forth
below. The representations and warranties of Span contained in this Section 6
shall survive to the extent set forth in Section 9 hereof.
6.1 INCORPORATION, POWERS AND QUALIFICATION.
Except as disclosed on Schedule 6.1, Span is a corporation duly
organized, existing and in good standing under the laws of the State of South
Carolina and is entitled to own its properties and assets and has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Span is not licensed or qualified as a foreign corporation under the laws of any
state and neither the character nor location of its properties nor the nature of
its business makes licensing or qualification in any foreign jurisdiction
necessary.
6.2 AUTHORITY RELATIVE TO AGREEMENT.
The execution, delivery and performance of this Agreement by Span and
the consummation by Span of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and this Agreement constitutes a
legal, valid and binding obligation of Span which is enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the enforcement of creditors' rights generally and by general equity principles.
6.3 AUTHORIZATION AND EXECUTION OF DOCUMENTS.
The execution, delivery and performance of this Agreement by Span and
the consummation of the transactions hereunder do not (i) require the consent,
waiver, approval, license or authorization of any public authority, (ii)
violate, with or without the giving of notice and/or the passage of time, (A)
14
any provision of law applicable to Span, or (B) any existing order, writ,
injunction or decree of any court, administrative agency or governmental body to
which Span is subject, or (iii) conflict with or result in a breach or
termination of or constitute a default under any mortgage, deed of trust,
indenture, or other agreement or instrument to which Span is a party or by which
it is bound or to which any of its assets or properties are subject.
6.4 BROKERS.
Notwithstanding VADUS' engagement of a broker as disclosed on Schedule
5.27, Span has not taken any additional action relating to any broker, finder,
consultant or other expert that could result in the imposition on VADUS or the
Sellers of any obligation to pay a fee to any broker, finder, consultant or
other similar expert in connection herewith.
6.5 DISCLOSURE.
No representation or warranty by Span in this Agreement, nor any
statement or certificate furnished to or to be furnished to VADUS pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain at Closing any untrue statement of a fact, or omits or will omit to
state a fact necessary to make the statements contained therein not misleading.
6.6 RELIANCE.
The foregoing representations and warranties are made by Span with the
knowledge and expectation of the Sellers' and VADUS' reliance thereon.
SECTION 7. COVENANTS OF THE PARTIES
7.1 ACCESS.
At all times after the date hereof and prior to the Closing Date or
earlier termination of this Agreement, VADUS will give to Span and to its
counsel, accountants, auditors, and other consultants and representatives,
reasonable access during normal business hours throughout such period to all of
their properties, books, contracts, commitments and records pertaining to VADUS,
and furnish Span during such period with all such information concerning the
affairs of VADUS as Span may reasonably request of VADUS. From time to time
throughout such period, VADUS will permit Span to make, and cooperate and assist
Span in making, such investigations as may be appropriate to enable Span to
determine compliance by VADUS with the terms of this Agreement. In the event of
termination of this Agreement, Span will deliver to VADUS all documents, work
papers and other material so obtained by Span, or on its behalf, from VADUS and
all copies thereof, whether so obtained before or after the execution of this
Agreement.
7.2 CONFIDENTIALITY.
Each party will and will cause its employees and agents (including,
without limitation, attorneys and accountants) to hold in strict confidence,
unless disclosure is compelled by judicial or administrative process, or in the
written legal opinion of its counsel, by other requirements of law, all
Confidential Information and will not disclose the same to any person.
Confidential Information shall be used only for the purpose of and in connection
with consummating the transaction contemplated herein. If this Agreement is
terminated, each party hereto will promptly return all documents of whatever
type, kind or nature, including but not limited to, photocopies, notes,
memoranda, computer discs, calculations, work sheets, abstracts, synopses,
tapes, recordings, etc., whether in the possession of Span, its agents or
employees, or VADUS, its agents or employees, received by it from each other
party containing Confidential Information.
15
7.3 CONDUCT OF VADUS PENDING CLOSING.
During the period commencing on the date hereof and continuing until
the Closing Date or earlier termination of this Agreement, VADUS covenants and
agrees to the following (except to the extent that Span shall otherwise
expressly consent in writing, which consent shall not be unreasonably delayed or
withheld); provided, however, that any breach of or inaccuracy in any of the
covenants given in this Section must be Material in the aggregate with respect
to the business of VADUS before such breach shall be actionable or shall
constitute grounds for termination or failure to perform under this Agreement.
(1) VADUS will promptly advise Span orally and in writing of any
change in the business of VADUS that is or may reasonably be
expected to be Materially Adverse to the business of VADUS.
(2) VADUS will not take, agree to take, or knowingly permit to be
taken any action or do or knowingly permit to be done anything
in the conduct of the business of VADUS, or otherwise, which
would be contrary to or in breach of any of the terms or
provisions of this Agreement, or which would cause any of the
representations of VADUS contained herein to be or become untrue
in any Material respect.
(3) Prior to the Closing or the termination of this Agreement, VADUS
will not acquire or agree to be acquired, merge or consolidate
with any other company, or purchase substantially all of the
assets of any other business, corporation, partnership,
association or other business organization, entity or division
thereof.
7.4 [RESERVED].
7.5 EXPENSES.
Each party shall bear their own expenses in connection with this
Agreement and the transactions contemplated herein.
7.6 REGULATORY APPROVALS.
After the date hereof and prior to Closing, VADUS shall use its best
efforts to procure all Regulatory Approvals, if any such Regulatory Approvals
are required. After the Closing, the parties hereto agree to cooperate to a
reasonable extent in order that Span may receive the benefits of any progress
made by VADUS prior to Closing with respect to receipt of the Regulatory
Approvals and other approvals.
7.7 [RESERVED].
7.8 [RESERVED].
7.9 NONDISCLOSURE.
Neither (i) Span nor (ii) the Sellers and VADUS shall make, or permit
any of their respective Affiliates to make, any public disclosure or issue any
news release concerning the execution of this Agreement or otherwise relating to
the transactions contemplated hereby without the prior consent of the other
party (which shall not be unreasonably withheld), except that Span, VADUS or the
Sellers may disclose the existence of this Agreement (but not the specific terms
hereof) and the completion of the transactions contemplated hereby if (i) in the
legal opinion of its counsel such disclosure is required by applicable law and
(ii) the other party is provided a reasonable opportunity to review and comment
on such proposed disclosure. Notwithstanding the foregoing, the Sellers and
VADUS hereby consent to the disclosure by Span and its agents (and VADUS after
Closing) of the transactions contemplated herein in connection with the
reporting and disclosure obligations of Span under the Securities Act of 1933 or
the Securities and Exchange Act of 1934.
16
7.10 PAYMENT OF OBLIGATIONS/PAYMENT OF ROYALTIES.
Any monetary obligations of VADUS that Span or its Affiliates may
become liable for at any time after execution of this Agreement shall be set off
against Royalties owed to VADUS by Span.
7.11 NON-COMPETE
For a period of three years following the Closing Date (the "Three-Year
Restricted Period"), VADUS and each Seller (whether employed by Span or its
Affiliates or not) will not, without the prior written consent of Span, Compete
(defined below) with Span or its Affiliates in the Restricted Area (defined
below). VADUS or any Seller shall be deemed to "Compete" with Span or its
Affiliates if it, he or she shall directly or indirectly assist, engage in, or
be interested in any corporation, firm or other enterprise which is engaged in
the same, or substantially the same, Field in the Restricted Area, or if it, he
or she is affiliated with any person or enterprise where it, he or she would be
able to use Confidential Information of Span or its Affiliates in a manner that
would likely have an adverse business impact on Span or its Affiliates. Sellers
or VADUS shall be deemed to be directly or indirectly interested in a
corporation, firm or other enterprise if he or she is involved in such
enterprise as an owner, principal, agent, employee, partner, consultant,
investor, stockholder, trustee, creditor, director or officer in a role which
would compete in the Field. The covenants contained herein, and the construction
of the word "Compete," shall not preclude any one of the Sellers or VADUS from
becoming the holder of any stock or other ownership interest of a
publicly-traded company provided he does not directly or indirectly through a
related party or Affiliate acquire an ownership interest in excess of 10% (in
the aggregate) of such company. The term "Restricted Area" shall mean the world
and, in the alternative, each of the United States, Canada, Japan, and the
countries that are members of the European Union as of the Closing Date.
7.12 NONSOLICITATION
With respect to the Business, during the Three-Year Restricted Period,
Sellers and VADUS will not, directly or indirectly, in connection with any
competing business in the Restricted Area, solicit business from any existing or
former customers of VADUS or any customers of Span for the purposes of
performing work for such customers that is generally performed by VADUS or Span
for such customers or similar customers or for performing work for such
customers that is substantially similar to work that Span or VADUS does not
currently perform but has made significant investment in being able to perform,
and has plans to perform in the future. Sellers and VADUS will not, directly or
indirectly, call upon or contact any employee or agent of Span or VADUS for the
purpose of (i) employing, contracting with, or seeking to employ or contract
with such employee or other agent for purposes of competing with Span or VADUS
or (ii) inducing such employee or other agent to discontinue employment or
service with or Span or any affiliated company.
SECTION 8. SURVIVABILITY AND INDEMNIFICATION OF SPAN
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Subject to the limitations set forth in Section 8.3 of this Agreement
and notwithstanding any investigation conducted at any time with regards thereto
by or on behalf of Span, all representations and warranties of VADUS and the
Sellers contained herein shall survive the execution, delivery and performance
of this Agreement for a period of two years. It is acknowledged that knowing
misrepresentations or fraud in connection with representations, warranties,
covenants and agreements shall remain actionable forever; provided, however,
that this provision shall not be construed to limit any applicable statute of
limitations applicable to any breach of such representations, warranties,
covenants and agreements. As used in this Section, any reference to a
representation, warranty or covenant contained in any Section of this Agreement
shall include the Schedule relating to such Section.
8.2 INDEMNIFICATION.
Subject to the limitations set forth in Section 8.3, VADUS and the
Sellers jointly and severally hereby covenant and agree to indemnify and hold
harmless Span from and against any and all liabilities, costs and expenses,
including, without limitation, reasonable attorneys' fees, any and all
reasonable expenses incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation (collectively,
"Damages"), asserted against, resulting to, imposed upon, or incurred or
suffered by Span, directly or indirectly, as a result of or arising from any
inaccuracy in or breach or nonfulfillment of any of the representations or
warranties made by VADUS or the Sellers in this Agreement (collectively,
"Indemnifiable Claims").
8.3 LIMITATIONS ON INDEMNIFICATION.
The indemnification set forth in this Section 8 shall be subject to the
following limitations:
(1) Span shall not be entitled to indemnification hereunder with
respect to an Indemnifiable Claim (or Claims) arising out of a
breach of a representation or warranty unless the aggregate
amount of Damages with respect to such Indemnifiable Claim
together with all other Indemnifiable Claims exceeds $10,000 in
any consecutive 12 month period following Closing (but upon
exceeding such $10,000, all Damages shall be payable); provided,
however, that the $10,000 threshold in this Section 8.3 shall
not apply to any covenants to perform or pay specific
obligations hereunder (such as in Section 7.10).
(2) Indemnifiable Claims arising out of all provisions of this, or
any covenants to perform or pay specific obligations hereunder
shall be payable only to the extent of the Option Payment paid
and Royalties payable to VADUS; provided, however that Royalties
payable after the termination of the representations or
warranties may be utilized to offset Indemnifiable Claims
arising before such termination. (By way of example, if an
Indemnifiable Claim totals $30,000 and only $20,000 in Royalties
are payable to VADUS before the termination of a particular
representation which was breached, future Royalties payable to
VADUS may be retained by Span to offset the $10,000 balance.
8.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS.
If Span determines to seek indemnification under this Section with
respect to Indemnifiable Claims resulting from the assertion of liability by
third parties, it shall give notice to VADUS within 10 business days of Span's
becoming aware of any such Indemnifiable Claim. The notice shall set forth such
information with respect thereto as is then reasonably available to Span. In
case any such liability is asserted against Span and Span provides notices as
set forth herein, VADUS will be entitled, if they so elect by written notice
delivered to Span within ten days after receiving Span's notice, to assume the
defense thereof with counsel satisfactory to Span. Notwithstanding the foregoing
(i) Span shall also have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of Span; (ii)
Span shall not have any obligation to give any notice of any assertion of
liability by a third party unless such assertion is in writing, provided
however, that Span will make reasonable efforts to communicate verbal assertions
to VADUS on a timely basis; and (iii) the rights of Span to be indemnified
hereunder in respect to Indemnifiable Claims resulting from the assertion of
liability by third parties shall not be adversely affected by its failure to
give notice pursuant to the foregoing unless, and, if so, only to the extent
that, VADUS suffers Material prejudice thereby. With respect to any assertion of
liability by a third party that results in an Indemnifiable Claim, the parties
hereto shall make available to each other all relevant information in their
possession material to any such assertion. In the event that VADUS, within 10
days after receipt of the aforesaid notice of an Indemnifiable Claim, fails to
assume the defense of Span against such Indemnifiable Claim, Span shall have the
right to undertake the defense, compromise or settlement of such action on
18
behalf of and for the account and risk of VADUS. Notwithstanding anything in
this Section to the contrary, (y) if there is a reasonable probability that an
Indemnifiable Claim may have a Materially Adverse affect on Span, its
subsidiaries or affiliates, other than as a result of money damages or other
money payments, then Span shall have the right, at its own costs and expense, to
defend, compromise or settle such Indemnifiable Claim so long as in connection
therewith, Span makes payment of any money damges related thereto; and (z) VADUS
shall not, without Span's written consent, settle or compromise any
Indemnifiable Claim or consent to entry of any judgment in respect thereof
unless such settlement, compromise or consent includes as an unconditional term
thereof the giving by the claimant or the plaintiff to Span (and its
subsidiaries and affiliates) a release from all liability in respect of such
Indemnifiable Claim.
8.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD PARTY CLAIMS.
In the event that Span asserts the existence of an Indemnifiable Claim
giving rise to Damages (but excluding Indemnifiable Claims resulting from the
assertion of liability by third parties), it shall give written notice to VADUS
and the Sellers specifying the nature and amount of the Indemnifiable Claim
asserted. If VADUS and the Sellers, within 45 days after the mailing of notice
by Span, shall not give written notice to Span announcing their intent to
contest such assertion of Span, such assertion shall be deemed accepted and the
amount of Indemnifiable Claim shall be deemed a valid Indemnifiable Claim.
8.6 NOTICE; TERMINATION OF INDEMNIFICATION RIGHTS.
Notice for any claims for indemnification arising under this Section 8
must be given in writing to VADUS, the Sellers and the Sellers' designated
agent, if notice of such agent has been previously provided to Span pursuant to
Section 12.6, within two years of the Closing Date otherwise such rights of
indemnification are terminated.
SECTION 9. SURVIVABILITY AND INDEMNIFICATION OF VADUS AND THE SELLERS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Subject to the limitations set forth in Section 9.3 of this Agreement
and notwithstanding any investigation conducted at any time with regards thereto
by or on behalf of VADUS and the Sellers, all representations and warranties of
Span contained herein shall survive the execution, delivery and performance of
this Agreement for a period of two years. It is acknowledged that knowing
misrepresentations and fraud in connection with representations, warranties,
covenants and agreements shall remain actionable forever; provided, however,
that this provision shall not be construed to limit any applicable statute of
limitations applicable to any breach of such representations, warranties,
covenants and agreements. As used in this Section, any reference to a
representation, warranty or covenant contained in any Section of this Agreement
shall include the Schedule relating to such Section.
9.2 INDEMNIFICATION.
Subject to the limitations set forth in Section 9.3, Span covenants and
agrees to indemnify and hold harmless VADUS and the Sellers from and against any
and all liabilities, costs and expenses, including, without limitation,
reasonable attorneys' fees, any and all reasonable expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages"), asserted against,
resulting to, imposed upon, or incurred or suffered by VADUS and the Sellers,
directly or indirectly, as a result of or arising from any inaccuracy in or
breach or nonfulfillment of any of the representations or warranties made by
Span in this Agreement (collectively, "Indemnifiable Claims").
9.3 LIMITATIONS ON INDEMNIFICATION.
The VADUS or Sellers shall not be entitled to indemnification hereunder
with respect to an Indemnifiable Claim arising out of a breach of a
representation or warranty (or, if more than one such Indemnifiable Claims)
unless the aggregate amount of Damages with respect to such Indemnifiable Claim
19
together with all other Indemnifiable Claims exceeds $10,000, and then only to
the extent of such excess.
9.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS.
If VADUS determines to seek indemnification under this Section with
respect to Indemnifiable Claims resulting from the assertion of liability by
third parties, they shall give notice to Span within 10 business days of VADUS'
becoming aware of any such Indemnifiable Claim. The notice shall set forth such
information with respect thereto as is then reasonably available to VADUS. In
case any such liability is asserted against VADUS and VADUS notifies Span
thereof, Span will be entitled, if it so elects by written notice delivered to
the VADUS within ten days after receiving VADUS' notice, to assume the defense
thereof with counsel satisfactory to VADUS. Notwithstanding the foregoing (i)
VADUS shall also have the right to employ its own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of VADUS; (ii)
VADUS shall not have any obligation to give any notice of any assertion of
liability by a third party unless such assertion is in writing; and (iii) the
rights of VADUS to be indemnified hereunder in respect to Indemnifiable Claims
resulting from the assertion of liability by third parties shall not be
adversely affected by their failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, Span suffers Material prejudice
thereby. With respect to any assertion of liability by a third party that
results in an Indemnifiable Claim, the parties hereto shall make available to
each other all relevant information in their possession material to any such
assertion. In the event that Span, within 10 days after receipt of the aforesaid
notice of an Indemnifiable Claim, fails to assume the defense of VADUS against
such Indemnifiable Claim, VADUS shall have the right to undertake the defense,
compromise or settlement of such action on behalf of and for the account and
risk of Span. Notwithstanding anything in this Section to the contrary, (y) if
there is a reasonable probability that an Indemnifiable Claim may have a
Materially Adverse affect on VADUS, other than as a result of money damages or
other money payments, then VADUS shall have the right, at its own costs and
expense, to defend, compromise or settle such Indemnifiable Claim, so long as in
connection therewith, VADUS makes payment of any money damages related thereto;
and (z) Span shall not, without the written consent of VADUS, settle or
compromise any Indemnifiable Claim or consent to entry of any judgment in
respect thereof unless such settlement, compromise or consent includes as an
unconditional term thereof the giving by the claimant or the plaintiff to VADUS
a release from all liability in respect of such Indemnifiable Claim.
9.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD PARTY CLAIMS
In the event that VADUS or the Sellers asserts the existence of an
Indemnifiable Claim giving rise to Damages (but excluding Indemnifiable Claims
resulting from the assertion of liability by third parties), they shall give
written notice to Span specifying the nature and amount of the Indemnifiable
Claim asserted. If Span, within 45 days after the mailing of notice by VADUS or
the Sellers, shall not give written notice to VADUS or the Sellers announcing
its intent to contest such assertion of VADUS or the Sellers, such assertion
shall be deemed accepted and the amount of Indemnifiable Claim shall be deemed a
valid Indemnifiable Claim.
9.6 NOTICE; TERMINATION OF INDEMNIFICATION RIGHTS.
Notice for any claims for indemnification arising under this Section 9
must be given in writing to Span within two years of the Closing Date otherwise
such rights of indemnification are terminated.
SECTION 10. CONDITIONS PRECEDENT TO CLOSING OF SPAN
Unless waived by Span, the obligations of Span under the Agreement are
subject to the fulfillment, prior to or at Closing, of each of the following
conditions:
10.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING.
The several warranties and representations of VADUS and the Sellers
20
contained herein shall be construed to be continuous and continuing from the
date of this Agreement to the Closing Date, and shall be true at the time of
Closing as though such representations and warranties were made at and as of
such time except as otherwise contemplated by this Agreement, and shall not be
affected by any investigation, verification or approval by any party hereto or
by anyone on behalf of any of such parties.
10.2 PERFORMANCE
VADUS and the Sellers shall have performed and complied in all Material
respects with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by either or both prior to or at
Closing.
10.3 DELIVERY OF DOCUMENTS.
VADUS and/or the Sellers shall have delivered to Span all documents and
other information required to be provided to Span on or before Closing as set
forth herein. The following shall be delivered to Span on or before Closing:
(1) A Certificate of Good Standing from the Secretary of State of
Delaware;
(2) A certificate signed by VADUS and the Sellers stating that all the
warranties and representations made by them herein remain true and
correct on the Closing Date and that all covenants and agreements
required herein to have been performed by them by Closing have been
performed;
(3) Certified copies of actions of the VADUS shareholders and directors
approving this Agreement and all documents to be executed and
delivered in accordance herewith and authorizing the officers of
VADUS to execute this Agreement and to take all other steps
required to carry out the terms hereof;
(4) Physical possession of the Assets;
(5) Any and all other instruments and documents that may be reasonably
necessary to effectuate the obligations of the Sellers and VADUS
hereunder.
10.4 CONDUCT OF BUSINESS.
The business of VADUS shall have been conducted in the usual and
customary manner, and there shall have been no Material casualty or Materially
Adverse change in the Assets or the business or financial condition of VADUS as
it relates to the Assets from the date hereof through the Closing Date.
10.5 CONSENTS
All permits, orders, consents, or other authorizations necessary, in
the reasonable opinion of counsel for Span, to the consummation of the
transactions contemplated hereby shall have been obtained, and no governmental
agency or department or judicial authority shall have issued any order, writ,
injunction or decree prohibiting the consummation of the transactions
contemplated hereby.
10.6 CERTIFICATE.
Span shall have been furnished with such certificates of officers of
VADUS and/or such certificates of the Sellers, in form and substance reasonably
satisfactory to Span, dated as of the Closing Date, certifying to such matters
as Span may reasonably request, including but not limited to the fulfillment of
the conditions specified in this Section 10; provided, however, it shall not be
deemed a reasonable request to require certification of a matter which
constitutes a substantive change to this Agreement.
10.7 OPINION OF COUNSEL.
The Sellers and VADUS shall have furnished Span with an opinion of
counsel, dated as of the Closing Date, and in form and substance reasonably
21
satisfactory to Span and its counsel, to the effect that: (i) VADUS is duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (ii) to the knowledge of counsel, with reasonable inquiry of the
officers of VADUS, the consummation of the transactions contemplated by this
Agreement will not (A) violate any provision of VADUS' Articles of Incorporation
or Bylaws as certified to such counsel, (B) violate any provision of, result in
the termination of, or result in the acceleration of any obligation under, any
mortgage, lien, lease, franchise, license, permit, agreement, instrument, order,
arbitration award, judgment or decree known to counsel to which VADUS is a
party, or by which it is bound, except as such would not, in the aggregate, have
a Materially Adverse effect on the business or financial condition of VADUS, or
(C) violate or conflict with any other restriction of any kind or character
known to counsel and to which VADUS is subject; (iii) to the knowledge of
counsel, with reasonable inquiry of the officers of VADUS and the Sellers, the
Sellers and VADUS have the legal right and power, and have or reasonably expect
to obtain without substantial difficulty, all authorizations and approvals
required by law, to enter into this Agreement, and to consummate the
transactions contemplated herein; (iv) VADUS has full corporate power and
authority to enter into this Agreement, and this Agreement has been duly
authorized, executed and delivered by VADUS and constitutes a valid and legally
binding obligation of VADUS enforceable against VADUS in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws now or hereafter in effect
relating to creditors' rights or debtors' obligations generally; (v) assuming
the due execution of the powers of attorney reference on the signature page
hereof and the legal capacity of the grantor of such powers of attorney, this
Agreement has been executed and delivered by the Sellers and constitutes a valid
and legally binding obligation of the Sellers enforceable against each of the
Sellers in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws now or hereafter in effect relating to creditors' rights or
debtors' obligations generally; (vi) to the knowledge of such counsel after
reasonable inquiry of the officers of VADUS, no Material suit or proceeding is
pending or threatened against VADUS or other parties which would have a
Materially Adverse effect on VADUS' business or properties or its abilities to
make the representations and warranties and perform the obligations set forth
herein. For purposes of the opinion, the term Agreement shall include this
Agreement and all agreements attached hereto as exhibits. Additionally, the
Sellers and VADUS shall furnish an opinion of its Intellectual Property counsel,
to the effect that: (y) all Patents are properly registered with the United
States Patent and Trademark Office or such other equivalent agency in foreign
countries and such registrations are current and valid; and (z) all Intellectual
Property that is registered is in the name of VADUS, or if not, that all such
assignments and other agreements required to give effect to the assignment of
the Intellectual Property to VADUS have been executed and filed with the proper
governmental agency.
10.8 DUE DILIGENCE.
Within 60 days from the date of delivery of the last of the Secure IV
units as provided for in Section 2.3(4) above, Span shall have completed a due
diligence investigation of VADUS, the results of which shall be reasonably
satisfactory to Span. Should Span's due diligence investigation result in Span's
desire to terminate this Agreement, the due diligence report shall be disclosed
to VADUS, and VADUS shall have a reasonable opportunity to cure any adverse
conditions of the report; provided, however, that such opportunity to cure shall
not extend past June 30, 2002.
10.9 PRODUCTION, MARKETING AND PRODUCT DEVELOPMENT SUPPORT AGREEMENT
VADUS and Span shall have executed a Production, Marketing and Product
Development Support Agreement, which shall provide in part for the services of
John Marano, substantially in the form attached hereto as Exhibit B.
22
SECTION 11. CONDITIONS PRECEDENT TO CLOSING OF THE SELLERS
Unless waived by Sellers, the obligations of VADUS and the Sellers under
the Agreement are subject to the fulfillment, prior to or at Closing, of each of
the following conditions:
11.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING
The several warranties and representations of Span contained herein
shall be construed to be continuous and continuing from the date of this
Agreement to the Closing Date, and shall be true at the time of Closing as
though such representations and warranties were made at and as of such time, and
shall not be affected by any investigation, verification or approval by any
party hereto or by anyone on behalf of any of such parties.
11.2 PERFORMANCE.
Span shall have performed and complied in all Material respects with
all agreements, covenants and conditions required by this Agreement to be
performed or complied with by Span prior to or at Closing.
11.3 DELIVERY OF DOCUMENTS.
Span shall have delivered to VADUS and the Sellers all documents and
other information required to be provided to VADUS and the Sellers on or before
Closing as set forth herein. The following additional documents shall be
delivered to VADUS and the Sellers on or before Closing:
(1) The remainder of the Option Payment, if not previously paid;
(2) A certificate signed by Span stating that all the warranties and
representations made by Span herein remain true and correct on the
Closing Date and that all covenants and agreements required herein
to have been performed by Span by Closing have been performed;
(3) An Assignment Agreement signed by VADUS that assigns all
Intellectual Property to Span in the form attached hereto as
Exhibit C; and
(4) Any and all other instruments and documents that may be reasonably
necessary to effectuate the obligations of Span hereunder.
11.4 CERTIFICATE.
The Sellers shall have been furnished with such certificates of Span,
in form and substance reasonably satisfactory to VADUS, dated as of the Closing
Date, certifying to such matters as VADUS may reasonably request, including but
not limited to the fulfillment of the conditions specified in this Section;
provided, however, it shall not be deemed a reasonable request to require
certification of a matter which constitutes a substantive change to this
Agreement.
11.5 OPINION OF COUNSEL.
Span shall have furnished the Sellers and VADUS with an opinion of its
counsel, dated as of the Closing Date, and in form and substance reasonably
satisfactory to the Sellers and VADUS and their counsel, to the effect that: (i)
the consummation of the transactions contemplated by this Agreement will not (A)
violate any provision of, result in the termination of, or result in the
acceleration of any obligation under, any mortgage, lien, lease, franchise,
license, permit, agreement, instrument, order, arbitration award, judgment or
decree known to counsel to which Span is a party, or by which he is bound,
except as such would not, in the aggregate, have a Materially Adverse effect on
the business or financial condition of Span, or (B) violate or conflict with any
other restriction of any kind or character of which such counsel has knowledge
and to which Span is subject; (ii) to the best knowledge of counsel, Span has
the legal right and power, and has or reasonably expects to obtain all
authorizations and approvals required by law, to enter into this Agreement, and
to consummate the transactions contemplated herein; (iii) this Agreement
23
constitutes a valid and legally binding obligation of Span enforceable against
Span in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws
now or hereafter in effect relating to creditors' rights or debtors' obligations
generally; (iv) to the best knowledge of such counsel, no Material suit or
proceeding is pending or threatened against Span or other parties which would
have a Materially Adverse effect on Span's business or properties or its
abilities to make the representations and warranties and perform the obligations
set forth herein. For purposes of the opinion, the term Agreement shall include
this Agreement and all agreements attached hereto as exhibits. The opinion (i)
may contain exceptions consistent with all disclosures by Span, as well as usual
and customary qualifications and exceptions and (ii) need not contain an opinion
on the validity or enforceability of any noncompetition provision.
SECTION 12. MISCELLANEOUS
12.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date
(a) by the mutual consent of VADUS and Span, (b) as set forth in Section 2.1 by
either party, if the Closing has not occurred by June 30, 2002, unless such
failure to close is a result of action taken, or the failure to take action, in
bad faith or in breach of this Agreement by the party seeking to terminate this
Agreement, or (c) by either party, if Span or VADUS has been informed that the
likelihood of receipt of the Regulatory Approvals has been materially lessened.
Nothing in this Agreement shall limit the liability of the defaulting party in
the event that this Agreement is terminated without Closing as a result of
action taken, or the failure to take action, by the defaulting party in bad
faith or in breach of this Agreement.
12.2 WAIVERS.
VADUS or Span may, by written notice to the other, (a) extend the time
for the performance of any of the obligations or other actions of the other
under this Agreement; (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement; (c) waive compliance with any of the conditions to
its own performance contained in this Agreement; or (d) waive or modify
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of
either party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement by the other party. The waiver by any
party of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
12.3 AMENDMENT.
This Agreement contains the entire agreement between the parties hereto. It
may be amended only by an instrument in writing signed by, Span, VADUS and the
Sellers.
12.4 PARTIES IN INTEREST.
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, executors, administrators, successors and assigns, provided
that none of the parties hereto shall assign any of his or its rights or
privileges hereunder prior to the consummation of the transaction contemplated
hereby without the written consent of Span, VADUS and a majority of the Sellers,
which consent shall not be unreasonably withheld. Any rights (but not
obligations) under this Agreement may be assigned by any of the parties hereto
upon notice to the other parties hereto. Notwithstanding any provisions to the
contrary herein and any permitted assignment or transfer, any assignor shall
remain primarily liable for all of his, her or its obligations hereunder.
24
12.5 GOVERNING LAW.
This Agreement shall be construed and governed in accordance with the
laws of the State of South Carolina, without regard to its choice of law
provisions.
12.6 NOTICES.
Any notice provided pursuant to this Agreement shall be in writing and
shall be deemed given (i) if by hand delivery or overnight courier, upon receipt
thereof; or (ii) if mailed, three days after deposit in the United States mails,
postage prepaid, certified mail return receipt requested. All notices hereunder
shall be addressed to (y) the appropriate post office box address, if given in
this Section 12.6, when sending via United States mail; or (z) the street
address given in this Section 12.6 when sending via overnight courier. It is
acknowledged that the persons listed on behalf of the Sellers shall have the
obligation to forward the notice to the other Sellers.
As to the Sellers: -----------------------
-----------------------
-----------------------
-----------------------
Attention:-------------
With a copy to: -----------------------
-----------------------
-----------------------
Attention:-------------
As to Span: Span-America Medical Systems, Inc.
Post Office Box 5231 (Zip Code 29606)
70 Commerce Center
Greenville, South Carolina 29615
Attention: Mr. James Ferguson
With a copy to: Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728 (Zip Code 29602-0728)
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: James M. Shoemaker, Esquire
12.7 SURVIVABILITY OF COVENANTS.
The covenants of the parties herein shall survive forever; provided,
however, that this provision shall not be construed to limit any applicable
statute of limitations applicable to any breach of such covenants.
12.8 HEADINGS.
The headings of the sections of this Agreement are for the convenience
of reference only and do not form a part hereof and in no way modify, interpret
or construe the meanings of the parties.
12.9 INTERPRETATION.
The principle that any ambiguity shall be construed against the drafter
of an agreement shall not be applicable to this Agreement, such that the
25
Agreement shall not be construed for or against one party or the other.
12.10 COUNTERPARTS.
This Agreement may be signed in one or more counterparts, all of which,
collectively, shall be construed to be an original.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.
VADUS, INC. SPAN-AMERICA MEDICAL SYSTEMS, INC.
By: By:
---------------------------------- -------------------------------------
Title: Title:
---------------------------------- -------------------------------------
SELLERS:
---------------------------------- -------------------------------------
Robert N. Armstrong T. Hoy Booker
---------------------------------- -------------------------------------
H. Bruce Dukeman Michael Gentry
---------------------------------- -------------------------------------
John P. Marano Lauren Marano
---------------------------------- -------------------------------------
David A. Wallington Scott Wells
26
AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement (this "Amendment") is
entered into by and between Span-America Medical Systems, Inc. (the "Span"),
VADUS, Inc. ("VADUS") and certain of the stockholders of VADUS set forth on the
signature page hereof (such stockholders being hereinafter referred to
collectively as the "Sellers") as of this 20th day of May, 2002.
A. The parties previously entered into an Asset Purchase Agreement dated
February 1, 2002 (the "Agreement"), which provided for a period of time to
investigate the viability of certain IV syringes in the marketplace before and
as a condition to closing of the purchase transaction contemplated in the
Agreement.
B. The Investigation Period, as that term is defined in the Agreement, is set to
expire on May 20, 2002, yet Span has not completed its investigation.
C. The parties wish to amend the Agreement to extend the Investigation Period.
NOW THEREFORE, the parties, wishing to be legally bound by the revision
contained herein, agree to amend the Agreement as set forth below:
1. The Investigation Period is extended through and set to expire at close of
business on June 20, 2002.
2. In consideration for VADUS and the Sellers agreeing to the extension of the
Investigation Period, Span shall pay at the time of execution of this Amendment
Thirty-Five Thousand Eight Hundred Twenty-Eight and No/100 Dollars ($35,828.00)
to VADUS. Such payment shall be paid by check and shall be treated as an
additional payment under Section 2.4 of the Agreement.
The parties have executed this Amendment as of the date set forth above.
VADUS, INC. SPAN-AMERICA MEDICAL SYSTEMS, INC.
By: By:
---------------------------------- -------------------------------------
Title: Title:
---------------------------------- -------------------------------------
SELLERS:
---------------------------------- -------------------------------------
Robert N. Armstrong T. Hoy Booker
---------------------------------- -------------------------------------
H. Bruce Dukeman Michael Gentry
---------------------------------- -------------------------------------
John P. Marano Lauren Marano
---------------------------------- -------------------------------------
David A. Wallington Scott Wells
27
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
This Second Amendment to Asset Purchase Agreement (this "Amendment") is
entered into by and between Span-America Medical Systems, Inc. (the "Span"),
VADUS, Inc. ("VADUS") and certain of the stockholders of VADUS set forth on the
signature page hereof (such stockholders being hereinafter referred to
collectively as the "Sellers") as of this 9th day of July, 2002.
A. The parties previously entered into an Asset Purchase Agreement dated
February 1, 2002 (the "Agreement"), which provided for a closing of the
transaction no later than June 30, 2002.
B. The necessary documentation to facilitate closing has not yet been completed,
but the parties still wish to close the contemplated transaction.
C. Therefore, the parties wish to amend the Agreement to replace the date
provided in Section 3.4 to with the date of July 15, 2002.
NOW THEREFORE, the parties, wishing to be legally bound by the revision
contained herein, agree to amend the Agreement as set forth below:
1. The date of June 30, 2002 provided in Section 3.4 is deleted and replaced by
the date July 15, 2002.
The parties have executed this Amendment as of the date set forth above.
VADUS, INC. SPAN-AMERICA MEDICAL SYSTEMS, INC.
By: By:
---------------------------------- -------------------------------------
Title: Title:
---------------------------------- -------------------------------------
SELLERS:
---------------------------------- -------------------------------------
Robert N. Armstrong T. Hoy Booker
---------------------------------- -------------------------------------
H. Bruce Dukeman Michael Gentry
---------------------------------- -------------------------------------
John P. Marano Lauren Marano
---------------------------------- -------------------------------------
David A. Wallington Scott Wells
28