ASSET PURCHASE AGREEMENT BY AND BETWEEN SUNTECH MEDICAL INC. (as "Buyer", on the one hand) AND CAS MEDICAL SYSTEMS, INC. (as "Seller", on the other hand) July 25, 2017

ASSET PURCHASE AGREEMENT

 

BY AND BETWEEN

 

SUNTECH MEDICAL INC.
(as "Buyer", on the one hand)

 

AND

 

CAS MEDICAL SYSTEMS, INC.
(as "Seller", on the other hand)

 

 

 

 

July 25, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THIS ASSET PURCHASE AGREEMENT, dated as of July 25, 2017 (this "Agreement"), is by and between SunTech Medical Inc., a North Carolina corporation ("Buyer"), and CAS Medical Systems, Inc., a Delaware corporation ("CASMED" or "Seller").  Buyer and Seller are sometimes collectively referred to herein as the "Parties".  Any defined terms not otherwise defined in a particular section shall have the meanings set forth in Section 8.

 

WHEREAS, among other things, Seller is engaged in the development, assembly and sale of non-invasive blood pressure measurement medical products for worldwide use in the medical industry (collectively, the "Business"); and

 

WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, assets of Seller used primarily or exclusively in the Business, upon the terms and conditions and as further set forth in this Agreement.

 

NOW THEREFORE, in consideration of the mutual representations, warranties and covenants set forth below, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

 

 

 

 

 

 

 

(d) all goodwill related primarily or exclusively to the Business as a going concern;

 

(e) all data, files, books and records (including billing and financial and accounting records, but excluding email and other correspondence), business plans, strategies, marketing and other documents and information maintained by Seller relating primarily or exclusively to the Business (whether in print, electronic or other media and including all customer and supplier and prospective customer and supplier lists and files, and referral sources) and web page programming code owned by Seller relating exclusively to the Business or the Products; provided, however, that Seller shall be permitted to retain copies of the foregoing for its records;

 

 

 

 

(f) all of the rights of Seller under Fully Acquired Agreements (as defined in Section 1.3(a)(i)(A)) and a portion of the rights of Seller under the Partially Acquired Agreements (as defined in Section 1.3(a)(i)(B)) included in the Assumed Liabilities;

 

 

 

 

 

(a) all cash and cash equivalents of Seller;

 

 

(c) all of Seller's minute and stock books or similar corporate records or other constitutional or organizational documents;

 

(d) a copy of all personnel records and other records that Seller is required by applicable Laws and Regulations to retain in its possession;

 

 

 

(g) all of Seller's right, title and interest in and to all of the assets and properties not used primarily or exclusively in the Business (which shall, for the avoidance of doubt, include Seller's FORE-SIGHT® technology and related assets); and

 

(h) all of Seller's rights under this Agreement and the Transaction Documents and the consideration to be paid to Seller hereunder.

 

 

(a) Assumed Liabilities.  At the Closing, Buyer shall assume and agree to fully pay, perform or discharge or cause to be fully paid, performed or discharged when due, (i) only the post-Closing Liabilities arising out of (A) the contracts, equipment leases, license agreements, permits and agreements of or relating to the Business listed on Section 1.3(a)(i)(A) of the Seller Disclosure Schedule, the benefits of which are assigned to Buyer or for which Buyer otherwise receives substantially all of the economic benefits thereof pursuant to this Agreement to the extent, and only to the extent, such obligations accrue after the Closing Date or are expressly assumed by Buyer (the "Fully Acquired Agreements") and (B) the contracts and agreements of or relating to the Business listed on Section 1.3(a)(i)(B) of the Seller Disclosure Schedule, a portion of the benefits of which are assigned to Buyer or for which Buyer otherwise receives a portion of the economic benefits thereof pursuant to this Agreement to the extent, and only to the extent, such obligations accrue after the Closing Date or are expressly assumed by Buyer (the "Partially Acquired Agreements," and together with the Fully Acquired Agreements, the "Acquired Agreements"); and (ii) all Liabilities arising out of (A) Products manufactured by Buyer and (B) outstanding open order obligations to vendors for raw materials relating to the Business existing as of the end of the Manufacturing Transition Period (the Liabilities described in clauses (i) and (ii) above, collectively, the "Assumed Liabilities").  Notwithstanding this Section 1.3(a), to the extent that any Acquired Agreement is not capable of being sold, assigned, transferred or conveyed without the authorization, approval, consent or waiver of any other party thereto, Buyer's assumption of the Assumed Liabilities with respect to such Acquired Agreement shall only become effective upon such other party's authorization, approval, consent or waiver thereto.

 

(b) The assumption of the Assumed Liabilities by Buyer pursuant to Section 1.3(a) shall not enlarge any rights of third parties under contracts or arrangements with Buyer or Seller or any of their respective Affiliates.  Nothing herein shall prevent Buyer from contesting any of the Assumed Liabilities or Seller from contesting any of the Excluded Liabilities.

 

(c) Excluded Liabilities.  Except as otherwise specifically provided in this Agreement, Seller shall be solely responsible for any and all of its other Liabilities not included within the Assumed Liabilities, and Buyer shall not assume or be liable for any Liabilities of Seller or its Affiliates not included within the Assumed Liabilities (collectively, the "Excluded Liabilities").  For the avoidance of doubt, "Excluded Liabilities" includes the Liabilities described in Section 2.5 of the Seller Disclosure Schedule.

 

 

(a) $4,500,000  in cash (the "Closing Payment"), payable at the Closing (or, if the Closing occurs on a non-Business Day, on the first Business Day following the Closing) by wire transfer of immediately available funds to the single account designated in writing by Seller not less than two (2) Business Days prior to the Closing Date;

 

(b) up to $2,000,000 in contingent consideration, payable as described in Section 1.5 below; and

 

(c) The Purchased Inventory, as adjusted during the Manufacturing Transition Period (as defined in Section 4.7) and valued as set forth in Section 4.7.

 

 

(a) Earn-out Payment.  If Product Net Sales during the twenty-four month period ended on June 30, 2019 (the "Earn-out Period") is equal to or greater than $3,324,750.00, Buyer will pay to Seller an amount (the "Earn-out Payment") calculated in accordance with the methodologies set forth in Section 1.5(a) of the Seller Disclosure Schedule; provided, however, that in no instance shall the aggregate Earn-out Payment be greater than $2,000,000.   For the purposes of determining Product Net Sales in the Earn-out Period, the sale of a Product shall be deemed to occur on the date the Product was shipped by the Seller (from the Closing to the end of the Transition Services Agreement period) or the Buyer (effective from the expiration of the Transition Services Agreement) to the Physio-Control Corporation ("Physio-Control"), (or its permitted successor, transferee or assignee, if applicable).  For the purposes of calculating the Earn-out Payment, "Product Net Sales" do not include sales of NB Modules.

 

(b) Delivery of Earn-out Statement.  Within thirty (30) days following the end of the Earn-out Period, Buyer shall deliver or cause to be delivered to Seller a statement of Buyer's calculation of (x) the Product Net Sales recorded by Buyer (broken out by product) during the Earn-out Period and (y) the Warranty Reimbursement Amount to be set off against the Earn-out Payment in accordance with Section 4.4 (the "Earn-out Statement").

 

(c) Computation of Contingent Payments.

 

 

 

 

 

 

(a) The Earn-out Statement delivered by Buyer pursuant to Section 1.5(b) shall become finally determined and binding upon the Parties on the fifteenth (15^th) day following the date on which the Earn-out Statement is delivered to Seller, unless (i) earlier agreed to by the Parties or (ii) Seller delivers a written notice of its disagreement with the Earn-out Statement (a "Notice of Disagreement") to Buyer prior to such date.  Any Notice of Disagreement shall specify in reasonable detail the nature of any disagreement so asserted.  During the fifteen (15) day period following the delivery of the Notice of Disagreement, Seller shall have the right, directly or through its designated representatives, to inspect, audit and make copies of all of Buyer's books, records, correspondence, receipts, vouchers and memoranda relating to the Business.  Buyer shall preserve all such applicable records for a period of three (3) years, and shall provide access to the principal office of Buyer for such audit during normal business hours.  If a Notice of Disagreement is received by Buyer in a timely manner, then any Earn-out Statement so disputed (as revised in accordance with this sentence) shall become final and binding upon the Parties on the earlier of (x) the date the Parties resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement and (y) the date any disputed matters are finally resolved in writing by the Accounting Firm (as defined below).  During the fifteen (15) calendar day period following the delivery of a Notice of Disagreement, Seller and Buyer shall seek in good faith to resolve in writing any differences that they may have with respect to the matters specified in the Notice of Disagreement.  If at the end of such fifteen (15) day period Seller and Buyer have not resolved in writing all of the matters specified in the Notice of Disagreement, Seller and Buyer shall submit to an independent accounting firm (the "Accounting Firm") for arbitration within five (5) calendar days of the expiration of such fifteen (15) day period, in accordance with the standards set forth in this Section 1.6, only the matters that remain in dispute.  The Accounting Firm shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or such other nationally recognized independent public accounting firm as shall be agreed upon by Seller and Buyer in writing.  The Accounting Firm shall execute a confidentiality agreement in form and substance that is reasonably satisfactory to Buyer and Seller.  Seller and Buyer shall use reasonable efforts to cause the Accounting Firm to render a written decision resolving the matters submitted to the Accounting Firm within fifteen (15) calendar days of the receipt of such submission.  The Accounting Firm's decision shall be final and binding on the Parties.  Judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the Party against which such determination is to be enforced, subject to any further restrictions as set forth in this Agreement.  The fees and expenses of the Accounting Firm incurred pursuant to this Section 1.6 shall be split equally between Seller and Buyer.

 

(b) Within five (5) days of the final determination of the Earn-out Statement in accordance with Section 1.6(a) above (but no sooner than August 15, 2019), Buyer shall pay, by wire transfer of immediately available funds to an account designated by Seller, the finally determined amount of the Earn-out Payment.  If such payment date occurs on a non-Business Day, then the Earn-out Payment shall be payable on the first Business Day following such payment date.

 

 

(a) At the Closing, Seller shall deliver or cause to be delivered to Buyer all consents, certificates, documents, instruments and other items reasonably requested by Buyer to give effect to the transactions contemplated hereby, including those set forth in clauses (i) through (viii) below.  Such instruments shall include the following:

 

 

 

 

 

 

 

 

 

 

(b) At the Closing, Buyer shall deliver or cause to be delivered to Seller all consents, certificates, documents, instruments and other items reasonably requested by Seller to give effect to the transactions contemplated hereby, including those set forth in clauses (i) through (iv) below.  Such instruments shall include the following:

 

 

(ii)   an Assumption Agreement executed by Buyer;

 

 

 

 

(d) Seller shall cause the filing of the UCC Financing Amendments and Termination Statements described in Section 1.7(a)(vii) hereof on the Closing Date and shall deliver copies of such filed UCC Financing Amendments or Termination Statements to Buyer within two (2) Business Days following the date of filing thereof.

 

 

 

 

 

 

Seller represents and warrants to Buyer that, except as set forth in the disclosure schedule delivered by Seller to Buyer (the "Seller Disclosure Schedule"), the statements contained in this Section 2 are true and correct as of the Closing Date.  The Seller Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Section 2.

 

 

 

 

 

(a) Absence of Certain Changes.  Since December 31, 2016, except as disclosed in Section 2.4(a) of the Seller Disclosure Schedule, (A) there has been no change in the assets, liabilities or financial condition of the Business, except for changes in the ordinary course of business (none of which results from, arising out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law, and none of which, individually or in the aggregate, is material), (B) to the knowledge of Seller, there has occurred no event or development which, individually or in the aggregate, has had or would reasonably be expected to have in the future, a Seller Material Adverse Effect, and (C) Seller has not taken any of the following actions with respect to the Business or any of the Purchased Assets:

 

 

 

 

 

 

 

 

(a) For purposes of this Agreement, (i) "Tax Return" means any return, declaration, report, claim for refund, information return, or statement, and any schedule, attachment, or amendment thereto, including any consolidated, combined or unitary return or other document (including any related or supporting information), filed or required to be filed by any taxing authority in connection with the determination, assessment, collection, imposition, payment, refund or credit of any federal, state, local or foreign Tax or the administration of the laws relating to any Tax, and (ii) "Tax" or "Taxes" means any and all taxes, charges, fees, levies, deficiencies or other assessments of whatever kind or nature including all net income, gross income, profits, gross receipts, excise, real or personal property, sales, ad valorem, withholding, social security, retirement, employment, unemployment, minimum, estimated, severance, stamp, property, occupation, environmental, windfall profits, use, service, net worth, payroll, franchise, license, gains, customs, transfer, recording and other taxes, customs duty, fees assessments or charges of any kind whatsoever, imposed by any taxing authority, including any liability therefor as a transferee under Section 6901 of the Code or any similar provision of applicable law, as a result of Treasury Regulation Section 1.1502-6 or any similar provision of applicable law, or as a result of any Tax sharing or similar agreement, together with any interest, penalties or additions to tax relating thereof.

 

(b) All such Tax Returns are true, correct and complete in all material respects, and all Taxes owed by Seller, whether or not shown on any Tax Return, have been paid except such Taxes, if any, (i) as are listed in Section 2.7 of the Seller Disclosure Schedule and are being contested in good faith and as to which adequate reserves (determined in accordance with Applicable Accounting Standards) have been provided in the financial statements of Seller or (ii) where the failure to pay such taxes would not have a Seller Material Adverse Effect.  Seller has filed tax returns in all jurisdictions where it is required to file and Seller has not received notice of any claim by any taxing authority in any other jurisdiction that Seller is or may be subject to taxation by that jurisdiction.

 

(c) There are no Liens with respect to Taxes upon any of the Purchased Assets, other than with respect to Taxes not yet due and payable.

 

 

 

(a) Section 2.9(a) of the Seller Disclosure Schedule contains a complete and correct list of all personal property, fixtures, assets and rights, owned or used by Seller primarily or exclusively in the operation of the Business.

 

(b) Except as disclosed in Section 2.9(b) of the Seller Disclosure Schedule, Seller owns outright and has good and marketable title to all of its tangible properties and assets used or held for use jointly or exclusively in the Business, including the Purchased Assets, free and clear of any Liens.  Except for the Excluded Assets, the Purchased Assets constitute all the assets, properties or rights, including contract rights, that are necessary for the conduct of the Business as currently conducted by Seller as of the date hereof and as of the Closing Date.  No Person other than Buyer has any written or oral agreement or option or any right (whether by law, or contract) capable of becoming an agreement or option for the purchase or acquisition from Seller of any of the Purchased Assets.  All Liens with respect to the Purchased Assets will be released on the Closing Date.

 

(c) Except as set forth in Section 2.9(c) of the Seller Disclosure Schedule, the equipment and any related capitalized items and other tangible property (in each case which are material to the Business) included in the Purchased Assets are in good operating condition and repair, ordinary wear and tear excepted, are free from material defects, and have been maintained in accordance with normal industry practice.

 

 

(a) As used in this Agreement, the term "Intellectual Property Rights" means all: (i) patents, patent applications, including, without limitation, foreign counterparts, reissues, divisionals, continuations, continuations-in-part, extensions, and re-examinations thereof, inventions, improvements and designs, whether or not patentable or registerable and any registrations or certifications thereof with any agency or authority worldwide; (ii) trademarks, service marks, trade names, domain names, works of authorship, copyrights and mask works and all registrations and applications to register any of the foregoing with any agency or authority worldwide, and all goodwill arising therefrom or connected therewith; (iii) confidential information and trade secrets, whether patentable or unpatentable and whether or not reduced to practice, including all formulae, processes, know-how, technical and clinical data, and any media or other tangible embodiment thereof and all descriptions thereof; (iv) other technology and intangible property, including computer software and programs in object code or source code form ("Software"), databases, and documentation and flow charts; (v) embodiments of any of the foregoing; and (vi) licenses, grants or other rights running to or from a Person relating to, and rights to ▇▇▇ and recover damages for past, present and future infringement, misappropriation or other violation of, any of the foregoing.  The term "Seller Intellectual Property" means all Intellectual Property Rights owned, licensed or used by Seller jointly or exclusively in connection with the Business or any of the Purchased Assets.   The term "Exclusive Business IP" means all of the Seller Intellectual Property that is owned, licensed or used by Seller exclusively in connection with the Business or any of the Purchased Assets, whether or not listed in any Seller Disclosure Schedule.  The terms "Non-Exclusive Business IP" means all of the Seller Intellectual Property that are owned, licensed or used by Seller jointly in connection with the Business and Seller's other business, whether or not listed in any Seller Disclosure Schedule.  The term "Key Employee IP" means all of the Seller Intellectual Property authored, created, conceived, reduced to practice, generated, or developed solely by the employees set forth on Section 1.7(c) of the Seller Disclosure Schedule or jointly by such employees and another Person, in each case in connection with the Business and the Products, including, without limitation, all Intellectual Property Rights assigned to or otherwise vested in Seller pursuant to written agreements as described in Section 2.10(e) below.

 

(b) Seller has provided Buyer with a true, accurate and complete list of all Seller Intellectual Property Rights, of which the Exclusive Business IP will be set forth in Section 2.10(b)(i) of the Seller Disclosure Schedule and of which the Non-Exclusive Business IP will be set forth in Section 2.10(b)(ii) of the Seller Disclosure Schedule, specifying whether such Intellectual Property Rights are exclusive or non-exclusive, owned or licensed, to Seller and including identifying information of all federal, state and foreign registrations of such Intellectual Property Rights or applications for registration thereof and any restrictions on such Intellectual Property Rights; provided that Seller shall not be required to list unregistered copyrights that are not material to the Business; provided, further, that Seller shall not be required to list Software that are not material to the Business.

 

(c) Except as set forth in Section 2.10(c)(i) of the Seller Disclosure Schedule, the Seller Intellectual Property which is owned by Seller is owned exclusively by Seller free and clear of any Liens.  The Exclusive Business IP and the Non-Exclusive Business IP licensed to Buyer under Section 2.10(a)(i) are sufficient for the conduct of the Business as currently conducted by Seller, and there are no other Intellectual Property Rights that are material or necessary for the conduct of the Business as it is currently conducted.  All licenses, agreements, rights or options constituting or relating to any Seller Intellectual Property (the "Seller Licenses"), as well as the specific intellectual property subject to the license, agreement right or option, are identified on Section 2.10(c)(ii) of the Seller Disclosure Schedule (other than standard software licensed under "shrinkwrap" or "clickwrap" agreements that are generally commercially available).  Except for the Seller Licenses there are no outstanding rights or options (whether or not currently exercisable), licenses or agreements relating to the Seller Intellectual Property, nor is Seller bound by or a party to any rights or options (whether or not currently exercisable), licenses or agreements (other than standard software licensed under "shrinkwrap" or "clickwrap" agreements that are generally commercially available) with respect to the Seller Intellectual Property.  Except for Seller Intellectual Property as disclosed in Section 2.10(c)(ii) of the Seller Disclosure Schedule, Seller owns the exclusive rights, title and interest to all the copyrights, trademarks, and patents that constitute Seller Intellectual Property and any applications for or registrations of the foregoing.  Except otherwise as disclosed in Section 2.10(c)(iii) of the Seller Disclosure Schedule, Seller is not obligated to pay any royalties or other compensation (other than market rate fees for standard software licenses that are generally commercially available), to any third Person in respect of its ownership, use or license of any Seller Intellectual Property.  There has been no breach or violation by Seller of, and there is no breach or violation by any other party to, any Seller License, and the Seller Licenses are sufficient for use of the Seller Intellectual Property to which they relate in connection with the Business as it is currently conducted.

 

 

 

 

(d) The Business, as currently conducted, and the Seller Intellectual Property do not infringe, constitute the misappropriation of, or conflict with, any Intellectual Property Rights of any third Person.  There is no claim or threat, and Seller has not received any notice or other communication (in writing or otherwise) of any claim or threat from, any Person asserting that the Business infringes, constitutes the misappropriation of, or conflicts with, any Intellectual Property Rights of another Person.  There is no existing or, to the knowledge of Seller, threatened infringement, interference, misappropriation, or competing claim by any third Person regarding the right to use or ownership of any Seller Intellectual Property.

 

(e) All employees, contractors, agents and other Persons that have contributed to the conception, creation or development of any Seller Intellectual Property have executed, and, to Seller's knowledge are not in breach of, written agreements with Seller, pursuant to which the entire right, title and interest in and to such Seller Intellectual Property has been and is assigned to Seller and/or vests in Seller by operation of law.

 

(f) Seller has taken commercially reasonable measures to protect and maintain the confidentiality and value of all Confidential Information used or held for use in the conduct of the Business, including, without limitation, all source code that is Seller Intellectual Property.  To Seller's knowledge, no Confidential Information has been disclosed by Seller to or discovered by any Person except pursuant to non-disclosure agreements that obligate such Person to maintain the confidentiality of the confidential information.

 

(g) To Seller's knowledge, consummation of the transactions contemplated hereby will not result in the grant, license or assignment to any third party of any interest in or to, the modification or loss of any rights with respect to or the creation of any Lien on, any Seller Intellectual Property.

 

 

(a) Section 2.11(a) of the Seller Disclosure Schedule sets forth an accurate and complete list of the contracts that are material to the Business or the Purchased Assets (collectively, the "Material Contracts"), including:

 

 

 

 

(b) Seller has delivered to Buyer or its representative true and complete copies of all the Material Contracts and any Acquired Agreement, or an accurate summary of any oral agreement (and all written amendments or other modifications thereto).  All of such Material Contracts and Acquired Agreements are valid, in full force and effect and binding against Seller and the other parties thereto in accordance with their respective terms.  Except as set forth in Section 2.11(b) of the Seller Disclosure Schedule, neither Seller nor, to the knowledge of Seller, any other party thereto is, in material breach or default of any of its obligations under any such Material Contracts or such Acquired Agreements, nor does any condition exist that with notice or lapse of time or both would constitute a material breach or default thereunder.  Seller has performed all material obligations under each Material Contracts and each Acquired Agreements required to be performed by Seller on or prior to the date hereof.  Seller has not been notified in writing or orally that any party to a Material Contract or Acquired Agreement intends to cancel, terminate or refuse to renew such Material Contract or Acquired Agreements.

 

 

 

 

 

 

 

 

 

 

 

 

(a) Except as disclosed in Section 2.20(a)(i) of the Seller Disclosure Schedule, each Product subject to the U.S. Food, Drug and Cosmetic Act (including the rules and regulations of the FDA promulgated thereunder, the "FDA"), Canadian Medical Devices Regulation ("CMDR") SOR 98-282, Medical Devices Directive ("MDD") 93/42/ECC, or comparable applicable Laws and Regulations in any non-U.S. jurisdiction (each such product, a "Medical Device"), is being or has been developed, manufactured, sold, licensed, imported for resale, tested, processed, labeled, stored, distributed and marketed in material compliance with all necessary Permits and other applicable requirements under the FDA, CMDR, MDD and comparable laws in any non-U.S. jurisdiction, including those relating to premarket clearance or approval, establishment registration, device listing, quality system regulation, good manufacturing practices, labeling, advertising, record keeping and filing of required reports.  All applicable technical files have been established and maintained and are in material compliance with the regulations.  Section 2.20(a)(ii) of the Seller Disclosure Schedule lists the Seller's 510(k) notifications and pre-market approval applications ("PMAs") for the Products, including Medical Devices.  All of Products, including Medical Devices, in commercial distribution which are marketed without such approvals or under a Letter to File basis are listed on Section 2.20(a)(iii) of the Seller Disclosure Schedule, together with a statement describing the reasons why such products do not require formal market clearance.  Seller is in compliance with all applicable requirements of the FDA, CMDR and MDD relating to the maintenance of technical, clinical and other data generated prior to the Closing Date by Seller with respect to Medical Devices.

 

 

 

(d) In Seller's reasonable judgment after due investigation, all reports, documents, claims, Permits and notices required to be filed, maintained or furnished with or to the FDA or any other Governmental Entity by Seller for the Business have been so filed, maintained or furnished.  All such reports, documents, claims, Permits and notices were complete and accurate in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing).  All such reports, documents, claims, Permits and notices have been provided or made available to Buyer.

 

 

 

(g) Except as disclosed in Section 2.20(g)(i) of the Seller Disclosure Schedule, Seller has not voluntarily or involuntarily initiated, conducted or issued, or caused to be initiated, conducted or issued, any recall, field notifications, field corrections, market withdrawal or replacement, safety alert, warning, or "dear doctor" letter relating to an alleged lack of safety, efficacy or regulatory compliance of any Products, including Medical Devices.  Other than as set forth on Section 2.20(g)(ii) of the Seller Disclosure Schedule, and after having used reasonably diligent efforts to discover such facts, Seller and its consultants, agents and employees know of no facts which would cause or are reasonably likely to cause (i) the recall, market withdrawal or replacement of any Products, including Medical Devices; (ii) a change in the marketing classification or change in the labeling of any Products, including Medical Devices, or (iii) a termination or suspension of the marketing of any Products, including Medical Devices.

 

 

(i) Seller has not, with respect to the Business: (i) employed in any capacity any individual who has been debarred pursuant to the FDA; or (ii) committed any act, made any statement or failed to make any statement that would breach the FDA's policy with respect to "Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities," 56 Fed. Reg. 46191 (September 10, 1991), or any similar laws, rules, regulations or policies, whether under the jurisdiction of the FDA or a similar entity in any other jurisdiction.

 

(j) Seller has performed all of its services in connection with the Business in a manner consistent with, or in a manner that permits those to whom it provides services to perform in a manner consistent with, all Federal, state and local requirements applicable to the conduct of clinical and nonclinical trials, and the submission of applications for the approval of products, including the requirements of the Federal Food Drug and Cosmetic Act and its implementing regulations, particularly those found in 21 CFR Parts 50 (Protection of human subjects), 54 (Financial disclosure by clinical investigators), 56 (Institutional review boards), 58 (Good laboratory practice for nonclinical laboratory studies), 312 (Investigational new drug application) 314 (Applications for FDA approval to market a new drug), all requirements applicable to the conduct of Good Clinical Practices, the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use and all other similar international requirements.

 

(k) The Disclosure Schedule correctly lists each permit that is material to the operation of the Business as conducted immediately prior to the Closing, together with the name of the Governmental Entity issuing such permit.  Each Permit is valid and in full force and effect, is not in default in any material respect under, and, to Sellers' knowledge, no condition exists that with notice or lapse of time or both would constitute a default under, any such permit and none of such permits will be terminated, become terminable or otherwise be materially and adversely affected solely as a result of the transactions contemplated hereby.   Seller has made all filings with Governmental Entities necessary to conduct and operate the Business as currently conducted or operated.  Seller is in material compliance with all applicable Laws relating to the operation of the Business.

 

(l) Neither Seller nor, to Sellers' knowledge, any director, officer, agent, employee or other person acting on behalf of Seller, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, or (iv) made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment.  Neither Seller nor, to Sellers' knowledge, any director, officer, agent, employee or Affiliate of Seller is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department; and the Sellers will not use the Purchase Price, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.

 

 

 

 

 

 

 

Buyer represents and warrants to Seller that the statements contained in this Section 3 are true and correct as of the Closing Date.

 

 

 

 

 

 

 

SECTION 4

COVENANTS AND AGREEMENTS

 

 

 

 

 

 

 

4.7 Supply of Products during Manufacturing Transition Period.  Seller shall have and maintain title in its possession, at Seller's sole cost, of the Purchased Inventory.  With respect to the Products set forth on Section 4.7(a) of the Seller Disclosure Schedule (as used in this Section 4.7, "Transition Supply Products"), from and after the Closing and until the end of the manufacturing transition period under the Transition Services Agreement (the "Manufacturing Transition Period"), Seller shall be the sole and exclusive provider to Buyer of such Transition Supply Products at the prices and on the terms and conditions set forth on Section 4.7(b) of the Seller Disclosure Schedule, which prices shall take into account Seller's standard cost which includes the cost of direct material, direct labor and an overhead cost calculated upon direct material and direct labor consistent with current practices and as more fully set forth in the Transition Services Agreement (the "Transfer Price"). Buyer hereby agrees that during the Manufacturing Transition Period it shall not, nor shall it cause any of its Affiliates to, purchase or otherwise acquire from any Person (other than Seller or any Affiliate of Seller designated in writing by Seller) any Transition Supply Product with respect to any Product for which Seller is still responsible for the manufacture, sale and service thereof.  Upon completion of the Manufacturing Transition Period, Seller shall provide a list of Transition Supply Product, and all raw materials and work-in-progress with respect thereto constituting the balance of the Purchased Inventory, to be transferred to Buyer, together with an itemized invoice reflecting the applicable Transfer Price and Buyer shall deliver such amount to Seller by wire transfer of immediately available funds (and in any event as required by the Transition Services Agreement) and shall, at Buyer's expense, arrange for the physical delivery of such Transition Supply Product.  Buyer and Seller acknowledge and agree that the Transfer Price of any raw materials purchased by Buyer following the conclusion of the Manufacturing Transition Period in accordance with this Section 4.7 shall not include any manufacturing overhead costs.

 

 

 

 

 

 

 

 

 

(a) any misrepresentation or breach, as of the Closing Date, of any representation or warranty of Seller contained in this Agreement, the Seller Disclosure Schedule, the other Transaction Documents or any other agreement or instrument furnished by Seller to Buyer pursuant to this Agreement or the other Transaction Documents;

 

(b) any failure to perform any covenant or agreement of Seller contained in this Agreement, the other Transaction Documents or any agreement or instrument furnished by Seller to Buyer pursuant to this Agreement or the other Transaction Documents;

 

(c) any Excluded Assets or Excluded Liabilities (which, without limiting the general nature of the foregoing, shall include any claims by employees, former employees or consultants of Seller or the Business arising before or relating to the Closing (including claims for severance or severance-type payments);

 

(d) the negligent acts or omissions of Seller in connection with the operations of the Business prior to the Closing or any Third Party Claim to the extent relating to the operations of the Business prior to the Closing, in each case regardless of whether such Losses occur post-Closing (but not including ordinary-course warranty claims or the Warranty Services); and

 

(e) the failure to pay any pre-Closing Taxes or similar charges relating to the operations of the Business on or prior to the Closing Date (including any interest or penalties arising after the Closing Date and relating to Taxes accruing on or prior to the Closing Date.

 

 

(a) any misrepresentation or breach, as of the Closing Date, of any representation or warranty of Buyer contained in this Agreement, the other Transaction Documents or any other agreement or instrument furnished by Buyer to Seller pursuant to this Agreement or the other Transaction Documents;

 

(b) any failure to perform any covenant or agreement of Buyer contained in this Agreement, the other Transaction Documents or any agreement or instrument furnished by Buyer to Seller pursuant to this Agreement or the other Transaction Documents;

 

(c) any Assumed Liabilities;

 

(d) the negligent acts or omissions of Buyer in connection with the operations of the Business following the Closing or any Third Party Claim to the extent relating to the operations of the Business following the Closing;

 

(e) the failure to pay any post-Closing Taxes or similar charges relating to the operations of the Business from and after the Closing Date; and

 

(f) any other liabilities in connection with, relating to or arising from the operation of the Business by Buyer following the Closing.

 

 

(a) Notice of Claim.  Promptly after receipt of notice of any Losses for which an indemnified Party may seek indemnification under Section 5.2 or 5.3, it shall give written notice thereof to the indemnifying Party demanding payment of an indemnification claim arising under Section 5.2 or 5.3 (a "Demand").  Such Demand shall describe in reasonable detail the nature of the claim, an estimate of the amount of Losses attributable to such claim and the basis of the indemnified party's request for indemnification under this Agreement.  No delay on the part of the indemnified Party in notifying the indemnifying party shall relieve the indemnifying party from any obligation hereunder or otherwise except to the extent the indemnifying Party shall have been materially prejudiced by such failure.

 

(b) Response to a Demand.  The indemnifying Party may reply to a Demand made under Section 5.4(a) hereof by written notice given to the indemnified Party, which notice shall state whether the indemnifying Party agrees or disagrees that the claim asserted by the indemnified party is a valid claim under this Agreement and agrees or disagrees with respect to the amount of the Losses in such Demand.  If within fifteen (15) calendar days after receipt of the Demand (the "Indemnity Notice Period") the indemnifying Party does not give to the indemnified party a notice disputing such Demand specifying the nature and amount of such dispute or if the indemnifying party gives notice that such Demand is uncontested, then the indemnifying Party shall deliver payment to the indemnified party in cash an amount equal to the value of the Losses stated in the Demand within the fifteen (15) calendar days of the earlier of expiration of such Indemnity Notice Period or notice that the Demand is uncontested.  If the notice from the indemnifying Party admits that a portion of the Demand is a valid claim under Section 5.2 or 5.3 of this Agreement and the remaining portion of the Demand is disputed, then the indemnifying Party shall pay to the indemnified party in cash an amount equal to the value of the Losses as are allocable to mutually agreed upon Losses within the fifteen (15) calendar days of delivery of such notice from the indemnifying Party and the disputed portion of such Demand shall be resolved in accordance with Section 5.4(c).

 

(c) Disputed Claims.  If the notice given by the indemnifying Party as provided in Section 5.4(b) hereof disputes the claim or claims asserted in the Demand by the indemnified party or the amount of Losses thereof within the Indemnity Notice Period (a "Disputed Claim"), then the Demand shall be treated as a Disputed Claim and adjudicated in accordance with Section 9.10 hereof.

 

(d) Third Party Claims.  Promptly after receipt of any assertion of Losses by any third Person ("Third Party Claims") that might give rise to any Losses for which indemnification may be sought pursuant to Section 5.2 or 5.3, the indemnified Party shall promptly give written notice to the indemnifying party of such Third Party Claim (a "Notice of Third Party Claim"), stating the (i) nature, basis and facts giving rise to such Third Party Claim, (ii) the amount of Losses or the estimated amount thereof to the extent feasible, and (iii) the amount of liability asserted against the indemnifying party by reason of the Third Party Claim.  Such Notice of Third Party Claim shall be accompanied by copies of all relevant documentation with respect to such Third Party Claim, including any summons, complaint or other pleading that may have been served, any written demand or any other document or instrument.  Notwithstanding the foregoing, the failure to provide notice as aforesaid to the indemnifying Party will not relieve the indemnifying party from any liability which it may have to the indemnified party under this Agreement or otherwise except to the extent the indemnifying party shall have been materially prejudiced by such failure.

 

(e) Defense of Third Party Claims.  The indemnifying Party may elect to defend and control any Third Party Claim with counsel of its own choosing, reasonably acceptable to the indemnified Party, within ten (10) Business Days after receipt of the Notice of Claim by the indemnifying party (the "Election to Defend"), and shall act reasonably and in accordance with its good faith business judgment in handling such Third Party Claim, provided that (i) the indemnifying Party may not enter into or make any settlement, compromise, admission or acknowledgement of the validity of any Third Party Claim or any liability in respect thereof without the written consent of the indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed

 

 unless such settlement or compromise (i) involves only the payment of money damages by the indemnifying Party, and does not impose an injunction or other equitable relief upon the indemnified Party, (ii) includes an unconditional term by each claimant or plaintiff to each indemnified Party of a release from all liability in respect of such Third Party Claim, (iii) would not result in the finding or admission of any violation of law or the finding or admission of any fact that, in the indemnified Party's reasonable judgment, is counter to the indemnified Party's interests, and (iv) would not have a material and adverse effect on the indemnified Party or the Business.  The indemnifying Party shall diligently and actively defend any Third Party Claim. Seller shall maintain reasonable product liability insurance with respect to Third Party Claims that may arise from or relate to Products sold prior to the Closing Date and shall cause Buyer to be named as an additional insured on any such policy.

 

(f) If the indemnifying Party chooses not to defend any Third Party Claim by failure to deliver the Election to Defend, the indemnified party may defend against such Third Party Claim and consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner it may reasonably deem appropriate and seek indemnification pursuant to this Section 5 for Losses resulting from such Third Party Claim in accordance with Section 5.2 or 5.3.  In addition, if the indemnifying Party has assumed defense of the Third Party Claim in which both the indemnifying Party and the indemnified Party are parties or potential parties and either the indemnifying Party or the indemnified Party reasonably determines with advice of counsel that (A) there may be one or more legal defenses available to it that are different from or additional to those available to the other party, (B) that a potential or actual conflict of interest between such Parties may exist in respect of such Third Party Claim or (C) the employment of separate counsel shall have been authorized in writing by such indemnifying Party in connection with the defense of such Third Party Claim, then the indemnified Party shall be entitled to retain separate legal counsel and submit the fees and expenses of such counsel as part of a Demand for Indemnification pursuant to Section 5.2 or 5.3, as applicable.  Notwithstanding the foregoing, the indemnified Party shall at all times have the right to fully participate in such defense at its own expense directly or through counsel; provided that the indemnified Party may not enter into or make any settlement, compromise, admission or acknowledgement of the validity of any Third Party Claim or any liability in respect thereof without the written consent of the indemnifying Party, which consent shall not be unreasonably withheld.  The Parties shall make available to each other and their counsel and accountants all books and records and information relating to any Third Party Claim, keep each other fully apprised as to the details and progress of all proceedings relating thereto and render to each other such assistance as may be reasonably required for the proper and adequate defense of any Third Party Claim.

 

(g) The indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the indemnified Party shall be entitled to have sole control over, the defense or settlement, compromise, admission, or acknowledgment of, and the indemnifying Party shall pay the attorneys' fees and expenses of the Indemnified Party with respect to, any Third Party Claim (i) as to which the indemnifying party fails to assume the defense within a reasonable period of time (but no later than ten (10) Business Days upon sending of the Demand by the indemnified Party) or by failure to meet the conditions specified in this Section 5.4; (ii) as to which the indemnifying Party has failed or is failing to reasonably prosecute or defend such claim,  (iii) to the extent the Third Party Claim seeks an order, injunction, or other equitable relief against the indemnified Party or (iv) if the indemnifying Party does not irrevocably agree in writing to all damages, subject to the limitations set forth in Section 5.5, arising out of or related to such claim or demand or obligations of the indemnifying Party pursuant hereto and subject to indemnification hereunder.

 

 

(a) Time Limitations on Claims.  No claim for indemnification may be made pursuant to Section 5.2(a) or Section 5.3(a) following the date which is twenty-four (24) months following the Closing Date, except that:

 

 

(ii)   any claim based on any inaccuracy or breach of the representations made in Section 2.1 (Organization), Section 2.2 (Authority to Execute and Perform Agreements), Section 2.3(a) (Non-contravention), Section 2.9 (Properties; Title to Assets), Section 2.10 (Intellectual Property), Section 2.20 (FDA Regulatory Compliance and Compliance with other Laws) Section 3.1 (Organization), Section 3.2 (Authority to Execute and Perform Agreements) or Section 3.3(a) (Non-contravention) shall survive until the six (6) year anniversary of the Closing Date;

 

 

Each of the respective dates set forth above are referred to herein as an "Expiration Date" with respect to the applicable claim.  Each of the claims referred to above in clauses 5.5(a)(i) and 5.5(a)(ii) shall be referred to as a "Fundamental Claim".

 

(b) Ceiling on Claims for Losses.  The maximum aggregate liability of Seller for indemnification under Section 5.2(a) hereof will not exceed fifty percent (50%) of the Purchase Price (the "Cap").  The maximum aggregate liability of Buyer for indemnification under Section 5.3(a) hereof will not exceed the Cap.  Notwithstanding the foregoing, the Cap shall not apply to any Fundamental Claim.  The maximum aggregate amount of liability of Seller for all indemnification hereunder will not exceed the Purchase Price.  The maximum aggregate amount of liability of Buyer for all indemnification hereunder will not exceed the Purchase Price.

 

(c) Threshold on Losses.  No Losses may be paid pursuant to Section 5.2(a) or Section 5.3(a) unless and until the aggregate claim for such Losses exceeds one half percent (0.5%) of the Purchase Price (the "Threshold"), at which point the indemnifying Party shall be liable for all Losses, including losses below the Threshold.   Notwithstanding the foregoing, the Threshold shall not apply to any Fundamental Claim.

 

(d) Fraud Exception.  Notwithstanding anything contained herein to the contrary, there shall be no maximum liability or limit on the amount of any Losses for which Seller or Buyer shall be responsible for hereunder due to any intentional, willful or fraudulent breach by Seller or Buyer, respectively, of any covenants, obligations, or representations or warranties hereunder.

 

 

 

 

 

 

 

 

 

CONFIDENTIALITY

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