UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
report (Date of earliest event reported): June
29, 2007
INTEGRATED
SURGICAL SYSTEMS, INC.
(Exact
name of Registrant as specified in its Charter)
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Delaware
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1-12471
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68-0232575
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(State
or other jurisdiction of incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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1433
N. Market Blvd., Suite 1,
Sacramento, California |
95834
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|||
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code (916)
285-9943
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N/A
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(Former
name or former address, if changes since last
report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
| o |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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|
o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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|
o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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|
o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
2.01 Completion
of Acquisition or Disposition of Assets.
On
June
29, 2007, the Registrant completed the sale of substantially all of its assets
to Novatrix Biomedical, Inc. (“Novatrix”) pursuant to an Asset Purchase
Agreement dated as of August 4, 2006, as amended on April 23, 2007 (the “APA”),
by and between the Registrant and Novatrix. At the closing, Novatrix delivered
$4,000,000 to the Registrant on account of the purchase price pursuant to the
APA.
Item
9.01 Financial
Statements and Exhibits.
(d) Exhibits.
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Exhibit
Number
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Description
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10.1
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Asset
Purchase Agreement, dated August 4, 2006, by and between the Registrant
and
Novatrix Biomedical, Inc.
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10.2
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Amendment
to Asset Purchase Agreement, dated April 23, 2007, by and between
the
Registrant and Novatrix Biomedical, Inc. 1
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10.3
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Loan
Agreement and Secured Promissory Note, dated August 4, 2006, by
and
between the Registrant and Novatrix Biomedical, Inc.
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10.4
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Amendment
to Loan Agreement and Secured Promissory Note, dated August 4,
2006, by
and between the Registrant and Novatrix Biomedical, Inc.
1
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Security
Agreement, dated August 4, 2006, by and between the Registrant
and
Novatrix Biomedical, Inc.
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2
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Integrated
Surgical Systems, Inc.
(Registrant)
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| Dated: July 5, 2007 | By: | /s/ Ramesh Trivedi |
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Ramesh
Trivedi, Chief
Executive Officer
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3
ASSET
PURCHASE AGREEMENT
This
Asset Purchase Agreement (“Agreement”) is entered into as of August
4,
2006
by and
among Novatrix Biomedical, Inc., a California corporation (the “Purchaser”);
Integrated Surgical Systems, Inc., a Delaware corporation (“Seller”). Certain
capitalized terms used in this Agreement are defined on Exhibit A (“Certain
Definitions”).
RECITALS
The
Seller wishes to provide for the sale of substantially all of the Assets of
the
Seller to the Purchaser on the terms set forth in this Agreement.
The
parties to this Agreement, intending to be legally bound, agree as
follows:
AGREEMENT
SECTION
1. SALE
OF ASSETS; RELATED TRANSACTIONS.
1.1. Sale
of Assets. The
Seller shall cause to be sold, assigned, transferred, conveyed and delivered
to
the Purchaser, at the Closing (as defined below), good and valid title to the
Assets (as defined below), free of any Encumbrances, on the terms and subject
to
the conditions set forth in this Agreement. For purposes of this Agreement,
“Assets” shall mean and include: all of the properties, rights, interests and
other tangible and intangible assets of the Seller (wherever located and whether
or not required to be reflected on a balance sheet prepared in accordance with
generally accepted accounting principles), including any assets acquired by
the
Seller during the Pre-Closing Period. Without limiting the generality of the
foregoing, the Assets shall include:
(a) all
accounts receivable, notes receivable and other receivables of the Seller
(including all accounts receivable identified in Part 2.8 of the Disclosure
Schedule and all accounts receivable of the Seller that have arisen since August
4, 2006;
(b) all
inventories and work-in-progress of the Seller, and all rights to collect from
customers (and to retain) all fees and other amounts payable, or that may become
payable, to the Seller with respect to services performed on behalf of the
Seller on or prior to the Closing Date;
(c) all
equipment, materials, prototypes, tools, supplies, vehicles, furniture,
fixtures, improvements and other tangible Assets of the Seller (including the
tangible Assets identified in Part 2.10 of the Disclosure
Schedule);
(d) all
advertising and promotional materials possessed by the Seller;
(e) all
Proprietary Assets and goodwill of the Seller (including the right to use the
names “ROBODOC” and “ORTHODOC” and variations thereof, and the Proprietary
Assets identified in Part 2.12 of the Disclosure Schedule);
(f) all
rights of the Seller under the Seller Contracts (including the Seller Contracts
identified in Part 2.13 of the Disclosure Schedule);
(g) all
Governmental Authorizations held
by
the Seller (including the Governmental Authorizations identified in Part 2.16
of
the Disclosure Schedule);
(h) all
claims (including claims for past infringement of Proprietary Assets) and causes
of action of the Seller against other Persons (regardless of whether or not
such
claims and causes of action have been asserted by the Seller), and all rights
of
indemnity, warranty rights, tights of contribution, rights to refunds, rights
of
reimbursement and other rights of recovery possessed by the Seller (regardless
of whether such rights are currently exercisable).
1.2. Purchase
Price.
(a) As
consideration for the sale of the Assets to the Purchaser:
(i) at
the
Closing, the Purchaser shall pay to the Seller, in cash, an amount equal to
$2,000,000;
(ii) Purchaser
shall pay to Seller an additional $2,000,000 by wire transfer of immediately
available funds to an account or accounts designated by Seller upon the earlier
to occur of (i) completion of the milestone set forth in Schedule 1.2(a)(ii)
or
(ii) March 1, 2008.
(iii) Purchaser
agrees to continue to fund an additional three million three hundred thousand
dollars ($3,300,000) as working capital in Purchaser’s business for the
development of the Products, unless Seller otherwise agrees in
writing.
1.3. Sales
Taxes. The
Seller shall bear and pay, and shall reimburse the Purchaser and the Purchaser’s
affiliates for, any sales taxes, use taxes, transfer taxes, documentary charges,
recording fees or similar taxes, charges, fees or expenses that may become
payable in connection with the sale of the Assets to the Purchaser or in
connection with any of the other Transactions.
1.4. Closing.
(a) The
closing of the sale of the Assets to the Purchaser (the “Closing”) shall take
place at the offices of Soden & Steinberger, LLP, 550 West C Street, Suite
1710, at 10:00 a.m. on the date which is five (5) business days following the
satisfaction of all of the conditions set forth in Sections 6 and 7 hereof,
or
at such other time or place as may be agreed to by the parties. For purposes
of
this Agreement, “Scheduled Closing Time” shall mean the time and date as of
which the Closing is required to take place pursuant to this Section 1.4(a);
and
“Closing Date” shall mean the time and date as of which the Closing actually
takes place.
(b) At
the
Closing:
(i) the
Seller shall execute and deliver to the Purchaser such bills of sale,
endorsements, assignments and other documents as may (in the reasonable judgment
of the Purchaser or its counsel) be necessary or appropriate to assign, convey,
transfer and deliver to the Purchaser good and valid title to the Assets free
of
any Encumbrances;
(ii) the
Purchaser shall pay to the Seller two million dollars ($2,000,000) in cash
by
wire transfer of immediately available funds to an account or accounts
designated by Seller;
(iii) the
Seller shall execute and deliver to the Purchaser a certificate (the “Closing
Certificate”) setting forth the representations and warranties of the Seller
that (A) each of the representations and warranties made by the Seller in this
Agreement was accurate in all respects as of the date of this Agreement, (B)
except as expressly set forth in the Closing Certificate, each of the
representations and warranties made by the Seller in this Agreement is accurate
in all respects as of the Closing Date as if made on the Closing Date, (C)
each
of the covenants and obligations that the Seller is required to have complied
with and performed in all respects, and (D) except as expressly set forth in
the
Closing Certificate, each of the Conditions set forth in Section 6.4 and 6.5
has
been satisfied in all respects.
-2-
SECTION
2. REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
represents and warrants to the Purchaser, as follows:
2.1. Due
Organization; No Subsidiaries; Etc.
(a) Seller
is
a corporation duly organized, under the laws of the State of Delaware and has
all necessary corporate power and authority:
(i) to
conduct its business in the manner in which its business is currently being
conducted and in the manner in which its business is proposed to be
conducted;
(ii) to
own
and use its Assets in the manner in which its Assets are currently owned and
used and in the manner in which its Assets are proposed to be owned and used;
and
(iii) to
perform its obligations under all Seller Contracts.
(b) Seller
is
not, and none of the Seller has ever been, required to be qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule.
(c) Part
2.1
of the Disclosure Schedule accurately sets forth (i) the names of the members
of
Seller’s board of directors, (ii) the names of the members of each committee of
Seller’s board of directors, and (iii) the names and titles of Seller’s
officers.
(d) Seller
has no subsidiaries, and Seller has never owned, beneficially or otherwise,
any
shares or other securities of, or any direct or indirect interest of any nature
in, any Entity other than the Prior Subsidiary. The Prior Subsidiary was validly
dissolved on December 23, 2003, in full compliance with all applicable Legal
Requirements. Except as set forth in Part 2.1 of the Disclosure Schedule, the
Prior Subsidiary conducted no business and had no Liabilities prior to their
dissolution. Seller has delivered to the Purchaser accurate and complete copies
of the certificates of dissolution and all other documents relating to the
dissolution of the Prior Subsidiary.
2.2. Reserved.
2.3. Capitalization,
Etc. Except
as
set forth in Part 2.3 of the Disclosure Schedule, there is no: (a)
outstanding subscription,
option, call, warrant or right (whether or not currently
exercisable)
to
acquire any shares of the capital stock or other securities of the Seller;
(b)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities
of
the Seller; or (c) Contract under which the Seller is or may become obligated
to
sell or otherwise issue any shares of its capital stock or any other securities.
2.4. Financial
Statements.
(a) Seller
has delivered to the Purchaser the following financial statements and notes
(collectively, the “Seller Financial Statements”):
(i) the
audited balance sheets of Seller as of December 31, 2001 to December 31, 2004,
of Seller and the Prior Subsidiary as of December 31, 2002, and the related
audited, consolidated statements of operations, changes in Stockholders’ equity
and cash flows of Seller for the year then ended, together with the notes
thereto and the unqualified report and certification of
____________________________________ relating thereto; and
-3-
(ii) the
unaudited balance sheets of Seller from January 1, 2005 through May 31, 2006
(the “Unaudited Interim Balance Sheet”), and the related unaudited statements of
operations, changes in Stockholders’ equity and cash flows of
Seller.
(b) All
of
the Seller Financial Statements are accurate and complete in all material
respects, and the dollar amount of each line item included in the Seller
Financial Statements is accurate in all material respects. The financial
statements and notes referred to in Section 2.4(a)(i) present fairly the
consolidated financial position of Seller as of December 31, 2004, and the
consolidated results of operations, changes in Stockholders’ equity and cash
flows of Seller for the period then ended. The financial statements and notes
referred to in 2.4(a)(iii) present fairly the financial position of Seller
as of
the respective dates thereof and the results of operations, changes in
Stockholders’ equity and cash flows of Seller for the periods covered thereby.
The Seller Financial Statements have been prepared in accordance with generally
accepted accounting principles, applied on a consistent basis throughout the
periods covered.
2.5. Absence
of Changes. Except
as
set forth in Part 2.5 of the Disclosure Schedule, since May 31,
2006:
(a) there
have not been any material adverse changes and no material event has occurred
that would materially adversely effect the Assets or Seller’s business or
financial condition;
(b) there
has
not been any material loss, damage or destruction to, or any interruption in
the
use of, any of Seller’s Assets (whether or not covered by
insurance);
(c) Seller
has not purchased or otherwise acquired any other asset from any other person,
except for supplies acquired by the Seller in the Ordinary Course of
Business;
(d) Seller
has not leased or licensed any asset from any other Person;
(e) Seller
has not made any capital expenditure;
(f) Seller
has not sold or otherwise transferred, and has not leased or licensed, any
asset
to any other Person except for products sold by Seller from its inventory in
the
Ordinary Course of Business;
(g) Seller
has not written off as uncollectible, or established any extraordinary reserve
with respect to, any account receivable or other indebtedness;
(h) Seller
has not pledged or hypothecated any of its Assets or otherwise permitted any
of
its Assets to become subject to any Encumbrance;
(i) Seller
has not made any loan or advance to any other Person;
(j) Seller
has not (i) established or adopted any Employee Benefit Plan, or (ii) paid
any
bonus or made any profit-sharing or similar payment to, or increased the amount
of the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or
employees;
(k) no
Contract by which Seller or any of the Assets owned or used by Seller is or
was
bound, or under which Seller has or had any rights or interest has been amended
or terminated;
-4-
(l) Seller
has not incurred, assumed or otherwise become subject to any Liability, other
than accounts payable (of the type required to be reflected as current
liabilities in the “liabilities” column of a balance sheet prepared in
accordance with GAAP) incurred by Seller in the Ordinary Course of
Business;
(m) Seller
has not discharged any Encumbrance or discharged or paid any indebtedness or
other Liability, except for accounts payable that: (i) are reflected as current
liabilities in the “liabilities” column of the Unaudited Interim Balance Sheet
or have been incurred by Seller since May 31, 2006, in the Ordinary Course
of
Business, and (ii) have been discharged or paid in the Ordinary Course of
Business;
(n) Seller
has not changed any of its methods of accounting or accounting practices in
any
respect;
(o) Seller
has not entered into any transaction or taken any other action outside the
Ordinary Course of Business; and
(p) Seller
has not agreed, committed or offered (in writing or otherwise), and has not
attempted, to take any of the actions referred to in clauses “(c)” through “(p)”
above.
2.6. Title
to Assets.
(a) Seller
owns, and has good, valid and marketable title to, all Assets purported to
be
owned by it, including:
(i) all
Assets reflected on the Unaudited Interim Balance Sheet (except for inventory
sold by Seller since May 31, 2006, in the Ordinary Course of
Business);
(ii) all
Assets acquired by Seller since May 31, 2006 (except for inventory sold by
Seller since June 30, 2006, in the Ordinary Course of Business);
(iii) all
Assets referred to in Parts 2.8, 2.9, 2.10 and 2.12 of the Disclosure
Schedule-and all of Seller’s rights under Seller Contracts; and
(iv) all
other
Assets reflected in Seller’s books and records as being owned by
Seller.
Except
as
set forth in Part 2.6 of the Disclosure Schedule, all of said Assets are owned
by Seller free and clear of any Encumbrances.
(b) Part
2.6
of the Disclosure Schedule identifies all Assets that are being leased or
licensed to Seller. The Assets will collectively constitute, as of the Closing
Date, all of the properties, rights, interest, and other tangible and intangible
Assets necessary to enable the Seller to conduct its business in the manner
in
which such business is currently being conducted and in the manner in which
such
business is proposed to be conducted.
2.7. Bank
Accounts. Part
2.7
of the Disclosure Schedule accurately sets forth, with respect to each account
maintained by or for the benefit of Seller at any bank or other financial
institution:
(a) the
name
and location of the institution at which such account is
maintained;
(b) the
name
in which such account is maintained and the account number of such
account;
(c) a
description of such account and the purpose for which such account is
used;
-5-
(d) the
current balance in such account;
(e) the
rate
of interest being earned on the funds in such account; and
(f) the
names
of all individuals authorized to draw on or make withdrawals from such
account.
There
are
no safe deposit boxes or similar arrangements maintained by or for the benefit
of Seller.
2.8. Receivables;
Major Customers.
(a) Part
2.8
of the Disclosure Schedule provides an accurate and complete breakdown and
aging
of all accounts receivable, notes receivable and other receivables of Seller
as
of May 31, 2006.
(b) Except
as
set forth in Part 2.8 of the Disclosure Schedule, all existing accounts
receivable of Seller (including those accounts receivable reflected on the
Unaudited Interim Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since May 31, 2006, and have not yet been
collected):
(i) represent
valid obligations of customers of Seller arising from bona fide transactions
entered into in the Ordinary Course of Business; and
(ii) are
current and are collectable under the rules of GAAP in full (without any
counterclaim or setoff) on or before the Closing Date.
(c) Part
2.8
of the Disclosure Schedule accurately identifies, and provides in all material
respects an accurate and complete breakdown of the revenues received from,
each
customer or other Person that accounted for: (i) more than $10,000 of the
consolidated gross revenues of Seller, (ii) more than $10,000 of Seller’s gross
revenues in the Seller through December 31, 2006, or (iii) more than $25,000
of
Seller’s gross revenues through December 31, 2006, Seller has not received any
notice or other communication (in writing or otherwise), and has not received
any other information, indicating that any customer or other Person identified
in Part 2.8 of the Disclosure Schedule may cease dealing with Seller. Seller
has
represented that there are currently no unfilled orders.
2.9. Inventory.
Part
2.9
of the Disclosure Schedule provides an accurate and complete breakdown in all
material respects of all inventories (including raw materials, work in process
and finished goods) of Seller as of June 30, 2006. All of Seller’s existing
inventory (including all inventory that is reflected on the Unaudited Interim
Balance Sheet and that has not been disposed of by Seller since May 31,
2006.
(a) is
of
such quality and quantity as to be usable and saleable by Seller in the Ordinary
Course of Business;
(b) has
been
priced at the lower of cost or market value using the “last-in. first-out”
method; and
(c) is
free
of any defect or deficiency.
The
inventory levels maintained by Seller (i) are not excessive in light of Seller’s
normal operating requirements, and (ii) are adequate for the conduct of Seller’s
operations in the Ordinary Course of Business.
-6-
2.10. Equipment,
Etc.
(a) Part
2.10
of the Disclosure Schedule accurately identifies all equipment, furniture,
fixtures, improvements and other tangible Assets (other than inventory) owned
by
Seller, and accurately sets forth the date of acquisition, original cost and
book value of each of said Assets. Part 2.10 also accurately identifies all
tangible Assets leased to Seller.
(b) Each
asset identified or required to be identified in Part 2.10 of the Disclosure
Schedule:
(i) is
structurally sound, free of defects and deficiencies and in good condition
and
repair (ordinary wear and tear excepted);
(ii) complies
in all respects with, and is being operated and otherwise used in full
compliance with, all applicable Legal Requirements; and
(iii) is
adequate for the uses to which it is being put.
The
Assets identified in Part 2.10 of the Disclosure Schedule are adequate for
the
conduct of Seller’s business in the manner in which such business is currently
being conducted and in the manner in which such business is proposed to be
conducted.
2.11. Real
Property. Seller
does not own any real property or any interest in real property, except for
the
leaseholds created under the real property leases identified in Part 2.13 of
the
Disclosure Schedule. Part 2.11 of the Disclosure Schedule provides an accurate
and complete description in all material respects of the premises covered by
said leases and the facilities located on such premises. Seller enjoys peaceful
and undisturbed possession of such premises.
2.12. Proprietary
Assets.
(a) Disclosure
Schedule 2.12 identifies and provides a brief description of all Proprietary
Assets: (i) owned by the Seller, and (ii) owned by any other Person and that
is
licensed to or used by the Seller (except for any Proprietary Asset that is
licensed to Seller under any third party software license that: (1) is generally
available to the public, and (2) imposes no future monetary obligation on the
Seller) and identifies the license agreement or other agreement under which
such
Proprietary Asset is being licensed to or used by the Seller. Except as set
forth on Part 2.12 of the Disclosure Schedule, the Seller has good and valid
title to all of the Proprietary Assets and the Assets are free of any
Encumbrances, and, Seller’s Knowledge, has a valid right to use and otherwise
exploit, and to license others to use and otherwise exploit, all Proprietary
Assets identified in Disclosure Schedule 2.12. Except as otherwise identified
in
Disclosure Schedule 2.12, the Seller is not obligated to make any payment to
any
Person for the use or other exploitation of any Proprietary Asset and Seller
is
free to use, modify, copy, distribute, sell, license or otherwise exploit each
of the Seller Proprietary Assets on an exclusive basis (other than Proprietary
Assets consisting of software licensed to the Seller under third party licenses
generally available to the public, with respect to which the Seller’s rights are
not exclusive).
(b) The
Seller has taken all reasonable measures and precautions necessary to protect
and maintain the confidentiality and secrecy of all Seller Proprietary Assets
(except Seller
Proprietary Assets whose value would be unimpaired by public disclosure) and
otherwise to
maintain and protect the value of all Seller Proprietary Assets. The Seller
has
not disclosed or delivered or permitted to be disclosed or delivered to any
Person, and no Person (other than the Seller)
has access to or has any rights with respect to, the source code, or any portion
or aspect of
the
source code, of any Seller Proprietary Asset.
-7-
(c) All
patents, trademarks, service marks and copyrights that are registered with
any
Governmental Body and held by the Seller are valid and subsisting. To Seller’s
Knowledge, None of the Seller Proprietary Assets infringes or conflicts with
any
Proprietary Asset owned or used by any other Person. To the best of Seller’s
Knowledge, the Seller is not infringing, misappropriating or making any unlawful
use of, and the Seller has not at any time infringed, misappropriated or made
any unlawful use of, or received any notice or other communication of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To
Seller’s Knowledge, no other Person is infringing, misappropriating or making
any unlawful use of, and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Seller Proprietary Asset.
(d) The
Proprietary Assets constitute all the Proprietary Assets necessary to enable
the
Seller to conduct its business in the manner in which such business is being
conducted and in the manner in which such business is proposed to be conducted.
The Seller has not licensed any of the Seller Proprietary Assets to any Person
on an exclusive basis. The Seller has not entered into any covenant not to
compete or Contract limiting its ability to exploit fully any of the Seller
Proprietary Assets or to transact business in any market or geographical area
or
with any Person. The Seller has, and the Purchaser will acquire at the Closing,
the right to use all of Sellers trademarks and copyrights listed in Disclosure
Schedule 2.12 and variations thereof.
(e) Except
as
set forth in Disclosure Schedule 2.12, the Seller has not entered into and
is
not bound by any Contract under which any Person has the right to distribute
or
license any Proprietary Asset. The Seller has not disclosed or delivered to
any
Person, or permitted the disclosure or delivery to any Person, of the source
code, or any portion or
aspect
of the source code, or any proprietary information or algorithm contained in
any
source
code, of
any Proprietary Asset. No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, result in the
disclosure or delivery to any Person of the source code, or any portion or
aspect of the source
code, or
any
proprietary
information or algorithm contained in any source code, of any Proprietary
Asset.
(f) Except
as
set forth in Part 2.12 of the Disclosure Schedule, to Seller’s Knowledge, there
is no Proprietary Asset that is owned by or licensed to Seller or that is
otherwise used or useful in connection with Seller’s business.
(g) Seller
represents and warrants that it has full right, title and interest in and to
all
Proprietary Assets listed in Part 2.12 of the Disclosure Schedule, including
any
and all referenced documents thereto. Seller has taken all reasonable measures
and precautions necessary to protect the confidentiality and value of each
Proprietary Asset identified or required to be identified in Part 2.12 of the
Disclosure Schedule.
(h) To
Seller’s Knowledge, Seller is not infringing, and none of the Seller has at any
time infringed or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement of, any
Proprietary Asset owned or used by any other Person. To Seller’s Knowledge, no
other Person is infringing, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any Proprietary Asset owned or used by
Seller.
(i) The
Proprietary Assets identified in Part 2.12 of the Disclosure Schedule constitute
all of the Proprietary Assets necessary to enable Seller to conduct its business
in the manner in which its business is currently being conducted and in the
manner in which its business is proposed to be conducted.
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2.13. Contracts.
(a) Seller
has provided to Purchaser through its due diligence all material contracts,
except for the Seller Contracts identified in Part 2.13 of the Disclosure
Schedule, including all amendments thereto. Each Seller Contract is valid and
in
full force and effect, and is enforceable by Seller in accordance with its
terms.
(b) Except
as
set forth in Part 2.13 of the Disclosure Schedule, and except where no material
adverse effect on the Assets or Seller’s business or financial condition would
be likely to occur individually or in the aggregate (an “MAE”): (i) no Person
has violated or breached, or declared or committed any default under, any Seller
Contract; (ii) no event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time): (A) result in a violation
or breach of any of the provisions of any Seller Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Seller Contract,
(C) give any Person the right to accelerate the maturity or performance of
any
Seller Contract, or (D) give any Person the right to cancel, terminate or modify
any Seller Contract; (iii) Seller has not received any notice or other
communication (in writing or otherwise) regarding any actual, alleged, possible
or potential violation or breach of, or default under, any Seller Contract;
and
(iv) Seller has not waived any of its rights under any Seller
Contract.
(c) To
the
Seller’s Knowledge, each Person against which Seller has or may acquire any
rights under any Seller Contract is solvent and is able to satisfy all of such
Person’s current and future monetary obligations and other obligations and
Liabilities to Seller.
(d) Except
as
set forth in Part 2.13 of the Disclosure Schedule and to Seller’s Knowledge,
Seller has never guaranteed or otherwise agreed to cause, insure or become
liable for, and Seller has ever pledged any of its Assets to secure, the
performance or payment of any obligation or other Liability of any other
Person.
(e) Except
as
set forth in Part 2.15 of the Disclosure Schedule, the performance of the Seller
Contracts will not result in any violation of or failure to comply with any
Legal Requirements.
(f) No
Person
is renegotiating, or has the right to renegotiate, any amount paid or payable
to
Seller under any Seller Contract or any other term or provision of any Seller
Contract.
(g) The
Seller has no knowledge of any basis upon which any party to any Seller
Contracts may object to: (i) the assignment to the Purchaser of any right under
such Seller Contract, or (ii) the delegation to or performance by the Purchaser
of any obligation under such Seller Contract.
(h) The
Contracts identified in Part 2.13 of the Disclosure Schedule and the Excluded
Contracts collectively constitute all of the Contracts necessary to enable
Seller to conduct its business in the manner in which its business is currently
being conducted and in the manner in which its business is proposed to be
conducted.
(i) Part
2.13
of the Disclosure Schedule identifies and provides an accurate and complete
description, in all material respects of each proposed Contract as to which
any
bid, offer, written proposal, term sheet or similar document has been submitted
or received by Seller.
2.14. Liabilities;
Major Suppliers.
(a) Except
as
set forth in Part 2.14 of the Disclosure Schedule, Seller has no material
Liabilities, except for: (i) liabilities identified as such in the “liabilities”
column of the Unaudited Interim Balance Sheet; (ii) accounts payable (of the
type required to be reflected as current liabilities in the “liabilities” column
of a balance sheet prepared in accordance with GAAP) incurred by Seller in
the
Ordinary Course of Business since May 31, 2006; and (iii) Seller’s obligations
under the Contracts listed in Part 2.13 of the Disclosure Schedule and under
Excluded Contracts, to the extent that the existence of such obligations is
ascertainable solely by reference to such Contracts.
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(b) Part
2.14
of the Disclosure Schedule: (i) provides an accurate and complete breakdown
and
aging in all material respects of Seller’s accounts payable as of June 30, 2006;
(ii) provides an accurate and complete breakdown of all customer deposits and
other deposits held by Seller in all material respects as of the date of this
Agreement; and (iii) Provides an accurate and complete breakdown in all material
respects of all notes payable and other indebtedness of the Seller as of the
date of this Agreement.
(c) Except
as
set forth in Part 2.14 of the Disclosure Schedule, Seller has not paid, and
Seller is not and will not become liable for the payment of, any fees, costs
or
expenses of the type referred to in Section 11.1(a).
(d) Part
2.14
of the Disclosure Schedule accurately identifies, and provides an accurate
and
complete breakdown in all material respects of all of the accounts payable
as of
June 13, 2006.
2.15. Compliance
With Legal Requirements.
(a) Except
as
set forth in Part 2.15 of the Disclosure Schedule: (i) Seller is in all material
respects, in full compliance with each Legal Requirement that is applicable
to
it or to the conduct of its business or the ownership or use of any of its
Assets; (ii) no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in a violation by Seller of, or a failure on the part
of
Seller to comply with, any Legal Requirement; and (iii) Seller has not received,
at any time, any notice or other communication (in writing or otherwise) from
any Governmental Body or any other Person regarding: (1) any material actual,
alleged, possible or potential violation of, or failure to comply with, any
Legal Requirement, or (2) any material actual, alleged, possible or potential
obligation on the part of Seller to undertake, or to bear all or any portion
of
the cost of, any cleanup or any remedial, corrective or response action of
any
nature.
(b) Seller
has delivered to the Purchaser an accurate and complete copy of each report,
study, survey or other document to which Seller has access that addresses or
otherwise relates to the compliance of Seller with, or the applicability to
Seller of, any Legal Requirement.
(c) To
the
Seller’s Knowledge, no Governmental Body has proposed or is considering any
Legal Requirement that, if adopted or otherwise put into effect, (i) may have
an
adverse effect on the Assets or Seller’s business or financial condition or on
the ability of Seller to comply with or perform any covenant or obligation
under
any of the Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the
Transactions.
2.16. Governmental
Authorizations.
(a) Part
2.16
of the Disclosure Schedule identifies: (i) each Governmental Authorization
that
is held by Seller; and (ii) each other Governmental Authorization that, to
Seller’s Knowledge, is held by any employee of the Seller or any independent
contractor and relates to or is useful in connection with Seller’s
business.
(b) Seller
has delivered to the Purchaser accurate and complete copies of all of the
Governmental Authorizations identified in Part 2.16 of the Disclosure Schedule,
including all renewals thereof and all amendments thereto. Each Governmental
Authorization identified or required to be identified in Part 2.16 of the
Disclosure Schedule is valid and in full force and effect.
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(c) Except
as
set forth in Part 2.16 of the Disclosure Schedule: (i) To Seller’s Knowledge,
its employees and independent contractors are, and the Seller and their
respective employees have at all times been, in full compliance with all of
the
terms and requirements of each Governmental Authorization identified or required
to be identified in Part 2.16 of the Disclosure Schedule; (ii) no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in
a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization identified or required to be identified in Part
2.16
of the Disclosure Schedule, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, termination or modification
of
any Governmental Authorization identified or required to be identified in Part
2.16 of the Disclosure Schedule; (iii) Seller has never received, and, of CFO
,
no employee of Seller has ever received, any notice or other communication
(in
writing or otherwise) from any Governmental Body or any other Person regarding:
(A) any actual, alleged, possible or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization;
and
(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations required to be identified in Part 2.16 of the
Disclosure Schedule have been duly filed on a timely basis with the appropriate
Governmental Bodies, and each other notice or filing required to have been
given
or made with respect to such Governmental Authorizations has been duly given
or
made on a timely basis with the appropriate Governmental Body, except, with
respect to (i), (ii) or (iii) above, where an MAE would not be likely to
occur.
(d) The
Governmental Authorizations identified in Part 2.16 of the Disclosure Schedule
constitute all of the Governmental Authorizations necessary: (i) to enable
Seller to conduct its business in the manner in which its business is currently
being conducted and in the manner in which its business is proposed to be
conducted, and (ii) to permit Seller to own and use its Assets in the manner
in
which they are currently owned and used and in the manner in which they are
proposed to be owned and used.
2.17. Tax
Matters.
(a) Each
Tax
required to have been paid by Seller (whether pursuant to any Tax Return or
otherwise) has been duly paid in full or on a timely basis. Any Tax required
to
have been withheld or collected by Seller has been duly withheld and collected;
and (to the extent required) each such Tax has been paid to the appropriate
Governmental Body.
(b) Part
2.17
of the Disclosure Schedule accurately identifies each examination or audit
of
any Tax Returns of the Seller that has been conducted since December 31, 2002.
The Seller has delivered to the Purchaser accurate and complete copies of all
audit reports and similar documents (to which the Seller has access) relating
to
such Tax Returns.
(c) Except
as
set forth in Part 2.17 of the Disclosure Schedule, to Seller’s Knowledge, no
claim or other
Proceeding is pending or has been threatened against or with respect to the
Seller in respect
of any
Tax. There are no unsatisfied Liabilities for Taxes (including liabilities
for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency
or similar document received by the Seller. The Seller has not entered into
or
become
bound by
any agreement or
consent pursuant to Section 341(f) of the Code.
(d) There
is
no agreement, plan, arrangement or other Contract covering any employee or
independent contractor or former employee or independent contractor of the
Seller that, individually or collectively, could give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant
to
Section 280G or Section 162 of the Code.
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(e) The
Seller has delivered to (or made available for inspection by) the Purchaser
accurate and complete copies of all material Tax Returns that have been filed
on
behalf of or with respect to the Seller for taxable years 2001, 2002 and 2003.
The information contained in such Tax
Returns
is accurate and complete in all material respects.
2.18. Employee
and Labor Matters.
(a) Part
2.18
of the Disclosure Schedule accurately sets forth, with respect to each employee
of Seller (including any employee of Seller who is on a leave of absence or
on
layoff status): (i) the name of such employee and the date as of which such
employee was originally hired by Seller or one of the Prior Subsidiary; (ii)
such employee’s title, and a description of such employee’s duties and
responsibilities; (iii) the aggregate dollar amount of the compensation
(including wages, salary, commissions, director’s fees, fringe benefits,
bonuses, profit-sharing payments and other payments or benefits of any type)
received by such employee from Seller with respect to services performed in;
(iv) such employee’s annualized compensation as of the date of this Agreement;
(v) each Current Benefit Plan in which such employee participates or is eligible
to participate; and (vi) any Governmental Authorization that is held by such
employee and that relates to or is useful in connection with Seller’s
business.
(b) Except
as
set forth in Part 2.18 of the Disclosure Schedule, Seller is not a party to
or
bound by, and none of the Seller’s employees have ever been a party to or bound
by, any employment agreement or any union contract, collective bargaining
agreement or similar Contract.
(c) The
employment of the employees of the Seller is terminable by Seller at will and
no
employee is entitled to any severance pay or other benefits following
resignation or termination, except as provided by law. The Seller has delivered
to the Purchaser accurate and complete copies of all employee manuals and
handbooks, disclosure materials, policy statements and other materials relating
to the employment of the current and former employees of each of the
Seller.
(d) To
the
Seller’s Knowledge: (i) no employee of Seller intend to terminate his
employment; (ii) no employee of Seller has received an offer to join a business
that may be competitive with Seller’s business; and (iii) no employee of Seller
is a party to or is bound by any confidentiality agreement, noncompetition
agreement or other Contract (with any Person) that may have any material adverse
effect on (A) the performance by such employee of any of his duties or
responsibilities as an employee of Seller, or (B) Seller’s business or
operations.
(e) Seller
is
not engaged, and none of the Seller has ever been engaged, in any unfair labor
practice of any nature. There has never been any slowdown, work stoppage, labor
dispute or union organizing activity, or any similar activity or dispute,
affecting Seller or any of their employees. There is not now pending, and to
Seller’s Knowledge, no Person has threatened to commence, any such slowdown,
work stoppage, labor dispute or union organizing activity or any similar
activity or dispute. No event has occurred, and no condition or circumstance
exists, that might directly or indirectly give rise to or provide a basis for
the commencement of any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute.
(f) Part
2.18
of the Disclosure Schedule sets forth the name of, and a general description
of
the services performed by, each independent contractor to whom the Seller has
made any payments since December 31, 2004.
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2.19. Benefit
Plans; ERISA.
(a) Part
2.19
of the Disclosure Schedule identifies and provides an accurate and complete
description of each Current Benefit Plan and each Past Benefit Plan. None of
the
Seller has ever established, adopted, maintained, sponsored, contributed to,
participated in or incurred any Liability with respect to any Employee Benefit
Plan, except for the Company Plans identified in Part 2.19 of the Disclosure
Schedule; and none of the Seller has ever provided or made available any fringe
benefit or other benefit of any nature to any of its employees, except as set
forth in Part 2.19 of the Disclosure Schedule.
(b) No
Company Plan: (i) provides or provided any benefit guaranteed by the Pension
Benefit Guaranty Corporation; (ii) is or was a “multiemployer plan” as defined
in Section 4001(a)(3) of ERISA; or (iii) is or was subject to the minimum
funding standards of Section 412 of the Code or Section 302 of
ERISA.
There
is
no Person that (by reason of common control or otherwise) is or has at any
time
been treated together with Seller or any of the Prior Subsidiary as a single
employer within the meaning of Section 414 of the Code.
(c) Seller
has delivered to the Purchaser, with respect to each Company Plan: (i) an
accurate and complete copy of such Company Plan and all amendments thereto
(including any amendment that is scheduled to take effect in the future); (ii)
an accurate and complete copy of each Contract (including any trust agreement,
funding agreement, service provider agreement, insurance agreement, investment
management agreement or record keeping agreement) relating to such Company
Plan;
(iii) an accurate and complete copy of any description, summary, notification,
report or other document that has been furnished to any employee of Seller
with
respect to such Company Plan; (iv) an accurate and complete copy of any form,
report, registration statement or other document that has been filed with or
submitted to any Governmental Body with respect to such Company Plan; and (v)
an
accurate and complete copy of any determination letter, notice or other document
that has been issued by, or that has been received by Seller from, any
Governmental Body with respect to such Company Plan.
(d) Except
as
set for in Section 2.19 of the Disclosure Schedule and except where an MAE
would
not be likely to occur, each Current Benefit Plan is being operated and
administered in full compliance with the provisions thereof, and each Company
Plan has at all times been operated and administered in full compliance with
the
provisions thereof. Each contribution or other payment that is required to
have
been accrued or made under or with respect to any Company Plan has been duly
accrued and made on a timely basis. Each Current Benefit Plan complies and
is
being operated and administered in full compliance with, and each Company Plan
has at all times complied and been operated and administered in full compliance
with, all applicable reporting, disclosure and other requirements of ERISA
and
the Code and all other applicable Legal Requirements in all material respects.
None of the Seller has ever incurred any Liability to the Internal Revenue
Service or any other Governmental Body with respect to any Company Plan; and
no
event has occurred, and no condition or circumstance exists, that might (with
or
without notice or lapse of time) give rise directly or indirectly to any such
Liability. The Seller, and no Person that is or was an administrator or
fiduciary of any Company Plan (or any such administrator or fiduciary), has
engaged in any transaction or has otherwise acted or failed to act in a manner
that has subjected or may subject Seller to any Liability for breach of any
fiduciary duty or any other duty. No Company Plan, and no Person that is or
was
an administrator or fiduciary of any Company Plan (or any such administrator
or
fiduciary): (i) has engaged in a “prohibited transaction” within the meaning of
Section 406 of ERISA or Section 4975 of the Code; (ii) has failed to perform
any
of the responsibilities or obligations imposed upon fiduciaries under Title
I of
ERISA; or (iii) has taken any action that (A) may subject such Company Plan
or
such Person to any Tax, penalty or Liability relating to any “prohibited
transaction,” or (B) may directly or indirectly give rise to or serve as a basis
for the assertion (by any employee or by any other Person) of any claim under,
on behalf of or with respect to such Company Plan.
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(e) No
inaccurate or misleading representation, statement or other communication has
been made or directed (in writing or otherwise) to any current or former
employee of Seller (i) with respect to such employee’s participation,
eligibility for benefits, vesting, benefit accrual or coverage under any Company
Plan or with respect to any other matter relating to any Company Plan, or (ii)
with respect to any proposal or intention on the part of Seller to establish
or
sponsor any Employee Benefit Plan or to provide or make available any fringe
benefit or other benefit of any nature.
(f) Except
as
set forth in Part 2.19 of the Disclosure Schedule, Seller has not advised any
of
its employees (in writing or otherwise) that it intends or expects to establish
or sponsor any Employee Benefit Plan or to provide or make available any fringe
benefit or other benefit of any nature in the future.
2.20. Environmental
Matters.
(a) Seller
is
not liable or to Seller’s Knowledge potentially liable for any response cost or
natural resource damages under Section 107(a) of CERCLA, or under any other
so-called “superfund” or “superlien” law or similar Legal Requirement, at or
with respect to any site.
(b) The
Seller has never received any notice or other communication (in writing or
otherwise) from any Governmental Body or other Person regarding any actual,
alleged, possible or potential Liability arising from or relating to the
presence, generation, manufacture, production, transportation, importation,
use,
treatment, refinement, processing, handling, storage, discharge, release,
emission or disposal of any Hazardous Material. No Person has ever commenced
or
to Seller’s Knowledge threatened to commence any contribution action or other
Proceeding against Seller in connection with any such actual, alleged, possible
or potential Liability; and to Seller’s Knowledge, no event has occurred, and no
condition or circumstance exists, that may directly or indirectly give rise
to,
or result in Seller becoming subject to, any such Liability.
(c) Except
as
set forth in Part 2.20 of the Disclosure Schedule, none of the Seller has ever
generated, manufactured, produced, transported, imported, used, treated,
refined, processed, handled, stored, discharged, released or disposed of any
Hazardous Material (whether lawfully or unlawfully). Except as set forth in
Part
2.20 of the Disclosure Schedule, none of the Seller has ever permitted
(knowingly or otherwise) any Hazardous Material to be generated, manufactured,
produced, used, treated, refined, processed, handled, stored, discharged,
released or disposed of (whether lawfully or unlawfully): (i) on or beneath
the
surface of any real property that is, or that has at any time been, owned by,
leased to, controlled by or used by Seller; (ii) in or into any surface water,
groundwater, soil or air associated with or adjacent to any such real property;
or (iii) in or into any well, pit, pond, lagoon, impoundment, ditch, landfill,
building, structure, facility, improvement, installation, equipment, pipe,
pipeline, vehicle or storage container that is or was located on or beneath
the
surface of any such real property or that is or has at any time been owned
by,
leased to, controlled by or used by Seller.
(d) To
Seller’s Knowledge, all property that is owned by, leased to, controlled by or
used by Seller, and all surface water, groundwater, soil and air associated
with
or adjacent to such property: (i) is in clean and healthful condition; is free
of any Hazardous Material and any harmful chemical or physical conditions;
and
(ii) is free of any environmental contamination of any nature.
(e) Each
storage tank or other storage container that is or has been owned by, leased
to,
controlled by or used by Seller, or that is located on or beneath the surface
of
any real property owned by, leased to, controlled by or used by Seller: (i)
is
in sound condition; and (i) has been demonstrated by accepted testing
methodologies to be free of any corrosion or leaks.
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2.21. Sale
of Products; Performance of Services.
To
Seller’s Knowledge:
(a) Each
product that has been sold by Seller to any Person: (i) conformed and complied
in all material respects with the terms and requirements of any applicable
warranty or other Contract and with all applicable Legal Requirements; and
(ii)
was free of any material design defects, construction defects or other defects
or deficiencies at the time of sale.
(b) All
repair services and other services that have been performed by the Seller were,
in all material respects, performed properly and in full conformity with the
terms and requirements of all applicable warranties and other Contracts and
with
all applicable Legal Requirements.
(c) Seller
will not incur or otherwise become subject to any material Liability arising
directly or indirectly from any product manufactured or sold, or any repair
services or other services performed by, Seller on or at any time prior to
the
Closing Date.
(d) Except
as
set forth in Schedule 2.21 of the Disclosure Schedule, no product manufactured
or sold by Seller has been the subject of any recall or other similar action;
and no event has occurred, and no condition or circumstance exists, that might
(with or without notice or lapse of time) directly or indirectly give rise
to or
serve as a basis for any such recall or other similar action relating to any
such product.
(e) Except
as
set forth in Part 2.21 of the Disclosure Schedule, no customer or other Person
has ever asserted or threatened to assert any claim against Seller (i) under
or
based upon any warranty provided by or on behalf of Seller, or (ii) under or
based upon any other warranty relating to any product sold by Seller or any
services performed by Seller. To Seller’s Knowledge, no event has occurred, and
no condition or circumstance exists, that might (with or without notice or
lapse
of time) directly or indirectly give rise to or serve as a basis for the
assertion of any such claim.
2.22. Insurance.
(a) Part
2.22
of the Disclosure Schedule accurately sets forth, with respect to each insurance
policy maintained by or at the expense of, or for the direct or indirect benefit
of, Seller: (i) the name of the insurance carrier that issued such policy and
the policy number of such policy; (ii) whether such policy is a “claims made” or
an “occurrences” policy; (ii) a description of the coverage provided by such
policy and the material terms and provisions of such policy (including all
applicable coverage limits, deductible amounts and co-insurance arrangements
and
any non-customary exclusions from coverage); (iv) the annual premium payable
with respect to such policy, and the cash value (if any) of such policy; and
(v)
a description of any claims pending, and any claims that have been asserted
in
the past, with respect to such policy. Part 2.22 of the Disclosure Schedule
also
identifies: (1) each pending application for insurance that has been submitted
by or on behalf of Seller, (2) each self-insurance or risk-sharing arrangement
affecting Seller or, any of its Assets, and (3) all material risks (of the
type
customarily insured by comparable entities) for which the Seller does not
maintain insurance coverage. Seller has delivered to the Purchaser accurate
and
complete copies of all of the insurance policies identified in Part 2.22 of
the
Disclosure Schedule (including all renewals thereof and endorsements thereto)
and all of the pending applications identified in Part 2.22 of the Disclosure
Schedule.
(b) Each
of
the policies identified in Part 2.22 of the Disclosure Schedule is valid,
enforceable and in full force and effect, and has been issued by an insurance
carrier that, to Seller’s Knowledge, is solvent, financially sound and
reputable. All of the information contained in the applications submitted in
connection with said policies was (at the times said applications were
submitted) accurate and complete in all material respects, and all premiums
and
other amounts owing with respect to said policies have been paid in full on
a
timely basis. The nature, scope and dollar amounts of the insurance coverage
provided by said policies are sufficient to adequately insure Seller’s business,
Assets, operations, key employees, services and potential liabilities; and
said
insurance coverage is at least as comprehensive as the insurance coverage
customarily maintained by Comparable Entities.
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(c) Except
as
set forth in Part 2.22 of the Disclosure Schedule, there is no pending claim
under or based upon any of the policies identified in Part 2.22 of the
Disclosure Schedule; and no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any such claim.
(d) None
of
the Seller has received: (i) any notice or other communication (in writing
or
otherwise) regarding the actual or possible cancellation or invalidation of
any
of the policies identified in Part 2.22 of the Disclosure Schedule or regarding
any actual or possible adjustment in the amount of the premiums payable with
respect to any of said policies; (ii) any notice or other communication (in
writing or otherwise) regarding any actual or possible refusal of coverage
under, or any actual or possible rejection of any claim under, any of the
policies identified in Part 2.22 of the Disclosure Schedule; or (iii) any
indication that the issuer of any of the policies identified in Part 2.22 of
the
Disclosure Schedule may be unwilling or unable to perform any of its obligations
thereunder.
2.23. Related
Party Transactions. Except
as
set forth in Part 2.23 of the Disclosure Schedule and to Seller’s
Knowledge:
(a) no
Related Party has, and no Related Party has at any time since June 30, 2006,
had, any direct or indirect interest of any nature in any asset used in or
otherwise relating to the business of any of Seller;
(b) no
Related Party is, or has at any time since June
30,
2006 been,
nor
will any Related Party be indebted to Seller;
(c) since
June 30, 2006, no Related Party has entered into, or will be entering into
up
until the time of the Closing, or has had any direct or indirect financial
interest in, any Contract, transaction or business dealing of any nature
involving Seller;
(d) no
Related Party is competing or will be competing up until the time of the
Closing, or has at any time since June 30, 2006 competed, directly or
indirectly, with Seller in any market served by Seller;
(e) no
Related Party has any claim or right against Seller; and
(f) no
event
has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) directly or indirectly give rise to or serve
as
a basis for any claim or right in favor of any Related Party against
Seller.
2.24. Certain
Payments, Etc. Seller,
and to Seller’s Knowledge, no officer, employee, or other Person associated with
or acting for or on behalf of Seller, has at any time, directly or
indirectly:
(a) used
any
corporate funds: (i) to make any unlawful political contribution or gift or
for
any other unlawful purpose relating to any political activity, (ii) to make
any
unlawful payment to any governmental official or employee, or (iii) to establish
or maintain any unlawful or unrecorded fund or account of any
nature;
(b) made
any
false or fictitious entry, or failed to make any entry that should have been
made, in any of the books of account or other records of Seller;
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(c) made
any
payoff, influence payment, bribe, rebate, kickback or unlawful payment to any
Person;
(d) performed
any favor or given any gift which was not deductible for federal income tax
purposes;
(e) made
any
payment (whether or not lawful) to any Person, or provided (whether lawfully
or
unlawfully) any favor or anything of value (whether in the form of property
or
services, or in any other form) to any Person, for the purpose of obtaining
or
paying for (i) favorable treatment in securing business, or (ii) any other
special concession; or
(f) agreed,
committed, offered or attempted to take any of the actions described in clauses
“(a)” through “(e)” above.
2.25. Proceedings;
Orders.
(a) Except
as
set forth in Part 2.25 of the Disclosure Schedule and to Seller’s Knowledge,
there is no pending Proceeding, and no Person has threatened to commence any
Proceeding: (i) that involves Seller or that otherwise relates to or might
affect Seller’s business or any of the Assets owned or used by Seller (whether
or not Seller is named as a party thereto); or (ii) that challenges, or that
may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the Transactions.
(b) Except
as
set forth in Part 2.25 of the Disclosure Schedule, no event has occurred, and
no
claim, dispute or other condition or circumstance exists, that might directly
or
indirectly give rise to or serve as a basis for the commencement of any such
Proceeding.
(c) Except
as
set forth in Part 2.25 of the Disclosure Schedule, no Proceeding has ever been
commenced by or against Seller; and no Proceeding otherwise involving or
relating to Seller has been pending or to Seller’s Knowledge threatened at any
time.
(d) Seller
has delivered to the Purchaser accurate and complete copies of all pleadings,
correspondence and other written materials to which Seller has access that
relate to the Proceedings identified in Part 2.25 of the Disclosure Schedule.
(e) There
is
no Order to which Seller or any of the Assets owned or used by Seller, is
subject to any Order that relates to Seller’s business or to any of the Assets
owned or used by Seller.
(f) To
Seller’s Knowledge, Ramesh Trivedi, Leland Witherspoon and David Adams are not
subject to any Order that prohibits them from engaging in or continuing any
conduct, activity or practice relating to Seller’s business.
(g) There
is
no proposed Order that, if issued or otherwise put into effect: (i) would have
any material adverse effect on the Assets or Seller’s business or financial
condition,, or on the ability of Seller to comply with or perform any covenant
or obligation under any of the Transactional Agreements, or (ii) would, to
Seller’s Knowledge, have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
2.26. Authority;
Binding Nature of Agreements.
(a) Subject
to Stockholder approval, Seller has the absolute and unrestricted right, power
and authority to enter into and to perform its obligations under this Agreement;
and the execution, delivery and performance by Seller of this Agreement have
been duly authorized by all necessary action on the part of Seller and its
Stockholders, board of directors and officers. This Agreement constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as the same may be limited by applicable
bankruptcy or insolvency laws.
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2.27. Non-Contravention;
Consents. Except
as
set forth in Part 2.27 of the Disclosure Schedule, neither the execution and
delivery of any of the Transactional Agreements, nor the consummation or
performance of any of the Transactions, will directly or indirectly materially
(with or without notice or lapse of time):
(a) contravene,
conflict with or result in a violation of (i) any of the provisions of Seller’s
certificate of incorporation or bylaws, or (ii) any resolution adopted Seller’s
board of directors or any committee of Seller’s board of directors;
(b) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Transactions or to exercise
any
remedy or obtain any relief under, any Legal Requirement or any Order to which
Seller, or any of the Assets owned or used by Seller, is subject;
(c) cause
Seller, the Purchaser or any affiliate of the Purchaser to become subject to,
or
to become liable for the payment of, any Tax;
(d) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by Seller
or
any of its employees or that otherwise relates to Seller’s business or to any of
the Assets owned or used by Seller;
(e) contravene,
conflict with or result in a violation or breach of, or result in a default
under, any provision of any Seller Contract;
(f) give
any
Person the right to (i) declare a default or exercise any remedy under any
Seller Contract, (ii) accelerate the maturity or performance of any Seller
Contract, or (iii) cancel, terminate or modify any Seller Contract;
or
(g) result
in
the imposition or creation of any Encumbrance upon or with respect to any asset
owned or used by Seller.
Except
as
set forth in Part 2.27 of the Disclosure Schedule, Seller has made all filings
with or given the necessary notices to, or to obtain any Consent from, any
Person in connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the
Transactions.
2.28. Brokers.
Seller
has not agreed or become obligated to pay, or has taken any action that might
result in any Person claiming to be entitled to receive, any brokerage
commission, finder’s fee or similar commission or fee in connection with any of
the Transactions.
2.29. Full
Disclosure.
(a) None
of
the Transactional Agreements contains or will contain any material untrue
statement of fact; and none of the Transactional Agreements omits or will omit
to state any material fact necessary to make any of the representations,
warranties or other statements or information contained therein not
misleading.
(b) Except
as
set forth in Part 2.30 of the Disclosure Schedule, there is no fact within
the
Knowledge of Seller (other than publicly known facts relating exclusively to
political or economic matters of general applicability that will adversely
affect all Comparable Entities) that: (i) may have any material adverse effect
on the Assets or Seller’s business or financial condition, or on the ability of
Seller to comply with or perform any covenant or obligation under any of the
Transactional Agreements, or (ii) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the
Transactions.
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(c) All
of
the information set forth in the Disclosure Schedule, and all other information
regarding the Seller and the Assets and the Seller’s business and financial
condition that has been furnished to the Purchaser or any of its Representatives
by or on behalf of Seller or any of Seller’s Representatives, is accurate and
complete in all respects.
(d) Seller
has provided the Purchaser and the Purchaser’s Representatives with full and
complete access to all of Seller’s records and other documents and data and to
all records and other documents and data of the Prior Subsidiary.
SECTION
3. REPRESENTATIONS
AND WARRANTIES OF PURCHASER
The
Purchaser represents and warrants to Seller as follows:
3.1. Authority;
Binding Nature of Agreement.
Purchaser
has the absolute and unrestricted right, power and authority to enter into
and
to perform its obligations under this Agreement; and the execution, delivery
and
performance by Purchaser of this Agreement have been duly authorized by all
necessary action on the part of Purchaser and its board of directors and
officers. This Agreement constitutes the legal, valid and binding obligation
of
Purchaser, enforceable against Purchaser in accordance with its terms, except
as
the same may be limited by applicable bankruptcy or insolvency
laws;
3.2. Brokers.
The
Purchaser has not agreed or become obligated to pay, and has not taken any
action that might result in any Person claiming to be entitled to receive,
any
brokerage commission, finder’s fee or similar commission or fee in connection
with any of the Transactions.
SECTION
4. PRE-CLOSING
COVENANTS
4.1. Access
and Investigation. Seller
shall ensure will use commercially reasonable efforts to ensure that, at all
times during the pre-closing period:
(a) Seller
and its Representatives provide the Purchaser and its Representatives with
free
and complete access during normal business hours to personnel and Assets and
to
all existing books, records, Tax Returns, work papers and other documents and
information relating to the Seller;
(b) Seller
and its Representatives provide the Purchaser and its Representatives with
such
copies of existing books, records, Tax Returns, work papers and other documents
and information relating to the Seller as the Purchaser may request in good
faith; and
(c) Seller
and its Representatives compile and provide the Purchaser and its
Representations with such additional financial, operating and other data and
information regarding the Seller as the Purchaser may request in good
faith.
4.2. Operation
of Business. Seller
shall ensure that, during the Pre-Closing Period:
(a) Seller
conducts its operations exclusively in the Ordinary Course of Business and
in
the same manner as such operations have been conducted prior to the date of
this
Agreement;
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(b) Seller
preserves intact its current business organization, keeps available the services
of its current officers and employees and maintains its relations and good
will
with all suppliers, customers, landlords, creditors, licensors, licensees,
employees and other Persons having business relationships with
Seller;
(c) Seller
to
use all reasonable efforts and within a reasonable time to execute all necessary
documents to put into place all reasonable and necessary insurance policies
as
required under Section 2.22(b) prior to Closing;
(d) Seller’s
officers confer with the Purchaser regularly to the Purchaser concerning the
status of the Assets or Seller’s business or financial condition;
(e) Seller
immediately notifies the Purchaser of any inquiry, proposal or offer from any
Person relating to any Acquisition Transaction;
(f) Seller
and its officers use commercially reasonable efforts to cause the Company to
operate profitably and to maximize its net income;
(g) Seller
does not form any subsidiary or acquire any equity interest or other interest
in
any other Entity;
(h) Seller
does not enter into or permit any of the Assets owned or used by Seller to
become bound by any Contract, except for any Excluded Contract;
(i) Seller
does not incur, assume or otherwise become subject to any Liability, except
for
current liabilities (of the type required to be reflected in the “liabilities”
column of a balance sheet prepared in accordance with GAAP) incurred in the
Ordinary Course of Business;
(j) Seller
does not enter into any transaction or take any other action of the type
referred to in Section 2.5;
(k) Seller
does not enter into any transaction or take any other action outside the
Ordinary Course of Business;
(l) Seller
does not enter into any transaction or take any other action that might cause
or
constitute a Breach of any representation or warranty made by Seller in this
Agreement or in the Closing Certificate; and
(m) Seller
does not agree, commit or offer (in writing or otherwise), and does not attempt,
to take any of the actions described in clauses “(i)” through “(v)” of this
Section 4.2.
4.3. Filings
and Consents. Seller
shall ensure that:
(a) as
soon
as possible after the date of this Agreement, Seller files with the appropriate
Governmental Bodies the notification form required to be filed by Seller with
respect to the Transactions, together with a request for early termination
of
the applicable waiting period;
(b) after
consultation with the Purchaser, Seller promptly makes any additional filing
required to be made by Seller under th and promptly furnishes to the appropriate
Governmental Bodies such additional information as may be requested under the
(c) each
other filing or notice required to be made or given (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by Seller in connection
with
the execution and delivery of any of the Transactional Agreements or in
connection with the consummation or performance of any of the Transactions
(including each of the filings and notices identified in Part 2.28 of the
Disclosure Schedule) is made or given as soon as possible after the date of
this
Agreement;
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(d) each
Consent required to be obtained (pursuant to any applicable Legal Requirement,
Order or Contract, or otherwise) by Seller in connection with the execution
and
delivery of any of the Transactional Agreements or in connection with the
consummation or performance of any of the Transactions (including each of the
Consents identified in Part 2.28 of the Disclosure Schedule) is obtained as
soon
as possible after the date of this Agreement and remains in full force and
effect through the Closing Date;
(e) Seller
promptly delivers to the Purchaser a copy of each filing made, each notice
given
and each Consent obtained by Seller during the Pre-Closing Period;
and
(f) during
the Pre-Closing Period, Seller and its Representatives cooperate with the
Purchaser and with the Purchaser’s Representatives, and prepare and make
available such documents and take such other actions as the Purchaser may
request in good faith, in connection with any filing, notice or Consent that
the
Purchaser is required or elects to make, give or obtain.
4.4. Notification;
Updates to Disclosure Schedule.
(a) During
the Pre-Closing Period, Seller shall promptly notify the Purchaser in writing
of: (i) the discovery by Seller of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this Agreement and that
caused or constitutes a Breach of any representation or warranty made by Seller
in this Agreement; (ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a Breach of any representation or warranty made by Seller in this
Agreement if (A) such representation or warranty had been made as of the time
of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any Breach
of
any covenant or obligation of Seller: and (iv) any event, condition, fact or
circumstance that may make the timely satisfaction of any of the conditions
set
forth in Section 6 or Section 7 impossible or unlikely.
(b) If
any
event, condition, fact or circumstance that is required to be disclosed pursuant
to Section 4.4(a) requires any change in the Disclosure Schedule, or if any
such
event, condition, fact or circumstance would require such a change assuming
the
Disclosure Schedule were dated as of the date of the occurrence, existence
or
discovery of such event, condition, fact or circumstance, then Seller shall
promptly deliver to the Purchaser an update to the Disclosure Schedule
specifying such change. No such update shall be deemed to supplement or amend
the Disclosure Schedule for the purpose of (i) determining the accuracy of
any
of the representations and warranties made by Seller in this Agreement or in
the
Closing Certificate, or (ii) determining whether any of the conditions set
forth
in Section 6 has been satisfied.
4.5. No
Negotiation.
Seller
shall ensure that, during the Pre-Closing Period, neither Seller nor any of
Seller’s Representatives directly or indirectly:
(a) solicits
or encourages the initiation of any inquiry, proposal or offer from any Person
(other than the Purchaser) relating to any Acquisition Transaction;
(b) participates
in any discussions or negotiations with, or provides any non-public information
to, any Person (other than the Purchaser) relating to any Acquisition Proposal;
or
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(c) except
as
otherwise required by applicable law, rule or regulation or through the exercise
of appropriate fiduciary duty, considers the merits of any unsolicited inquiry,
proposal or offer from any Person (other than the Purchaser) relating to any
Acquisition Transaction.
4.6. Best
Efforts; Stockholder Approval.
Both
parties shall use their best efforts to mutually cooperate with each other
and
ensure that all closing conditions are satisfied on a timely basis. The Board
of
Directors of Seller shall recommend to the Stockholders that the Stockholders
approve the Transaction and take any other action reasonably necessary to
effectuate such approval.
4.7. Employment
Offers.
Purchaser and Seller shall mutually negotiate in good faith the terms and
conditions of employment with Purchaser for each of Ramesh Trivedi, Leland
Witherspoon, and Dave Adams.
4.8. Confidentiality.
Purchaser
and Seller shall ensure that, during the Pre-Closing Period:
(a) Purchaser,
Seller and their respective Representatives keep strictly confidential the
existence and terms of this Agreement;
(b) neither
party nor any of its Representatives issues or disseminates any press release
or
other publicity or otherwise makes any disclosure of any nature (to any of
Seller’s suppliers, customers, landlords, creditors or employees or to any other
Person) regarding any of the Transactions, except in each Parties reasonable
discretion and to the extent that either party is required by law, rule or
regulation to make any such disclosure regarding the Transactions:
and
(c) if
either
party is required by law to make any disclosure regarding the Transactions,
the
disclosing party shall advise the non-disclosing party, the nature and content
of the intended disclosure within a reasonable time either before or after
such
disclosure.
SECTION
5. RESERVED
SECTION
6. CONDITIONS
PRECEDENT TO PURCHASER’S OBLIGATION TO CLOSE
The
Purchaser’s obligation to purchase the Assets and to take the other actions
required to be taken by the Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part, in accordance
with Section 11.10):
6.1. Accuracy
of Representations.
(a) Each
of
the Specified Representations shall have been accurate in all material respects
as of the date of this Agreement, and shall be accurate in all respects as
of
the Scheduled Closing Time as if made at the Scheduled Closing Time, without
giving effect to any update to the Disclosure Schedule.
(b) All
of
the other representations and warranties made by Seller in this Agreement
(considered collectively), and each of said representations and warranties
(considered individually), shall have been accurate in all material respects
as
of the date of this Agreement, and shall be accurate in all material respects
as
of the Scheduled Closing Time as if made at the Scheduled Closing Time, without
giving effect to any update to the Disclosure Schedule.
6.2. Performance
of Obligations.
(a) Seller
shall have executed and delivered each of the agreements required to be executed
and delivered by Seller pursuant to Section 1.4(b).
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(b) All
of
the other covenants and obligations that Seller is required to comply with
or to
perform at or prior to the Closing (considered collectively), and each of said
covenants and obligations (considered individually), shall have been duly
complied with and performed in all material respects.
6.3. Consents.
Each
of
the Consents identified in Part 2.28 of the Disclosure Schedule shall have
been
obtained and shall be in full force and effect.
6.4. Additional
Documents.
Purchaser shall have received the following documents:
(a) an
opinion letter from law firm of Snow Becker Krauss P.C. dated the Closing Date,
in the form of Exhibit E;.
(b) a
letter
from _________________________________, dated as of a date not more than three
days prior to the Closing Date, in the form of Exhibit F;
(c) such
other documents as the Purchaser may reasonably request in good faith for the
purpose of (i) evidencing the accuracy of any representation or warranty made
by
Seller, (ii) evidencing the compliance by Seller , or the performance by Seller
of, any covenant or obligation set forth in this Agreement, (iii) evidencing
the
satisfaction of any condition set forth in this Section 6, or (iv) otherwise
facilitating the consummation or performance of any of the
Transactions.
6.5. No
Proceedings.
Since
the date of this Agreement, there shall not have been commenced or threatened
against the Purchaser, or against any Person affiliated with the Purchaser,
any
Proceeding (a) involving any challenge to, or seeking damages or other relief
in
connection with, any of the Transactions, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
6.6. No
Prohibition. Neither
the consummation nor the performance of any the Transactions will, directly
or
indirectly (with or without notice or lapse of time), contravene or conflict
with or result in a violation of, or cause the Purchaser or any Person
affiliated with the Purchaser to suffer any adverse consequence under, (a)
any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been proposed by or before any Governmental Body.
SECTION
7. CONDITIONS
PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
The
Seller’s obligation to Sell the Assets and to take the other actions required to
be taken by the Seller at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may
be
waived by the Seller, in whole or in part, in writing):
7.1. Accuracy
of Representations. Each
of
said representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall
be
accurate in all material respects as of the Scheduled Closing Time as if made
at
the Scheduled Closing Time.
7.2. Purchaser’s
Performance.
All
of
the covenants and obligations that the Purchaser is required to comply with
or
to perform pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of said covenants and obligations (considered
individually), shall have been complied with and performed in all material
respects.
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7.3. Additional
Documents.
Seller
shall have received the following documents:
(a) an
opinion letter from law firm of Soden & Steinberger, LLP dated the Closing
Date, in the form of Exhibit F;.
(b) such
other documents as the Seller may request in good faith for the purpose of
(i)
evidencing the accuracy of any representation or warranty made by Purchaser,
(ii) evidencing the compliance by Purchaser with, or the performance by
Purchaser of, any covenant or obligation set forth in this Agreement, (iii)
evidencing the satisfaction of any condition set forth in this Section 7, or
(iv) otherwise facilitating the consummation or performance of any of the
Transactions.
7.4 Stockholder
Approval.
Stockholders of Seller representing not less than a majority of the issued
and
outstanding shares of capital stock of Seller shall have approved this Agreement
and the transactions contemplated hereby at a meeting of stockholders of Seller
for which due notice has been provided.
SECTION
8. TERMINATION
8.1. Termination
Events. This
Agreement may be terminated prior to the Closing:
(a) by
the
Purchaser if (i) there is a material Breach of any representation, warranty,
covenant or obligation of Seller, or (ii) the Purchaser reasonably determines
that the timely satisfaction of any condition set forth in Section 6 has become
impossible, or impractical (other than as a result of any failure on the part
of
the Purchaser to comply with or perform its covenants and obligations under
this
Agreement);
(b) by
the
Seller if (i) there is a material Breach of any representation, warranty,
covenant or obligation of the Purchaser, or (ii) the Seller reasonably
determines that the timely satisfaction of any condition set forth in Section
7
has become impossible or impractical (other than as a result of any failure
on
the part of the Seller to comply with or perform its covenants and obligations
under this Agreement);
(c) by
the
Purchaser, at Purchaser’s sole discretion if the Closing has not taken place on
or before June 30, 2007, (other than as a result of any failure on the part
of
the Purchaser to comply with or perform its covenants and obligations under
this
Agreement);
(d) by
the
mutual consent of the Purchaser and the Seller.
8.2. Termination
Procedures. If
the
Purchaser wishes to terminate this Agreement pursuant to Section 8.1(a) or
Section 8.1(c), the Purchaser shall deliver to the Seller a written notice
stating that the Purchaser is terminating this Agreement and setting forth
a
brief description of the basis on which the Purchaser is terminating this
Agreement. If the Seller wishes to terminate this Agreement pursuant to Section
8.1(b), the Seller shall deliver to the Purchaser a written notice stating
that
the Seller is terminating this Agreement and setting forth a brief description
of the basis on which the Seller is terminating this Agreement.
8.3. License
Agreement.
In the
event that this Agreement is terminated by Purchaser pursuant to Section 8.1(c)
or by Seller for any reason other than pursuant to Section 8.1(b) or (d) hereof,
and provided that Purchaser is not in default of any provision of this
Agreement, Seller agrees to execute in favor of Purchaser an exclusive license
to use, manufacture, market and sell the ROBODOC Surgical Assist System and
ORTHODOC Pre-Surgical Planning Station, including any and all Licensed Software
as defined in the License Agreement annexed as Exhibit A to that certain Loan
Agreement and Secured Promissory Note of even date herewith by and between
the
parties.
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8.4. Termination
Fee.
(a) In
the
event that the Closing does not occur as a result of the material breach of
this
Agreement by Seller (that cannot be cured upon reasonable notice and an
opportunity to cure), then Seller shall, within thirty (30) days after
termination of this Agreement, pay to Purchaser, as liquidated damages and
not
as a penalty, an amount equal to $240,000.
(b) Seller
acknowledges that the termination fee pursuant to this Section 8.3(b) is an
integral part of the transactions contemplated by this Agreement, and that,
without such fee, Purchaser would not enter into this Agreement. Seller further
acknowledges that damages resulting from the failure to consummate the Closing
as a result of a breach by Seller hereto would be difficult to determine and
the
termination fee payable pursuant to clause (i) above is the parties’ best
estimate of such damages.
8.5. Effect
of Termination. If
this
Agreement is terminated pursuant to Section 8.1, all further obligations of
the
parties under this Agreement shall terminate; provided, however,
that:
(a) no
party
shall be relieved of any obligation or other Liability arising from any Breach
by such party of any provision of this Agreement; and
(b) the
parties shall, in all events, remain bound by and continue to be subject to
the
provisions set forth in Section 10; and
(c) all
parties shall, in all events, remain bound by and continue to be subject to
Section 4.8.
8.6. Nonexclusivity
of Termination Rights. The
termination rights provided in Section 8.1 shall not be deemed to be exclusive.
Accordingly, the exercise by any party of its right to terminate this Agreement
pursuant to Section 8.1 shall not be deemed to be an election of remedies and
shall not be deemed to prejudice, or to constitute or operate as a waiver of,
any other right or remedy that such party may be entitled to exercise (whether
under this Agreement, under any other Contract, under any statute, rule or
other
Legal Requirement, at common law, in equity or otherwise).
SECTION
9. INDEMNIFICATION,
ETC.
9.1. Survival
of Representations and Covenants.
(a) The
representations, warranties, covenants and obligations of each party to this
Agreement shall survive: (i) the Closing and the sale of the Assets to the
Purchaser; (ii) any sale or other disposition of any or all of the Assets by
the
Purchaser; and (iii) the death or dissolution of any party to this Agreement,
in
each case for a period of six (6) months from the date of the Closing,
provided that,
the
representations and warranties contained in Section 2.17 shall survive the
Closing for a period of six (6) years.
(b) In
the
event that a Claim Notice (as defined below) relating to any representation,
warranty, covenant or obligation is given to any party on or prior to the
applicable survival period set forth in subsection (a) above, then,
notwithstanding anything to the contrary contained in this Section 9.1, such
representation or warranty shall not so expire with respect to the specific
claim so asserted.
(c) For
purposes of this Agreement, a “Claim Notice” relating to a particular
representation, warranty, covenant or obligation shall be deemed to have been
given if any party, acting in good faith, delivers to the other party a written
notice stating that such party believes that there is or has been a possible
Breach of such representation, warranty, covenant or obligation and containing
(i) a brief description of the circumstances supporting such party’s belief that
there is or has been such a possible Breach, and (ii) a non-binding, preliminary
estimate of the aggregate dollar amount of the actual and potential Damages
that
have arisen and may arise as a direct or indirect result of such possible
Breach.
-25-
(d) For
purposes of this Agreement, each statement or other item of information set
forth in the Disclosure Schedule or in any update to the Disclosure Schedule
shall be deemed to be a representation and warranty made by the Seller in this
Agreement.
9.2. Indemnification
By The Seller.
(a) The
Shareholders and the Seller, jointly and severally, shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages that are directly or
indirectly suffered or incurred by any
of
the Indemnitees or
to
which any
of
the Indemnitees may otherwise
become subject
at any
time
(regardless of whether or not such Damages relate to any third-party claim)
and
that arise directly or indirectly from or as a direct or indirect
result of, or are directly or indirectly connected with:
(i) any
Breach of any of the representations or warranties made by the Seller
in
this Agreement (without giving effect to any update to the Disclosure
Schedule) or in the Closing Certificate or any of the other Transactional
Agreements;
(ii) any
Breach of any covenant or obligation of the Seller contained in any of the
Transactional Agreements;
(iii) any
Liability of the Seller arising prior to the Closing, other than the Assumed
Liabilities; or
(iv) any
Proceeding relating directly or indirectly to any Breach, alleged Breach,
Liability or matter of the type referred to in clause “(i),”
“(ii),”
or “(iii),” above
(including any Proceeding commenced by any party for the purpose of enforcing
any of its rights under this Section 9.2).
(b) The
Seller shall not be required to make any indemnification payment pursuant to
Section 9.2(a) until such time as the total amount of all Damages that have
been
directly or indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds $25,000. (If the total amount of such Damages
exceeds the $25,000, the Indemnitees shall be entitled to be indemnified against
and compensated and reimbursed for the entire amount of such Damages, and not
merely the portion of such Damages exceeding $25,000.)
9.3. Indemnification
By Purchaser.
(a) The
Purchaser shall hold harmless and indemnify the Seller from and against, and
shall compensate and reimburse the Seller for, any Damages that are directly
or
indirectly suffered or incurred by the Seller or to which the Seller may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third-party claim) and that arise directly or indirectly from
or
as a direct or indirect result of, or are directly or indirectly connected
with:
(i) any
failure on the part of the Purchaser to perform and discharge the Assumed
Liabilities on a timely basis;
(ii) any
Breach of any representation or warranty made by the Purchaser in this Agreement
or any of the Transactional Agreements;
-26-
(iii) any
Breach of any covenant or obligation of the Purchaser contained in this
Agreement or any of the Transactional Agreements; or
(iv) any
Proceeding relating directly or indirectly to any failure or Breach of the
type
referred to in clause “(i)”, “(ii)” or “(iii)” above (including any Proceeding
commenced by the Seller for the purpose of enforcing its rights under this
Section 9.3).
(b) Subject
to Section 9.3(c), the Purchaser shall not be required to make any
indemnification payment pursuant to Section 9.3(a) for any Breach of any of
its
representations and warranties until such time as the total amount of all
Damages (including the Damages arising from such Breach and all other Damages
arising from any other Breaches of its representations or warranties) that
have
been directly or indirectly suffered or incurred by the Seller, or to which
the
Seller have otherwise become subject, exceeds $25,000 in the aggregate. (If
the
total amount of such Damages exceeds $25,000 in the aggregate, the Seller shall
be entitled to be indemnified against and compensated and reimbursed for the
entire amount of such Damages, and not merely the portion of such Damages
exceeding $25,000.)
(c) The
limitation on the indemnification obligations of the Purchaser that is set
forth
in Section 9.3(b) shall not apply to any Breach arising directly or indirectly
from any circumstance of which the Purchaser had knowledge on or prior to the
Closing Date.
9.4. Nonexclusivity
Of Indemnification Remedies. The
indemnification remedies and
other remedies
provided in this Section 9 shall not be
deemed
to be
exclusive. Accordingly,
the
exercise by any Person of any of its rights under this Section 9 shall not
be
deemed to be an election of remedies and shall not be deemed to prejudice,
or to
constitute or operate as a waiver of, any other right or remedy that such Person
may be entitled to exercise (whether under this Agreement, under any other
Contract, under any statute, rule or other Legal Requirement, at common law,
in
equity or otherwise).
(a) Defense
Of Third Party Claims.
In the
event of the assertion or commencement by any Person of any claim or Proceeding
(whether against the Purchaser, against any other Indemnitee or against any
other Person) with respect to which any of the Seller may become obligated
to
indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant to
this Section 9, the Purchaser shall have the right, at its election, to assume
the defense of such claim or Proceeding at the sole expense of the Seller.
If
the
Purchaser so proceeds with the defense of any such claim or Proceeding on its
own:
(i) all
expenses relating to the defense of such claim or Proceeding (whether or not
incurred by the Purchaser) shall be borne and paid exclusively by the
Purchaser;
(ii) the
Seller shall make available to the Purchaser any documents and materials in
the
possession or control of any of the Seller that may be necessary to the defense
of such claim or Proceeding;
(iii) the
Purchaser shall keep the Seller informed of all material developments and events
relating to such claim or Proceeding; and
(iv) the
Purchaser shall have the right to settle, adjust or compromise such claim or
Proceeding with the consent of the Seller; provided, however, that the Seller
shall not unreasonably withhold such consent.
9.5. Exercise
of Remedies by Indemnitees Other Than Purchaser. No
Indemnitee (other than the Purchaser or any successor thereto or assign thereof)
shall be permitted to
assert
any indemnification claim or exercise any other remedy under this Agreement
unless the Purchaser (or any successor thereto or assign thereof) shall have
consented to the assertion of such indemnification claim or the exercise of
such
other remedy.
-27-
SECTION
10. CERTAIN
POST-CLOSING COVENANTS.
10.1. Further
Actions.
From and
after the Closing Date, the Seller shall cooperate with the Purchaser and the
Purchaser’s affiliates and Representatives, and shall execute and deliver such
documents and take such other actions as the Purchaser may reasonably request,
for the purpose of evidencing the Transactions and putting the Purchaser in
possession and control of all of the Assets.
10.2. Publicity.
Without
limiting the generality of anything contained in Section 4.7, Purchaser and
Seller shall ensure that, on and at all times after the Closing Date: (a) no
press release or other publicity concerning any of the Transactions is issued
or
otherwise disseminated by or on behalf of Purchaser and Seller without the
prior
written consent of the other party; (b) the terms of this Agreement and the
other Transactional Agreements are kept strictly confidential; and (c) no
disclosure shall be made to any other Person of any non-public document or
other
information that relates directly or indirectly to the business of the Seller,
the Purchaser or any affiliate of the either party.
SECTION
11. MISCELLANEOUS
PROVISIONS
11.1. Fees
and Expenses.
(a) Seller
shall bear and pay all fees, costs and expenses (including all legal fees and
expenses payable to the law firm of Snow Becker Krauss P.C.) that have been
incurred or that are in the future incurred by, on behalf of or for the benefit
of Seller in connection with: (i) the negotiation, preparation and review of
any
term sheet or similar document relating to any of the Transactions; (ii) the
investigation and review conducted by the Purchaser and its Representatives
with
respect to Seller’s business (and the furnishing of information to the Purchaser
and its Representatives in connection with such investigation and review);
(iii)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedule), the other Transactional Agreements and all certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the Transactions; (iv) the preparation and submission of any
filing or notice required to be made or given in connection with any of the
Transactions, and the obtaining of any Consent required to be obtained in
connection with any of the Transactions; and (v) the consummation and
performance of the Transactions.
(b) Subject
to the provisions of Section 9 (including the indemnification and other
obligations of the Seller thereunder), the Purchaser shall bear and pay all
fees, costs and expenses (including all legal fees and expenses payable to
Soden
& Steinberger, LLP) that have been incurred or that are in the future
incurred by or on behalf of the Purchaser in connection with: (i) the
negotiation, preparation and review of any term sheet or similar document
relating to any of the Transactions; (ii) the investigation and review conducted
by the Purchaser and its Representatives with respect to Seller’s business;
(iii) the negotiation, preparation and review of this Agreement, the other
Transactional Agreements and all certificates, opinions and other instruments
and documents delivered or to be delivered in connection with the Transactions;
and (iv) the consummation and performance of the Transactions.
11.2. Attorneys’
Fees. If
any
legal action or other legal proceeding relating to any of the Transactional
Agreements or the enforcement of any provision of any of the Transactional
Agreements is brought against any party hereto, the prevailing party shall
be
entitled to recover reasonable attorneys’ fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be
entitled).
-28-
11.3. Notices.
Any
notice or other communication required or permitted to be delivered to any
party
under this Agreement shall be in writing and shall be deemed properly delivered,
given and received when delivered (by hand, by registered mail, by courier
or
express delivery service or by facsimile) to the address or facsimile number
set
forth beneath the name of such party below (or to such other address or
facsimile number as such party shall have specified in a written notice given
to
the other parties hereto):
If
to
Seller:
Integrated
Surgical Systems, Inc.
6220
Belleau Wood Lane, Suite 4
Sacramento,
CA 95822
Phone:
(916) 391-0420
Fax:
(916) 391-0420
Copy
to:
Snow
Becker Krauss P.C.
605
Third
Avenue
New
York,
New York 10158
Attention:
Jack Becker, Esq.
Fax:
(212) 949-7052
if
to the
Purchaser:
Novatrix
Biomedical, Inc.
16259
Laguna Canyon Rd.
Irvine,
CA 92618
Attention:
Dr. Soonkap Hahn
Fax: (949)
502-6786
With
Copy
to:
Soden
& Steinberger, LLP
550
West
C Street, Suite 1710
San
Diego, CA, 92101
Attention:
Stephen R. Soden. Esq.
Fax:
(619) 238-4581
11.4. Time
of the Essence.
Time is
of the essence of this Agreement.
11.5. Headings.
The
underlined headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or interpretation of this
Agreement.
11.6. Counterparts.
This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
11.7. Governing
Law; Venue.
(a) This
Agreement shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of California (without giving effect to
principles of conflicts of laws).
-29-
(b) Any
legal
action or other legal proceeding relating to this Agreement or the enforcement
of any provision of this Agreement may be brought or otherwise commenced in
any
state or federal court located in the County of Orange, California. Each party
to this Agreement:
(i) expressly
and irrevocably consents and submits to the jurisdiction of each state and
federal court located in the County of Orange, California (and each appellate
court located in the State of California) in connection with any such legal
proceeding;
(ii) agrees
that each state and federal court located in the County of Orange, California
shall be deemed to be a convenient forum; and
(iii) agrees
not to assert (by way of motion, as a defense or otherwise), in any such legal
proceeding commenced in any state or federal court located in the County of
Orange, California, any claim that such party is not subject personally to
the
jurisdiction of such court, that such legal proceeding has been brought in
an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or
by
such court.
(c) Seller
agrees that, if any Proceeding is commenced against any Indemnitee by any Person
in or before any court or other tribunal anywhere in the world, then such
Indemnitee may proceed against Seller, or any Stockholder of Seller, in such
court or other tribunal with respect to any indemnification claim or other
claim
arising directly or indirectly from or relating directly or indirectly to such
Proceeding or any of the matters alleged therein or any of the circumstances
giving rise thereto.
(d) The
Parties irrevocably waive the right to a jury trial in connection with any
legal
proceeding relating to this Agreement or the enforcement of any provision of
this Agreement.
11.8. Successors
and Assigns, Parties in Interest.
(a) This
Agreement shall be binding upon: Seller and the Purchaser and its successors
and
assigns (if any). This Agreement shall inure to the benefit of: Seller; the
Purchaser; the other Indemnitees (subject to Section 9.7); and the respective
successors and assigns (if any) of the foregoing.
(b) The
Purchaser may freely assign any or all of its rights under this Agreement
(including its indemnification rights under Section 9), in whole or in part,
to
any other Person without obtaining the prior written consent or approval of
any
other party hereto or of any other Person. Seller shall not be permitted to
assign any of their rights or delegate any of their obligations under this
Agreement without the Purchaser’s prior written consent.
(c) Except
for the provisions of Section 9 hereof, none of the provisions of this Agreement
is intended to provide any rights or remedies to any Person other than the
parties to this Agreement and their respective successors and assigns (if any).
Without limiting the generality of the foregoing: (i) no employee of the Seller
shall have any rights under this Agreement or any of the other Transactional
Agreements, and (ii) no creditor of the Seller shall have any rights under
this
Agreement or any of the other Transactional Agreements.
11.9. Remedies
Cumulative; Specific Performance. The
rights and remedies of the parties hereto shall be cumulative (and not
alternative). Seller agrees that:
(a) in
the
event of any Breach or threatened Breach by such Seller of any covenant,
obligation or other provision set forth in this Agreement, the Purchaser shall
be entitled (in addition to any other remedy that may be available to it) to
(i)
a decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such Breach or threatened Breach; and
-30-
(b) neither
the Purchaser nor any other Indemnitee shall be required to provide any bond
or
other security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.
11.10. Waiver.
(a) No
failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single
or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege
or
remedy.
(b) No
Person
shall be deemed to have waived any claim arising out of this Agreement, or
any
power, right, privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and
any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
11.11. Amendments.
This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered on behalf of the
Purchaser and the Seller.
11.12. Severability.
In
the
event that any provision of this Agreement, or the application of any such
provision to any Person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void
or
unenforceable, shall not be impaired or otherwise affected and shall continue
to
be valid and enforceable to the fullest extent permitted by law.
11.13. Entire
Agreement. The
Transactional Agreements set forth the entire understanding of the parties
relating to the subject matter thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter thereof.
11.14. Construction.
(a) For
purposes of this Agreement, whenever the context requires: the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used
in this Agreement, the words “include” and “including and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words “without limitation.”
(d) Except
as
otherwise indicated, all references in this Agreement to “Sections” and
“Exhibits” are intended to refer to Sections of this Agreement and Exhibits to
this Agreement.
-31-
The
parties hereto have caused this Agreement to be executed and delivered as of
August 4, 2006.
|
“PURCHASER”:
|
NOVATRIX
BIOMEDICAL, INC.,
a
California corporation
|
|
| |
|
|
| By: | /s/ Soonkap Hahn | |
|
Soonkap
Hahn, President
|
||
| By: | /s/ Patrick Roycroft | |
|
Patrick
Roycroft, Secretary
|
||
|
“SELLER”:
|
Integrated
Surgical Systems, Inc.
a
Delaware corporation
6220
Belleau Wood Lane, Suite4
Sacramento,
CA 95822
|
|
| |
|
|
| By: | /s/ Ramesh Trivedi | |
|
Ramesh
Trivedi, Director and Acting
CEO
|
||
-32-
EXHIBIT
A
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this Exhibit A):
Acquisition
Transaction. “Acquisition
Transaction” shall mean any transaction involving:
(a) the
sale
or other disposition of all or any portion of Seller’s business or Assets (other
than in the Ordinary Course of Business); or
(b) any
merger, consolidation, business combination, share exchange, reorganization
or
similar transaction involving Seller.
Agreement.
“Agreement” shall mean the Stock Purchase Agreement to which this Exhibit A is
attached (including the Disclosure Schedule), as it may be amended from time
to
time.
Best
Efforts.
“Best
Efforts” shall mean the efforts that a prudent Person desiring to achieve a
particular result would use in order to ensure that such result is achieved
as
expeditiously as possible.
Breach.
There
shall be deemed to be a “Breach” of a representation, warranty, covenant,
obligation or other provision if there is or has been (a) any material
inaccuracy in or material breach of, or any material failure to comply with
or
perform, such representation, warranty, covenant, obligation or other provision,
or (b) any material claim (by any Person) or other circumstance that is
inconsistent with such representation, warranty, covenant, obligation or other
provision; and the term “Breach” shall be deemed to refer to any such
inaccuracy, breach, failure, claim or circumstance.
CERCLA.
“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act.
Closing.
“Closing” shall have the meaning specified in Section 1.3(a) of the
Agreement.
Closing
Certificate.
“Closing Certificate” shall have the meaning specified in Section 1.3(b)(v) of
the Agreement.
Closing
Date.
“Closing Date” shall have the meaning specified in Section 1.4(a) of the
Agreement.
Code.
“Code”
shall mean the Internal Revenue Code of 1986.
Seller.
“Seller” shall mean Seller and the Prior Subsidiary.
Company
Plan.
“Company Plan” shall mean any Current Benefit Plan or Past Benefit
Plan.
Comparable
Entities.
“Comparable Entities” shall mean Entities (other than Seller) that are engaged
in businesses similar to Seller’s business.
Consent.
“Consent” shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
Contract.
“Contract” shall mean any written, oral, implied or other agreement, contract,
understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, beneft plan, commitment, covenant,
assurance or undertaking of any nature.
-33-
Current
Benefit Plan. “Current
Benefit Plan” shall mean any Employee Benefit Plan that is currently in effect
and:
(a) that
was
established or adopted by Seller or any ERISA Affiliate or is maintained or
sponsored by Seller;
(b) in
which
Seller participates;
(c) with
respect to which Seller or any ERISA Affiliate is or may be required or
permitted to make any contribution; or
(d) with
respect to which Seller or any ERISA Affiliate is or may become subject to
any
Liability.
Damages.
“Damages” shall include any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense
of
any nature.
Disclosure
Schedule.
“Disclosure Schedule” shall mean the schedules (dated as of the date of the
Agreement) together with the Due Diligence book delivered to the Purchaser
on
behalf of Seller, a copy of which is attached to the Agreement and incorporated
into the Agreement by reference.
Employee
Benefit Plan.
“Employee Benefit Plan” shall have the meaning specified in Section 3(3) of
ERISA.
Encumbrance.
“Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, equity, trust, equitable interest, claim,
preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right of first
refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on
the
voting of any security, any restriction on the transfer of any security or
other
asset, any restriction on the receipt of any income derived from any asset,
any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any
asset).
Entity.
“Entity” shall mean any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
ERISA.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974.
ERISA
Affiliate. “ERISA
Affiliate” shall mean any Person that is, was or would be treated as a single
employer with Seller under Section 414 of the Code.
Excluded
Contract. “Excluded
Contract” shall mean any Seller Contract that:
(a) Seller
has entered into in the Ordinary Course of Business;
-34-
(b) is
identical in all material respects to one of the Standard Form
Agreements;
(c) has
a
term of less than 90 days or may be terminated by Seller (without penalty)
within 90 days after the delivery of a termination notice by Seller;
and
(d) does
not
contemplate or involve the payment of cash or other consideration in an amount
or having a value in excess of $10,000.
GAAP.
“GAAP”
shall mean generally accepted accounting principles, applied on a basis
consistent with the basis on which the Seller Financial Statements were
prepared.
Governmental
Authorization. “Governmental
Authorization” shall mean any:
(a) permit,
license, certificate, franchise, concession, approval, consent, ratification,
permission, clearance, confirmation, endorsement, waiver, certification,
designation, rating, registration, qualification or authorization that is,
has
been or may in the future be issued, granted, given or otherwise made available
by or under the authority of any Governmental Body or pursuant to any Legal
Requirement; or
(b) right
under any Contract with any Governmental Body.
Governmental
Body. “Governmental
Body” shall mean any:
(a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature;
(b) federal,
state, local, municipal, foreign or other government;
(c)
governmental or quasi-governmental authority of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other
tribunal);
(d) multi-national
organization or body; or
(e)
individual, Entity or body exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military or taxing
authority or power of any nature.
Hazardous
Material.
“Hazardous Material” shall include:
(a) any
petroleum, waste oil, crude oil, asbestos, urea formaldehyde or polychlorinated
biphenyl;
(b) any
waste, gas or other substance or material that is explosive or
radioactive;
(c)
any
“hazardous substance,” “pollutant,” “contaminant,” “hazardous waste,” “regulated
substance,” “hazardous chemical” or “toxic chemical” as designated, listed or
defined (whether expressly or by reference) in any statute, regulation or other
Legal Requirement (including CERCLA, any other so-called “superfund” or
“superlien” law, the Resource Conservation Recovery Act, the Federal Water
Pollution Control Act, the Toxic Substances Control Act, the Emergency Planning
and Community Right-to-Know Act and the respective regulations promulgated
thereunder);
-35-
(d)
any
other substance or material (regardless of physical form) or form of energy
that
is subject to any Legal Requirement which regulates or establishes standards
of
conduct in connection with, or which otherwise relates to, the protection of
human health, plant life, animal life, natural resources, property or the
enjoyment of life or property from the presence in the environment of any solid,
liquid, gas, odor, noise or form of energy; and
(e)
any
compound, mixture, solution, product or other substance or material that
contains any substance or material referred to in clause “(a)”, “(b)”, “(c)” or
“(d)” above.
Indemnitees.
“Indemnitees”
shall mean the following Persons:
(a) the
Purchaser;
(b) the
Purchaser’s current and future affiliates;
(c) the
respective Representatives of the Persons referred to in clauses “(a)” and “(b)”
above; and
(d) the
respective successors and assigns of the Persons referred to in clauses “(a)”,
“(b)” and “(c)” above; provided, however, that (i) Seller shall not be entitled
to exercise any rights as an Indemnitee prior to the Closing, and (ii) the
Stockholders shall not be deemed to be “ Indemnitees.”
Knowledge.
An
individual shall be deemed to have “Knowledge” of a particular fact or other
matter if:
(a) such
individual is actually aware of such fact or other matter; or
(b) a
prudent
individual could be expected to discover or otherwise become aware of such
fact
or other matter in the normal course of conduct upon reasonable
inquiry.
Seller
shall be deemed to have “Knowledge” of a particular fact or other matter if any
executive officer of Seller has Knowledge of such fact or other
matter.
Legal
Requirement. “Legal
Requirement” shall mean any federal, state, local, municipal, foreign or other
law, statute, legislation, constitution, principle of common law, resolution,
ordinance, code, edict, decree, proclamation, treaty, convention, rule,
regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation that is, has been or may
in
the future be issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
Liability.
“Liability”
shall mean any debt, obligation, duty or liability of any nature (including
any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether such debt, obligation, duty or liability
would
be required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles and regardless of whether such debt,
obligation, duty or liability is immediately due and payable.
Order.
“Order”
shall mean any:
(a) order,
judgment, injunction, edict, decree, ruling, pronouncement, determination,
decision, opinion, verdict, sentence, subpoena, writ or award that is, has
been
or may in the future be issued, made, entered, rendered or otherwise put into
effect by or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
-36-
(b) Contract
with any Governmental Body that is, has been or may in the future be entered
into in connection with any Proceeding.
Ordinary
Course of Business.
An
action taken by or on behalf of Seller shall not be deemed to have been taken
in
the “Ordinary Course of Business” unless:
(a) such
action is consistent with Seller’s past practices and is taken in the ordinary
course of Seller’s normal day-to-day operations;
(b) such
action is not required to be authorized by Seller’s Stockholders, Seller’s board
of directors or any committee of Seller’s board of directors and does not
require any other separate or special authorization of any nature.
Past
Benefit Plan.
“Past
Benefit Plan” shall mean any Employee Benefit Plan (other than a Current Benefit
Plan):
(a) of
which
Seller or any ERISA Affiliate has ever been a “plan sponsor” (as defined in
Section 3(16)(B) of ERISA) or that otherwise has at any time been established,
adopted, maintained or sponsored by Seller or by any ERISA
Affiliate;
(b) in
which
Seller or any ERISA Affiliate has ever participated;
(c) with
respect to which Seller or any ERISA Affiliate has ever made, or has ever been
required or permitted to make, any contribution; or
(d) with
respect to which Seller or any ERISA Affiliate has ever been subject to any
Liability.
Person.
“Person” shall mean any individual, Entity or Governmental Body.
Pre-Closing
Period.
“Pre-Closing Period” shall mean the period commencing as of the date of the
Agreement and ending on the Closing Date.
Prior
Subsidiary. “Prior
Subsidiary” shall mean Innovative Medical Machine International, Lyon France.
This entity was dissolved in 2003.
Proceeding.
“Proceeding” shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination or investigation that is, has been or may in the
future be commenced, brought, conducted or heard by or before, or that otherwise
has involved or may involve, any Governmental Body or any arbitrator or
arbitration panel.
Proprietary
Asset.
“Proprietary Asset” shall mean any patent, patent application, trademark
(whether registered or unregistered and whether or not relating to a published
work), trademark application, trade name, fictitious business name, service
mark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, franchise, system, computer software,
invention, design, blueprint, proprietary product, technology, proprietary
right
or other intellectual property right or intangible asset.
Purchase
Price.
“Purchase Price” shall have the meaning specified in Section 1.2 of the
Agreement.
-37-
Purchaser.
“Purchaser” shall mean Purchaser Corporation, a Delaware
corporation.
Related
Party.
Each
individual who is, or who has at any time been, an officer of Seller shall
be
deemed to be a “Related Party”:
Representatives.
“Representatives” shall mean officers, directors, employees, attorneys,
accountants, advisors and representatives.
Scheduled
Closing Time.
“Scheduled Closing Time” shall have the meaning specified in Section 1.3(a) of
the Agreement.
Seller.
“Seller” shall mean Integrated Surgical Systems, Inc., a Delaware
corporation.
Seller
Material Contract.
“Seller
Material Contract” shall mean any Contract:
(a) to
which
Seller is a party;
(b) by
which
Seller or any of its material Assets is or may become bound or under which
Seller has, or may become subject to, any obligation; or
(c) under
which Seller has or may acquire any material right or interest.
Seller Financial
Statements. “Seller
Financial Statements” shall have the meaning specified in Section 2.4(a) of the
Agreement.
Seller
Returns. “Seller
Returns” shall have the meaning specified in Section 2.17(a) of the
Agreement.
Stockholders.
“Stockholders” shall mean all of the stockholders of Integrated Surgical
Systems, Inc., a Delaware corporation.
Specified
Representations. “Specified
Representations” shall mean the representations and warranties set forth in
Sections 2.1, 2.3, 2.4 and 2.27 of the Agreement.
Tax.
“Tax”
shall mean any tax (including any income tax, franchise tax, capital gains
tax,
estimated tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll
tax), levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), that is, has been or may in the future be (a)
imposed, assessed or collected by or under the authority of any Governmental
Body, or (b) payable pursuant to any tax-sharing agreement or similar
Contract.
Tax Return.
“Tax
Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or
may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
Transactional
Agreements.
“Transactional Agreements” shall mean:
|
(a)
|
the
Agreement;
|
-38-
|
(b)
|
the
Noncompetition Agreement referred to in Section 1.3(b)(iii) of the
Agreement;
|
|
(c)
|
the
Employment Agreement referred to in Section 1.3(b)(iv) of the Agreement;
and
|
|
(d)
|
the
Closing Certificate.
|
Transactions.
“Transactions” shall mean
(a) the
execution and delivery of the respective Transactional Agreements, and
(b) all
of
the transactions contemplated by the respective Transactional Agreements,
including the performance by Seller and the Purchaser of their respective
obligations under the Transactional Agreements and the exercise by Seller and
the Purchaser of their respective rights under the Transactional
Agreements.
Unaudited
Interim Balance Sheet. “Unaudited
Interim Balance Sheet” shall have the meaning specified in Section 2.4(a)(ii) of
the Agreement.
-39-
LOAN
AGREEMENT
AND
SECURED
PROMISSORY NOTE
|
August
4, 2006
|
|
|
Irvine,
California
|
FOR
VALUE RECEIVED, Integrated
Surgical Systems, Inc.,
a
Delaware corporation (“Borrower”),
hereby
promises to pay, expressly subject to the terms and conditions contained in
this
Agreement, to the order of Novatrix
Biomedical, Inc.,
a
California corporation (“Lender”),
in
lawful
money of the United States of America and in immediately available funds, the
principal sum of six million dollars ($6,000,000) together
with accrued and unpaid interest thereon.
RECITALS:
A. The
parties are simultaneously entering into an Asset Purchase Agreement pursuant
to
which Lender has agreed to purchase substantially all of the assets of Borrower
(the “Asset Purchase Agreement”).
B. The
parties agree and acknowledge that a condition to consummation of the
transactions contemplated by the Asset Purchase Agreement is the approval of
the
stockholders of Borrower beneficially owning not less than a majority of the
issued and outstanding stock of Borrower at a meeting duly called for such
purpose (“Stockholder Approval”).
C. The
parties wish to enter into this Agreement in order to fund the business of
the
Borrower.
Borrower
agrees to:
(a) In
the
event that (i) Stockholder Approval is not obtained by June 30, 2007 or (ii)
in
the event the Asset Purchase Agreement is terminated by Borrower for any reason
other than a default by Lender under this Agreement or the Asset Purchase
Agreement, Borrower shall execute in favor of Lender an exclusive license to
use, manufacture, market and sell the ROBODOC Surgical Assist System and
ORTHODOC Pre-Surgical Planning Station, including any and all Licensed Software
for the Robodoc surgical system substantially in the form annexed hereto as
Exhibit A;
(b) Use
best
efforts to settle not less than 80% of the debts currently listed in the Due
Diligence Disclosure dated June 30, 2006; and
(c) Use
best
efforts to reinstate all previous insurance policies as soon as reasonably
practicable after the date hereof.
(d) Work
in
good faith towards an expedient closing as set forth in the Asset Purchase
Agreement (“Closing”). Borrower further agrees not to directly, or indirectly,
from the date of the execution of this Agreement until the earlier of (i) June
30, 2007 or (ii) the date of the meeting of stockholders called to vote on
the
Asset Purchase Agreement: (i) take any action to solicit, initiate, encourage,
or assist the submission of any proposal, negotiation, or offer from any person
or entity other than the Lender relating to the sale of any of the capital
stock
of the Borrower or the sale, lease, license, or other disposition of any
Intellectual Property as defined in the License Agreement attached as Exhibit
A,
or any material part of the stock or assets of the Borrower as defined in
Security Agreement, or (ii) engage in any discussions, negotiations, or
agreements regarding financing with any third party, and (iii) shall notify
the
Lender within a reasonable time of any inquiries by any third parties in regard
to the foregoing.
-1-
This
Agreement is referred to in and is executed and delivered in connection with
that certain Security Agreement dated as of even date herewith and executed
by
Borrower in favor of Lender (as the same may from time to time be amended,
modified or supplemented or restated, the “Security
Agreement”).
Additional
rights of Lender are set forth in the Security Agreement. All capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
given to them in the Security Agreement.
1. Loan
Tranches.
Lender
shall make borrowings to Borrower pursuant to this Agreement as
follows:
1.1. $2.7
million immediately upon the execution of this Agreement.
1.2. $1.0
million upon the later to occur of (i) March 1, 2007 and (ii) five (5) patient
clinical trials in respect of the ROBODOC and OTHODOC products having been
conducted.
1.3. $2.3
million no later than August 1, 2007, unless there is a material default by
Borrower of any of its obligations under the Asset Purchase Agreement, this
Agreement or the Security Agreement, provided that,
Lender
shall provide Borrower with written notice of any such default and a reasonable
opportunity to cure if such default is reasonably capable of cure.
2. Principal
Repayment. The
outstanding principal amount of the Loan shall be due and payable on demand
subject to the terms and conditions of this Agreement, including without
limitation, “Termination of this Agreement” set forth below. Under
no
circumstances shall Borrower be liable to make repayments to Lender for any
amounts not actually loaned by Lender to Borrower.
3. Termination
of this Agreement. The
parties expressly agree that, upon the earlier to occur of (i) Stockholder
Approval or (ii) a material default by Lender of any of its obligations under
the Asset Purchase Agreement or this Agreement, (A) any and all obligations
of
Borrower to make any repayments hereunder shall immediately terminate with
no
further action of any party required in connection therewith, and (B) the
Security Agreement shall immediately terminate and Lender shall have no rights
whatsoever to any secured interest in the assets of Borrower.
4. Conversion
of Loans to Working Capital. Upon
the
Closing, Lender unconditionally agrees to convert any and all of Lender’s
obligations to advance funds to Borrower as set forth in this Agreement into
obligations of Lender to fund Lender’s working capital in equal amounts as set
forth in “Loan Tranches” above, which funds shall expressly be used only for
further development of the ROBODOC and OTHODOC products, unless otherwise agreed
in writing by Borrower.
5. Interest
Rate. Borrower
further promises to pay interest on the outstanding principal amount hereof
from
the date hereof until payment in full, which interest shall be payable at the
prime rate of interest as quoted by Wells Fargo Bank, N.T. & S.A from time
to time plus one percent (Prime plus +1%) per annum or the maximum rate
permissible by law (which under the laws of the State of California shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less. Interest shall be due and payable on demand in the
event of a default of the provisions set forth in the Security Agreement and
shall be calculated on the basis of a 360 day year for the actual number of
days
elapsed.
-2-
6. Place
of Payment. All
amounts payable hereunder shall be payable at the office of Lender, 16259 Laguna
Canyon Rd., Irvine, CA 92618, unless another place of payment shall be specified
in writing by Lender.
7. Application
of Payments. Payment
on this Note shall be applied first to accrued interest, and thereafter to
the
outstanding principal balance hereof. Any principal repayment or interest
payment on the Loan hereunder not paid when due, whether at stated maturity,
by
acceleration or otherwise, shall bear interest at one and one-half percent
(1-1/2%) per month or the maximum legal rate of interest, whichever is
less.
8. Secured
Note. The
full
amount of this Note is secured by the Collateral identified and described in
the
Security Agreement executed by and delivered by Borrower. Borrower shall not,
directly or indirectly, create, permit or suffer to exist, and shall defend
the
Collateral against and take such other action as is necessary to remove, any
Lien on or in the Collateral, or in any portion thereof, except as permitted
pursuant to the Security Agreement.
9. Default.
Each
of
the following events shall be an “Event
of Default” hereunder:
9.1. Borrower
fails to pay timely any of the principal amount due under this Note or any
accrued interest or other amounts due under this Note within six (6) months from
the date of Stockholder Approval; or
9.2. Borrower
files any petition or action for relief under any bankruptcy, reorganization,
insolvency or moratorium law or any other law for the relief of, or relating
to,
debtors, now or hereafter in effect, or makes any assignment for the benefit
of
creditors or takes any corporate action in furtherance of any of the foregoing;
or
9.3. An
involuntary petition is filed against Borrower (unless such petition is
dismissed or discharged within sixty (60) days) under any bankruptcy statute
now
or hereafter in effect, or a custodian, receiver, trustee, assignee for the
benefit of creditors (or other similar official) is appointed to take
possession, custody or control of any property of Borrower or
9.4. An
“Event
of Default” under the Security Agreement.
Upon
the
occurrence of an Event of Default hereunder, all unpaid principal, accrued
interest and other amounts owing hereunder shall, at the option of Lender,
automatically become immediately due, payable and collectible by Lender pursuant
to applicable law.
10. Subordination.
The
indebtedness evidenced by this Note is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of payment to the
prior
payment in full of the Senior Indebtedness.
“Senior
Indebtedness” shall
mean, unless expressly subordinated to or made on a party with the amounts
due
under this Note, the principal of, unpaid interest on and amounts reimbursable,
fees, expenses, costs of enforcement and other amounts due in connection with
(a) indebtedness of Borrower to banks or commercial finance or other lending
institutions regularly engaged in the business of lending money (including
venture capital, investment banking or similar institutions and their affiliates
which sometimes engage in lending activities but which are primarily engaged
in
investments in equity securities), whether or not secured, and (b) any such
indebtedness or any debentures, notes or other evidence of indebtedness issued
in exchange for such Senior Indebtedness, or any indebtedness arising from
the
satisfaction of such Senior Indebtedness by a guarantor, the total principal
amount of such indebtedness described in (a) and (b) above not exceeding fifty
thousand dollars ($50,000) in
the
aggregate.
-3-
10.1. Insolvency
Proceedings. If
there
shall occur any receivership, insolvency, assignment for the benefit of
creditors, bankruptcy, reorganization, or arrangements with creditors (whether
or not pursuant to bankruptcy or other insolvency laws), sale of all or
substantially all of the assets, dissolution, liquidation, or any other
marshaling of the assets and liabilities of Borrower, (a) no amount shall be
paid by Borrower in respect of the principal of, interest on or other amounts
due with respect to this Note at the time outstanding, unless and until the
principal of and interest on the Senior Indebtedness then outstanding shall
be
paid in full, and (b) no claim or proof of claim shall be filed by or on behalf
of Lender which shall assert any right to receive any payments in respect of
the
principal of and interest on this Note except subject to the payment in full
of
the principal of and interest on all of the Senior Indebtedness then
outstanding.
10.2. Default
on Senior Indebtedness. If
there
shall occur an event of default which has been declared in writing with respect
to any Senior Indebtedness, as defined therein, or in the instrument under
which
it is outstanding, permitting the holder to accelerate the maturity thereof
and
Lender shall have received written notice thereof from the holder of such Senior
Indebtedness, then, unless and until such event of default shall have been
cured
or waived or shall have ceased to exist, or all Senior Indebtedness shall have
been paid in full, no payment shall be made in respect of the principal of
or
interest on this Note unless within one hundred eighty (180) days after the
happening of such event of default the maturity of such Senior Indebtedness
shall not have been accelerated. Not more than one notice may be given to Lender
pursuant to the terms of this Section 10.2
during any 360 day period.
10.3. Further
Assurances. By
acceptance of this Note Lender agrees to execute and deliver customary forms
of
subordination agreement requested from time to time by the holders of Senior
Indebtedness and, as a condition to Lender’s rights hereunder, Borrower may
require that Lender execute such forms of subordination agreement, provided
that
such forms shall not impose on Lender terms less favorable than those provided
herein.
10.4. Other
Indebtedness. No
indebtedness which does not constitute Senior Indebtedness shall be senior
in
any respect to the indebtedness represented by this Note.
10.5. Subrogation.
Subject
to the payment in full of all Senior Indebtedness, Lender shall be subrogated
to
the rights of the holder(s) of such Senior Indebtedness (to the extent of the
payments or distributions made to the holder(s) of such Senior Indebtedness
pursuant to the provisions of this Section 10)
to
receive payments and distributions of assets of Borrower applicable to the
Senior Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between Borrower and its creditors, other than the
holders of Senior Indebtedness and Lender, be deemed to be a payment by Borrower
to or on account of this Note; and for purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness to which Lender would
be
entitled except for the provisions of this Section 10 shall, as between Borrower
and its creditors, other than the holders of Senior Indebtedness and Lender,
be
deemed to be a payment by Borrower to or on account of the Senior
Indebtedness.
10.6. No
Impairment. Subject
to the rights, if any, of the holders of Senior Indebtedness under this Section
10 to receive cash, securities or other properties otherwise payable or
deliverable to Lender, nothing contained in this Section 10 shall impair, as
between Borrower and Lender, the obligation of Borrower, subject to the terms
and conditions hereof, to pay to Lender the principal hereof and interest hereon
as and when the same become due and payable, or shall prevent Lender, upon
default hereunder, from exercising all rights, powers and remedies otherwise
provided herein or by applicable law.
-4-
10.7. Lien
Subordination. Any
lien
or security interest of Lender, whether now or hereafter existing in connection
with the amounts due under this Note, on any assets or property of Borrower
or
any proceeds or revenues therefrom which Lender may have at any time as security
for any amounts due and obligations under this Note, including, without
limitation, any Lien on or in the Collateral pursuant to the Security Agreement,
shall be subordinate to all liens or security interests now or hereafter granted
to a holder of Senior Indebtedness by Borrower or by law notwithstanding the
date, order or method of attachment or perfection of any such lien or security
interest or the provisions of any applicable law.
10.8. Applicability
of Priorities. The
priority of the holder of the Senior Indebtedness provided for herein with
respect to security interests and liens are applicable only to the extent that
such security interests and liens are enforceable and perfected and have not
been avoided; if a security interest or lien is judicially determined to be
unenforceable or unperfected or is judicially avoided with respect to any claim
of the holder of the Senior Indebtedness or any part thereof, the priority
provided for herein shall not be available to such security interest or lien
to
the extent that it is avoided or determined to be unenforceable or unperfected.
The foregoing notwithstanding, Lender covenants and agrees that it shall not
challenge, attack or seek to avoid any security interest or lien to the extent
that it secures any holder of the Senior Indebtedness. Nothing in this Section
10.8 affects the operation of any subordination of indebtedness or turnover
of
payment provisions hereof, or of any other agreements among any of the parties
hereto.
11. Reliance
of Holders of Senior Indebtedness. Lender,
by its acceptance hereof, shall be deemed to acknowledge and agree that the
foregoing subordination provisions are, and are intended to be, an inducement
to
and a consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions
in
acquiring and holding, or in continuing to hold, such Senior
Indebtedness.
12. Waiver.
Borrower
waives presentment and demand for payment, notice of dishonor, protest and
notice of protest of this Note, and shall pay all costs of collection when
incurred, including, without limitation, reasonable attorneys’ fees, costs and
other expenses. The right to plead any and all statutes of limitations as a
defense to any demands hereunder is hereby waived to the full extent permitted
by law.
13. Governing
Law. This
Note
shall be governed by, and construed and enforced in accordance with, the laws
of
the State of California, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
14. Entire
Agreement.
Except
for the Nondisclosure Agreement entered into by the parties as of May 26, 2006
(“NDA”), this Agreement sets forth all of the covenants, promises, agreements,
warranties, representations, conditions and understandings between Lender and
Borrower (individually “Party” and collectively “Parties”) hereto; constitutes
and contains the complete, final, and exclusive understanding and agreement
of
the parties with respect to the subject matter herein; and cancels, supersedes
and terminates all prior agreements and understanding between the Parties with
respect to the subject matter hereof. Except for the NDA, there are no
covenants, promises, agreements, warranties, representations conditions or
understandings, whether oral or written, between the Parties other than as
set
forth herein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing
and
signed by the respective authorized officers of the Parties.
-5-
15. Successors
and Assigns. The
provisions of this Note shall inure to the benefit of and be binding on any
successor to Borrower and shall extend to any holder hereof.
|
INTEGRATED
SURGICAL SYSTEMS, INC.
(BORROWER)
|
||
| |
|
|
| By: | ||
|
Ramesh
Trivedi, CEO
6220
Belleau Wood Lane, Suite 4
Sacramento,
CA 95822
Phone:
(916) 391- 0200
Fax:
(916) 391- 0200
|
||
-6-
EXHIBIT
A
LICENSE
AGREEMENT
This
License Agreement (“License Agreement”) is made and entered into as of this ____
of _________ 2006 (the “Effective Date”) by and between Integrated
Surgical Systems, Inc., a Delaware corporation (“Licensor”) and Novatrix
Biomedical, Inc. (“Licensee”), a California corporation.
RECITALS
WHEREAS,
Licensor has certain proprietary rights in the form of patents, copyrights,
trademarks, service marks, trade secrets, and licensing rights from third
parties that are sublicenseable and other software rights in the area of robotic
surgery; and
WHEREAS,
Licensee desires to obtain an exclusive license to use and sublicense the
Intellectual Property to third parties within the Territory, as defined below,
in accordance with the terms and conditions of this License Agreement; and
WHEREAS,
Licensee also desires to use the Intellectual Property to manufacture, market,
and sell the ROBODOC Surgical Assist System (“ROBODOC”) and the ORTHODOC
Pre-Surgical Planning Workstation together with all associated Licensed Software
and other Documentation to Licensee’s third party customers located within the
Territory; and
WHEREAS,
Licensee agrees to pay Licensor a one time licensing fee of one hundred thousand
dollars ($100,000) for the rights granted herein in accordance with the terms
and conditions of this License Agreement.
THEREFORE,
in full
and complete consideration and satisfaction the Parties agree as
follows:
AGREEMENT
1. DEFINITIONS
1.1. “Confidential
Information”
means
trade secrets, inventions, ideas, processes, formulas, source and object codes,
data programs, other works of authorship, know-how, improvements, discoveries,
developments, designs and techniques, licenses, prices and costs, suppliers
and
customers, or any other information of a party identified as confidential at
the
time of disclosure. Confidential Information may also include property of third
parties who have granted licenses to either party.
1.2. “Derivative
Works” means
a
work which is based upon the pre-existing Products and Licensed Software or
Documentation such as a revision, modification, translation, abridgment,
condensation, expansion, collection, compilation, or any other form in which
such pre-existing item may be recast, transformed or adapted, or which, if
prepared without authorization by the owner of the pre-existing works, would
constitute a copyright infringement.
1.3. “Documentation”
means
users’ manuals provided by Licensor in electronic form for use for the Products
and Licensed Software. It shall be the responsibility of Licensee to reformat,
copy, modify and provide to its customers documentation associated with
Licensee’s Products.
1.4. “Intellectual
Property” means
all
patents, copyrights, trademarks, service marks listed in Exhibit A, including
any patents, copyrights, trademarks, or service marks hereinafter acquired
by
the Licensor
and
shall also mean: (a) techniques and data relating to the research (to the extent
included in the development plan), development, manufacture, use or sale of
Products, including, but not limited to, inventions, practices, methods,
knowledge, know-how, skill, experience, test data including pharmacological,
orthopedic, toxicological and clinical test data, analytical and quality control
data, regulatory submissions, correspondence and communications, marketing,
pricing, distribution, cost, sales, manufacturing, patent and legal data or
descriptions, and (b) compositions of matter, devices, software and source
codes, articles of manufacture, assays and biological, chemical or physical
materials relating to development, manufacture, use or sale of
Product.
-1-
1.5. “Licensed
Software”
means
the ROBODOC Surgical System software, and the Research Modified Motion Control
Software in binary or source form and including any Documentation delivered
by
Licensor to Licensee and whether as part of the initial delivery, or as
delivered as part of a chargeable or non-chargeable modification, maintenance
or
update service.
1.6. “Object
Code” means
a
computer program in machine executable form and any modifications, enhancements,
corrections, updates, translations, interpretations, listings, compilations
or
derivations thereof, and all copies and portions in any medium.
1.7. “Product”
means
the ROBODOC Surgical Assist System (“ROBODOC”) and the ORTHODOC Pre-Surgical
Planning Workstation (“ORTHODOC”) together with any and all associated
consumable items (drill bits and machine tools, robot protectors, covers, etc.)
and the Licensed Software in Object Code and Source Code form and including
any
Derivative Works developed by Licensee.
1.8. “Source
Code”
means a
computer program in human readable form which would be reasonably necessary
to
enable an independent third-party programmer, with a high level of programming
skills, to produce Object Code without the help of any other person and, any
modifications, enhancements, corrections, updates, translations,
interpretations, listings, compilations or derivations thereof, and all copies
and portions in any medium of the program; and, further, shall include any
tools
and utilities necessary to build Object Code.
1.9. “Updates”
means
any
engineering patch intended to fix bugs and errors in the Licensed Software
or
any modifications to the Licensed Software as requested from time to time by
Licensee.
1.10. “Territory”
means
all
of the countries of Asia, including but not limited to China, Hong Kong,
Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand,
and
Vietnam.
2. GRANT
OF LICENSE.
2.1. License
Grant.
Subject
to the terms and conditions of this Agreement, Licensor hereby grants to
Licensee an exclusive, transferable, right and license, with sublicensing
rights, to modify, use, copy, prepare, and translate into other languages,
Derivative Works based on the Source Code therefrom, including the right to
distribute the Licensed Software in Object Code form, including any and all
Documentation to its third party customers. Licensor further grants to Licensee
the rights to use any and all Intellectual Property to manufacture, market
and
sell the Products bundled with the Licensed Software to its third party
customers within the Territory. Licensee’s rights in the Intellectual Property
shall also include the right to use and display any of Licensor’s trademarks,
service marks, and logos solely in connection with and only to the extent
reasonably necessary for marketing and branding the Products for sale in
accordance with the terms and conditions of this License Agreement. Licensor
shall not do or suffer to be done any act or thing that would impair Licensee’s
rights in the Intellectual Property. Licensor has the right to take all action
that it deems necessary to ensure that the advertising and promotional materials
related to the Licensee’s business or any sublicenses granted by Licensor are
consistent with the reputation and prestige of the Intellectual Property of
Licensor and its third party Licensors. Licensee agrees not to contest
Licensor’s trademarks or tradenames, or to make application for registration of
any of Licensee’s trademarks or tradenames. The rights granted herein shall
collectively be referred to as the “License.” Any sublicensing rights shall have
provisions that are no less restrictive than the License rights granted herein.
Licensee shall notify Licensor of any and all sublicenses granted to any third
parties. Licensee agrees and understands that any breach of the terms and
conditions of this License, including any sublicense shall be considered a
breach of this License Agreement and the rights granted herein.
-2-
2.2. Ownership.
The
License granted in Section 2.1 is not sold to Licensee. Licensor and its third
party licensors shall have and retain all right, title, and interest in the
License, including the goodwill pertaining thereto. Licensee acknowledges and
agrees that the License and any Derivative Works created by Licensee shall
be
the sole and separate property of Licensor, including any modifications thereto
expressly authorized by this Agreement.
2.3. Source
Code Limitations. Licensee
may use the Source Code subject to the following limitations:
(a) Licensor
grants to Licensee an exclusive license within the Territory and right to use
and prepare Derivative Works based on the Source Code for the purpose of
performing maintenance, making enhancements, and creating Object Code for use
in
the Products.
(b) Licensee
has the right to keep up to three copies, including backups, of the Source
Code
for use internally.
(c) Licensee
acknowledges that the Source Code contains Licensor’s valuable and proprietary
trade secrets, copyrights, and patents and shall treat the Source Code as
Confidential Information as defined in this Agreement. Further, Licensee shall
restrict access to Source Code to only those persons who are employees of
Licensee, and strictly for the purposes of performing the rights and licenses
granted in this Agreement.
(d) Licensee
shall keep reasonable records identifying the location of each copy of Source
Code and access list of personnel who have access to those copies.
(e) Licensee
agrees to retain all copyright notices in any form on all copies and Derivative
Works.
(f) Licensor
shall retain all ownership rights to the Source Code as delivered to
Licensee.
(g) However,
Licensee shall have the right to use the Source Code to create Derivative Works
and Licensee shall retain all ownership rights of such Derivative Works created
by Licensee.
(h) Licensor’s
Source Code and any rights and licenses granted in this Section may not be
assigned or otherwise transferred in any way. Licensee may not use, print,
copy,
disclose, display, sublicense, decompile, loan, rent, market, distribute, or
otherwise transfer the Source Code, or any Derivative Works of such Source
Code
in any form, in whole or in part, to any person or entity, except as expressly
provided in this Agreement.
3. TERM.
The
term
of this License Agreement shall be for ten (10) years from the Effective Date
or
for the life of the patents listed in Exhibit A, whichever is longer.
-3-
4. LICENSE
FEES AND OFFSET.
In
consideration for the License granted herein, Licensee has entered into an
Asset
Purchase Agreement and a Loan Agreement (“Loan”) dated August 4, 2006, to obtain
all right, title, and interest in and to the Products, including all
Intellectual Property and Licensed Software. In the event that Licensor is
unable to obtain shareholder approval prior to June 30, 2007 for the Asset
Purchase Agreement, Licensee has agreed to pay Licensor one hundred thousand
dollars ($100,000) for the License granted herein (“License Fees”). In the event
that Licensor is unable to get shareholder approval, the principal amount owing
under the Loan shall be offset by the amount of the License Fees.
5. MAINTENANCE
AND SUPPORT
In
the
event that Licensee or its customers request maintenance, any software issued
to
Licensee in the form of a revision, bug fixes and/or new release by Licensor
shall be subject to the same terms and conditions of this Agreement. Licensor
agrees to provide Licensee with revisions, bug-fixes and new releases to the
Licensed Software as reasonably required, provided that, Licensee pays to
Licensor an annual maintenance fee of $10,000 per annum.
6. WARRANTY
Licensor
warrants that it has all the necessary right, title and interest in and to
the
Intellectual Property, including the Licensed Software, Product, and
Documentation to enter into this License Agreement. Licensor
represents and warrants to Licensee that: (i) Licensor has developed or will
develop the Intellectual Property entirely through its own efforts for its
own
account or as a work for hire, and the Intellectual Property will be free and
clear of all liens, claims and encumbrances, (ii) Licensor has full and complete
rights to license the Intellectual Property and that such actions do not and
will not infringe upon any intellectual property rights of any third party,
(iii) Licensor has the right to license the Intellectual Property to Licensee
and the use of all Intellectual Property by Licensee and/or Licensee’s
sublicensees will not breach any terms of any contract between Licensor and
any
third party, and (iv) that the
Licensed Software is free from all material defects. In the event of any
defects, Licensor agrees to repair all such defects.
7. INDEMNIFICATION
Licensor
agrees to indemnify, defend and hold Licensee, its agents and employees harmless
from any and all costs, liabilities and damages (including reasonable attorneys’
fees) finally awarded by a court of competent jurisdiction directly caused
by or
arising out of a claim brought against Licensee, its agents and employees that
the Intellectual Property, including all Licensed Software, infringes or
misappropriates any patent right, copyright, trademark or other intellectual
property right of any third party; provided that (a) Licensor is notified in
writing within 30 calendar days of any statement or claim against Licensee;
(b)
Licensee permits Licensor sole control to defend, compromise or settle the
said
claim; and (c) Licensee gives Licensor all available information, assistance
and
authority, at Licensor’s reasonable expense, to enable Licensor to do so.
Notwithstanding the foregoing, Licensor shall have no liability for, nor shall
it indemnify Licensee, its agents or employees against any infringement claim
based on: (i) use of an old, superseded version of the Licensed Software or
Documentation therefore if such infringement would have been avoided by the
use
of the current version made available by Licensor; (ii) use of the Licensed
Software or Documentation in connection with or in combination with any other
equipment, devices or software if the Licensed Software or Documentation, if
used without such equipment devices or software, would not be infringing; (iii)
any modification of the Licensed Software or documentation by Licensee or any
third party where, in the absence of such modification, the Licensed Software
or
Documentation would not be infringing; (iv) continued allegedly infringing
activity by Licensee after Licensee has been notified of such possible
infringement. If use of the Licensed Software is permanently enjoined for any
reason, Licensor’s, at its option and in its sole discretion, may modify the
License Software so as to avoid infringement or procure the right for Licensee
to continue to use, reproduce and distribute the Licensed Software and
Documentation. If neither of such alternatives is reasonably possible, Licensor
may at its option, and without any obligation or liability, terminate this
Agreement with respect to that portion of the Licensed Software actually used
in
the country where the infringement claim arose, and Licensee shall return such
copies of Licensed Software to Licensor.
-4-
8. TRANSFER
OF ROBOT PARTS AND MATERIALS
Within
thirty (30) days after the execution of this Licensing Agreement, or less if
the
Parties mutually agree, Licensor will make available and deliver to Licensee,
all parts and materials of the Robot required to fully effectuate the License
granted herein. Costs associated with the delivery of such materials and parts
shall be paid by Licensee.
9. TERMINATION
9.1. Termination
for Cause.
Either
Party, as applicable, shall have the right, in addition and without prejudice
to
any other rights or remedies, to terminate this License Agreement as follows:
(a) except
as
set forth in (a) above, by either Party, effective immediately if the breaching
Party fails to cure its breach within thirty (30) days written notice by the
non-breaching Party; or
(b) by
either
Party effective immediately upon written notice if (i) all or a substantial
portion of the assets of the other Party are transferred to an assignee for
the
benefit of creditors, to a receiver or to a trustee in bankruptcy, (ii) a
proceeding is commenced by or against the other Party for relief under
bankruptcy or similar laws and such proceeding is not dismissed within 60 days,
or (iii) the other Party is adjudged bankrupt.
9.2. Termination
of Licensing Rights.
Immediately upon termination of this License Agreement for any reason
whatsoever, Licensee shall have a right to use the Intellectual Property,
including any Licensed Software for the limited purpose of completing the sale
and delivery of all Product orders currently in place at the time of
termination. Further, all Licensed Software to Licensee’s third party customers
shall be perpetual. Further, it shall be Licensee’s responsibility and at
Licensee’s sole cost to remove Intellectual Property in the possession of
Licensee or related to the sale of Products provided by Licensee or in which
Licensee has any control.
10. LIMITATION
OF LIABILITY
EXCEPT
FOR THE BREACH OF ANY WARRANTY BY LICENSOR UNDER SECTION 6 OR ANY BREACH BY
LICENSEE OF SECTIONS 2 OR 10, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY
INDIRECT, INCIDENTAL, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING
WITHOUT LIMITATION ANY LOSS OF INCOME, PROFITS OR DATA, OR COST OF PROCUREMENT
OF SUBSTITUTE GOODS, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE GRANT OF THE LICENSE
HEREUNDER.
11. CONFIDENTIALITY
11.1. Licensee
acknowledges that the Intellectual Property rights of Licensor, including but
not limited to, any modifications, Derivative Works or revisions thereto, and
any Documentation or information relating thereto, are the valuable confidential
and proprietary property of Licensor (“Confidential Information”) and are
protected by the copyright, trade secret and/or other laws of the United States
and within the laws of each of the individual states as it may apply to the
License Agreement. The Confidential Information of each Party shall be
safeguarded by the other to the same extent that it safeguards its own
Confidential Information, methods or data relating to its own business, but
using not less than a reasonable amount of care.
-5-
11.2. Exceptions.
The
obligations of confidentiality will not apply to the extent that a Party can
establish by competent proof that such Confidential Information:
(a) was
already known to it, other than under an obligation of confidentiality, at
the
time of its disclosure by the disclosing Party;
(b) was
generally available to the public or otherwise part of the public domain at
the
time of its disclosure to the receiving Party;
(c) became
generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the receiving
Party
in breach of this License Agreement;
(d) was
disclosed to it, other than under an obligation of confidentiality, by a third
party who had no obligation to the disclosing Party not to disclose such
information to others.
11.3. Licensee
and Licensor each agree that in the event of any breach of the provisions of
this Section 11,
the
non-breaching Party shall have the rights to obtain an injunction to be issued
by any tribunal of competent jurisdiction restricting Licensee or Licensor
as
the case may be, from continuing to breach the provisions of this Section
11.
The
provisions of this Section 11
shall
survive termination (for whatever reason) of this License
Agreement.
12. MISCELLANEOUS
12.1. Assignment.
Neither
party may assign this Agreement or any of its rights, duties or obligations
hereunder to any third party without the other party’s prior written consent,
which consent shall not be unreasonably withheld. Notwithstanding the foregoing,
either party may assign its rights and delegate its obligations under this
Agreement without the consent of the other party to a purchaser of all or
substantially all of its voting stock or capital assets or to an entity with
which such party merges or is consolidated.
12.2. Governing
Law.
This
License Agreement shall be governed by and interpreted in accordance with the
laws of the United States and the State of California applicable to agreements
made and to be performed within the State of California. Both Licensor and
Licensee agree that the State and Federal Courts in San Diego County shall
have
exclusive jurisdiction over all disputes arising from or pertaining to this
License Agreement and hereby waive any objections to the jurisdiction and venue
of such courts.
-6-
12.3. Notices.
Any
notice, request or other communication required or permitted under this License
Agreement shall be in writing and shall be given or made by physical delivery
or
by registered or certified mail, postage prepaid, return receipt requested
or by
overnight courier addressed to the appropriate Party. All such notices shall
be
addressed as follows:
|
If
to Licensor:
Integrated
Surgical Systems, Inc.
6220
Belleau Wood Lane, Suite 4
Sacramento,
CA 95882
Phone:
(916) 391-0420
Fax:
(916) 391-0200
With
a copy to:
Snow
Becker Krauss P.C.
605
Third Avenue
New
York, NY 10158
Attention:
Jack Becker, Esq.
|
If
to Licensee:
Novatrix
Biomedical, Inc.
16259
Laguna Canyon Rd.
Irvine,
CA 92618
Attention:
Dr. Soonkap Hahn
Fax: (949)
502-6786
With
Copy to General Counsel:
Soden
& Steinberger, LLP
550
West C Street, Suite 1710
San
Diego, CA 92101
|
12.4. Entire
Agreement.
This
License Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior letters
and
agreements with respect to the subject matter hereof. Except as otherwise
provided herein, this License Agreement may not be amended, supplemented,
canceled or discharged except by written instrument executed by each of the
parties hereto.
12.5. Severability.
If any
provision of this License Agreement, as applied to any Party or to any
circumstances, shall be finally determined by a court or arbitrator to be void
or unenforceable, the same shall be stricken from this License Agreement and
shall in no way affect any other provision of this License Agreement or the
validity or enforceability of this License Agreement.
12.6. Waiver.
The
waiver by any Party to this License Agreement of the breach of any provision
of
this License Agreement by the other Party shall not operate or be construed
as a
waiver of any subsequent breach by the other Party.
12.7. Section
Headings.
The
Section headings contained in this License Agreement are for convenient
reference only and shall not affect the construction of any provision of this
License Agreement.
12.8. Counterparts.
This
License Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and
the same instrument.
12.9. No
Agency or Partnership.
Each
Party is acting as an independent contractor. This License Agreement does not
create, nor is it intended to create any agency relationship between the parties
or a partnership or other joint venture or business relationship. Each Party
shall be responsible for all of its own Federal, State and local taxes of any
kind or nature.
12.10. No
Franchise.
This
License Agreement is a license of a copyright and intellectual property only,
and is not a franchise. The parties intend and acknowledge that their
relationship created by this License Agreement or otherwise is not subject
to
the franchise laws of any state.
12.11. Attorneys’
Fees.
If
either Party shall bring any proceedings to enforce the terms and provisions
hereof, to recover damages for breach, or to declare rights hereunder, the
Prevailing Party shall be entitled to recover from the other Party all costs,
expenses and attorneys’ fees incurred in connection with the exercise by the
Prevailing Party of its rights and remedies hereunder. Such costs, expenses
and
attorneys’ fees shall include, but not be limited to, reasonable attorneys’
fees, paralegal fees, expert witness fees, costs of tests and analyses, trial
and accommodation expenses, deposition and trial transcript copies, and costs
of
court. For purposes of this paragraph, the term “Prevailing Party” shall mean
(i) with respect to the claimant, one who is successful in obtaining
substantially all of the relief sought, and (ii) with respect to the defendant
or respondent, one who is successful in denying substantially all of the relief
sought by the claimant.
-7-
IN WITNESS
WHEREOF,
the
Parties hereto have caused this agreement to be duly executed the day and
year
first above written.
|
LICENSOR:
By:
Ramesh
Travedi, Chief Executive Officer
|
LICENSEE
By:
Dr.
Soonkap Hahn, Chief Executive
Officer
|
-8-
SECURITY
AGREEMENT
THIS
SECURITY AGREEMENT dated
as
of August 4, 2006 (“Security
Agreement”),
is
made
by
Integrated
Surgical Systems, Inc., a Delaware corporation
(“Debtor”),
in
favor
of Novatrix
Biomedical, Inc., a
California corporation (“Secured
Party”).
RECITALS
A. Secured
Party has made and has agreed to make certain advances of money and to extend
certain financial accommodation to Debtor as evidenced by that certain Secured
Promissory Note (the “Note”)
dated
August 4, 2006 executed by Debtor in favor of Secured Party (collectively,
the
“Loans”).
B. Secured
Party is willing to make the Loans to Debtor, but only upon the condition,
among
others, that Debtor shall have executed and delivered to Secured Party this
Security Agreement.
AGREEMENT
NOW,
THEREFORE,
in
order
to induce Secured Party to make the Loans and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound, Debtor hereby represents, warrants, covenants
and
agrees as follows:
1. DEFINED
TERMS. When
used
in this Security Agreement the following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural forms
of
the terms defined):
“Collateral”
shall
have the meaning assigned to such term in Section 2 of this Security
Agreement.
“Contracts”
means
all
contracts, undertakings, franchise agreements or other agreements in or under
which Debtor now holds or hereafter acquires any right, title or interest,
including, without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance
thereof.
“Copyright
License” means
any
written agreement, in which Debtor now holds or hereafter acquires any interest,
granting any right in or to any Copyright or Copyright registration (whether
Debtor is the licensee or the licensor thereunder) including, without
limitation, licenses pursuant to which Debtor has obtained the exclusive right
to use a copyright owned by a third party.
“Copyrights”
means
all
of the following in which Debtor now holds or hereafter acquires any interest:
(a) all copyrights, whether registered or unregistered, held pursuant to the
laws of the United States, any State thereof or any other country; (b)
registrations, applications, recordings and proceedings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (c) any continuations, renewals or
extensions thereof; (d) any registrations to be issued in any pending
applications; (e) prior versions of works covered by copyright and all works
based upon, derived from or incorporating such works; (f) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to copyrights, including, without limitation, damages, claims and recoveries
for
past, present or future infringement; (g) rights to sue for past, present and
future infringements of any copyright; and (h) any other rights corresponding
to
any of the foregoing rights throughout the world.
-A-1-
“Event
of Default”
means
(i) any failure by Debtor forthwith to pay or perform any of the Secured
Obligations and (ii) any “Event of Default” as defined in the Note.
“License”
means
any
Copyright License, Patent License, Trademark License or other license of rights
or interests now held or hereafter acquired by Debtor.
“Lien”
means
any
mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.
“Patent
License”
means
any written agreement, in which Debtor now holds or hereafter acquires any
interest, granting any right with respect to any invention on which a Patent
is
in existence (whether Debtor is the licensee or the licensor
thereunder).
“Patents”
means
all
of the following in which Debtor now holds or hereafter acquires any interest:
(a) all letters patent of the United States or any other country, all
registrations and recordings thereof and all applications for letters patent
of
the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, divisions, continuations,
renewals, continuations-in-part or extensions thereof; (c) all petty patents,
divisionals and patents of addition; (d) all patents to issue in any such
applications; (e) all Technical Disclosures and Trade Secrets; (f) all
information and data, including, but not limited to, preclinical and clinical
study data, engineering drawings and specifications, models and renderings,
computer and machine tool programming code, that Debtor considers proprietary
in
nature; (g) income, royalties, damages, claims and payments now and hereafter
due and/or payable with respect to patents, including, without limitation,
damages, claims and recoveries for past, present or future infringement; and
(h)
rights to sue for past, present and future infringements of any
patent.
“Secured
Obligations” means
(a)
the obligation of Debtor to repay Secured Party all of the unpaid principal
amount of, and accrued interest on (including any interest that accrues after
the commencement of bankruptcy), the Loans, (b) the obligation of Debtor to
pay
any fees, costs and expenses of the Secured Party under the Note or under
Section 6(b) hereof and (c) all other indebtedness, liabilities and obligations
of Debtor to Secured Party, whether now existing or hereafter incurred, and
whether created under, arising out of or in connection with any written
agreement or otherwise.
“Technical
Disclosure”
means
all Technical Disclosures (Schedule A).
“Trademark
License” means
any
written agreement, in which Debtor now holds or hereafter acquires any interest,
granting any right in and to any Trademark or Trademark registration (whether
Debtor is the licensee or the licensor thereunder).
-A-2-
“Trademarks”
means
any
of the following in which Debtor now holds or hereafter acquires any interest:
(a) any trademarks, tradenames, corporate names, company names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any Sate thereof or any other
country (collectively, the “Marks”); (b) any reissues, extensions or renewals
thereof; (c) the goodwill of the business symbolized by or associated with
the
Marks; (d) income, royalties, damages, claims and payments now and hereafter
due
and/or payable with respect to the Marks, including, without limitation,
damages, claims and recoveries for past, present or future infringement; and
(e)
rights to sue for past, present and future infringements of the
Marks.
“Trade
Secret” means
any
and all information pertaining to the filing of any patents, technical data,
customer lists, and technical know-how necessary to design manufacture, market
and sell any and all products developed by Debtor.
“UCC”
means
the
Uniform Commercial Code as the same may, from time to time, be in effect in
the
State of California; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of Secured Party’s security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of California, the term “UCC” shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
2. GRANT
OF SECURITY INTEREST. As
collateral security for the prompt and complete payment and performance when
due
(whether at stated maturity, by acceleration or otherwise) of all the Secured
Obligations and in order to induce Secured Party to cause the Loans to be made,
Debtor hereby assigns, conveys, mortgages, pledges, hypothecates and transfers
to Secured Party, and hereby grants to Secured Party, a security interest in
all
of Debtor’s right, title and interest in, to and under the following (all of
which being collectively referred to herein as the “Collateral”):
(a) All
Accounts of Debtor;
(b) All
Chattel Paper of Debtor;
(c) All
Contracts and License Agreements of Debtor;
(d) All
Deposit Accounts of Debtor;
(e) All
Documents of Debtor;
(f) All
Equipment of Debtor;
(g) All
Financial Assets of Debtor;
-A-3-
(h) All
Fixtures of Debtor;
(i) All
General Intangibles of Debtor, including, without limitation, all Copyrights,
Patents, Trademarks, Licenses, designs, drawings, technical information,
marketing plans, customer lists, trade secrets, proprietary or confidential
information, inventions (whether or not patentable), procedures, know-how,
models and data;
(j) All
Instruments of Debtor;
(k) All
Inventory of Debtor;
(l) All
Investment Property of Debtor;
(m) All
property of Debtor held by Secured Party, or any other party for whom Secured
Party is acting as agent hereunder, including, without limitation, all property
of every-description now or hereafter in the possession or custody of or in
transit to Secured Party or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Debtor, or
as
to which Debtor may have any right or power;
(n) All
other
goods and personal property of Debtor, wherever located, whether tangible or
intangible, and whether now owned or hereafter acquired, existing, leased or
consigned by or to Debtor;
(o) All
Insurance Proceeds to Debtor; and
(p) To
the
extent not otherwise included, all Proceeds of each of the foregoing and all
accessions to, substitutions and replacements for and rents, profits and
products of each of the foregoing.
3. RIGHTS
OF SECURED PARTY; COLLECTION OF ACCOUNTS.
(a) Notwithstanding
anything contained in this Security Agreement to the contrary, Debtor expressly
agrees that it shall remain liable under each of its Contracts and each of
its
Licenses to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and that it shall perform all of its
duties and obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract or License. Secured Party shall
not
have any obligation or liability under any Contract or License by reason of
or
arising out of this Security Agreement or the granting to Secured Party of
a
lien therein or the receipt by Secured Party of any payment relating to any
Contract or License pursuant hereto, nor shall Secured Party be required or
obligated in any manner to perform or fulfill any of the obligations of Debtor
under or pursuant to any Contract or License, or to make any payment, or to
make
any inquiry as to the nature or the sufficiency of any payment received by
it or
the sufficiency of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to collect or enforce
any
performance or the payment of any amounts which may have been assigned to it
or
to which it may be entitled at any time or times.
(b) Secured
Party authorizes Debtor to collect its Accounts, provided that such collection
is performed in a prudent and businesslike manner, and Secured Party may, upon
the occurrence and during the continuation of any Event of Default and without
notice, limit or terminate said authority at any time. Upon the occurrence
and
during the continuance of any Event of Default, at the request of Secured Party,
Debtor shall deliver all original and other documents evidencing and relating
to
the performance of labor or service which created such Accounts, including,
without limitation, all original orders, invoices and shipping
receipts.
-A-4-
(c) Secured
Party may at any time, upon the occurrence and during the continuance of any
Event of Default, without notifying Debtor of its intention to do so, notify
Account Debtors of Debtor, parties to the Contracts of Debtor, obligors in
respect of Instruments of Debtor and obligors in respect of Chattel Paper of
Debtor that the Accounts and the right, title and interest of Debtor in and
under such Contracts, Instruments and Chattel Paper have been assigned to
Secured Party and that payments shall be made directly to Secured Party. Upon
the request of Secured Party, Debtor shall so notify such Account Debtors,
parties to such Contracts, obligors in respect of such Instruments and obligors
in respect of such Chattel Paper. Upon the occurrence and during the continuance
of any Event of Default, Secured Party may, in its name or in the name of
others, communicate with such Account Debtors, parties to such Contracts,
obligors in respect of such Instruments and obligors in respect of such Chattel
Paper to verify with such parties, to Secured Party’s satisfaction, the
existence, amount and terms of any such Accounts, Contracts, Instruments or
Chattel Paper.
4. REPRESENTATIONS
AND WARRANTIES. Debtor
hereby represents and warrants to Secured Party that:
(a) Except
for the security interest granted to Secured Party under this Security
Agreement, Debtor is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all
Liens.
(b) No
effective security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of the Collateral
exists, except such as may have been filed by Debtor in favor of Secured Party
pursuant to this Security Agreement.
(c) This
Security Agreement creates a legal and valid security interest on and in all
of
the Collateral in which Debtor now has rights and all filings and other actions
necessary or desirable to perfect and protect such security interest have been
duly taken. Accordingly, Secured Party has a fully perfected first priority
security interest in all of the Collateral in which Debtor now has rights.
This
Security Agreement will create a legal and valid and fully perfected first
priority security interest in the Collateral in which Debtor later acquires
rights, when Debtor acquires those rights and additional filings to be made
with
the United States Copyright Office and/or Patent and Trademark Office as are
necessary to perfect Secured Party’s security interest in subsequent ownership
rights and interests of Debtor in Copyrights, Patents, Trademarks and
Licenses.
(d) Debtor’s
chief executive office, principal place of business and the place where Debtor
maintains its records concerning the Collateral are presently located at the
address set forth on the signature page hereof. The Collateral is presently
located at the address of the Debtor.
-A-5-
(e) All
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses now owned, held or in which Debtor otherwise has any interest
are listed on Schedule A attached hereto.
5. COVENANTS.
Debtor
covenants and agrees with Secured Party that from and after the date of this
Security Agreement and until the Secured Obligations have been performed and
paid in full:
5.1 Disposition
of Collateral. Debtor
shall not sell, lease, transfer, license or otherwise dispose of any of the
Collateral, or attempt or contract to do so.
5.2 Relocation
of Business or Collateral. Debtor
shall not relocate its chief executive office, principal place of business
or
its records, or allow the relocation of any Collateral (except as allowed
pursuant to Section 5.1 immediately above) from such address(es) provided to
Secured Party pursuant to Section 4(d) above without twenty (20) days prior
written notice to Secured Party.
5.3 Limitation
on Liens on Collateral. Debtor
shall not, directly or indirectly, create, permit or suffer to exist, and shall
defend the Collateral against and take such other action as is necessary to
remove, any Lien on the Collateral, except the Lien granted to Secured Party
under this Security Agreement.
5.4 Insurance.
Maintain
insurance policies insuring the Collateral against loss or damage from such
risks and in such amounts and forms and with such companies as are customarily
maintained by businesses similar to Debtor.
5.5 Taxes,
Assessments, Etc. Debtor
shall pay promptly when due all property and other taxes, assessments and
government charges or levies imposed upon, and all claims (including claims
for
labor, materials and supplies) against, the Equipment, Fixtures or Inventory,
except to the extent the validity thereof is being contested in good faith
and
adequate reserves are being maintained in connection therewith.
5.6 Maintenance
of Records. Debtor
shall keep and maintain at its own cost and expense satisfactory and complete
records of the Collateral.
5.7 Registration
and maintenance of Intellectual Property Rights. After
consultation with Secured Party, Debtor shall promptly register or cause to
be
registered (to the extent not already registered) the most recent version of
any
Copyright and any Copyright License and any Patent, Patent License, Trademark
or
Trademark License, which, individually or in the aggregate, is material to
the
conduct of Debtor’s business, with the United States Copyright Office or Patent
and Trademark Office or appropriate overseas patent, copyright, or trademark
office, as applicable, including, without limitation, in all such cases, the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings.
Debtor shall register or cause to be registered with the United States Copyright
Office or Patent and Trademark Office, as applicable, those additional rights
and interests developed or acquired by Debtor after the date of this Security
Agreement, including, without limitation, any additions to the rights and
interests of Debtor listed on Schedule A hereto
-A-6-
5.8 Notification
Regarding Changes in Intellectual Property. Debtor
shall promptly advise Secured Party of any subsequent ownership right or
interest of the Debtor in or to any Copyright, Patent, Trademark, Technical
Disclosure, Trade Secret or License not specified on Schedule A hereto and
shall
permit Secured Party to amend such Schedule, as necessary, to reflect any
addition or deletion to such ownership rights.
5.9 Defense
of Intellectual Property. Debtor
shall (i) protect, defend and maintain the validity and enforceability of the
Copyrights, Patents and Trademarks, (ii) use its best efforts to detect
infringements of the Copyrights, Patents and Trademarks and promptly advise
Secured Party in writing of material infringements detected and (iii) diligently
pay maintenance and registration fees and not allow any Copyrights, Patents
or
Trademarks to be abandoned, forfeited or dedicated to the public without the
written consent of Secured Party.
5.10 Further
Assurances; Pledge of Instruments. At
any
time and from time to time, upon the written request of Secured Party, and
at
the sole expense of Debtor, Debtor shall promptly and duly execute and deliver
any and all such further instruments and documents and take such further action
as Secured Party may reasonably deem necessary or desirable to obtain the full
benefits of this Security Agreement, including, without limitation, facilitating
the filing of UCC-1 Financing Statements in all applicable jurisdictions and
this Security Agreement (and any amendment hereto) with the United States
Copyright Office and/or Patent and Trademark Office, as applicable.
6. RIGHTS
AND REMEDIES UPON DEFAULT.
(a) Beginning
on the date which is thirty (30) business days after any Event of Default shall
have occurred and while such Event of Default is continuing, Secured Party
may
exercise in addition to all other rights and remedies granted to it under this
Security Agreement, all rights and remedies of a secured party under the
UCC.
(b) Debtor
also agrees to pay all fees, costs and expenses of Secured Party, including,
without limitation, reasonable attorneys fees, incurred in connection with
the
enforcement of any of its rights and remedies hereunder.
(c) Debtor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
(d) The
Proceeds of any sale, disposition or other realization upon all or any part
of
the Collateral shall be distributed by Secured Party in the following order
of
priorities:
FIRST,
to
Secured Party in an amount sufficient to pay in full the reasonable costs of
Secured Party in connection with such sale, disposition or other realization,
including all fees, costs, expenses, liabilities and advances incurred or made
by Secured Party in connection therewith, including, without limitation,
reasonable attorneys’ fees;
SECOND,
to
Secured Party in an amount equal to the then unpaid Secured Obligations;
and
-A-7-
FINALLY,
upon
payment in full of the Secured Obligations, to Debtor or its representatives,
in
accordance with the UCC or as a court of competent jurisdiction may
direct.
7. INDEMNITY.
Debtor
agrees to defend, indemnify and hold harmless Secured Party and its officers,
employees, and agents against (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Security Agreement and (b) all losses or
expenses in any way suffered, incurred, or paid by Secured Party as a result
of
or in any way arising out of, following or consequential to transactions between
Secured Party and Debtor, whether under this Security Agreement or otherwise
(including without limitation, reasonable attorneys fees and expenses), except
for losses arising from or out of Secured Party’s gross negligence or willful
misconduct.
8. LIMITATION
ON SECURED PARTY’S
DUTY IN RESPECT OF COLLATERAL. Secured
Party shall be deemed to have acted reasonably in the custody, preservation
and
disposition of any of the Collateral if it takes such action as Debtor requests
in writing, but failure of Secured Party to comply with any such request shall
not in itself be deemed a failure to act reasonably, and no failure of Secured
Party to do any act not so requested shall be deemed a failure to act
reasonably.
9. REINSTATEMENT.
This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against Debtor for liquidation
or
reorganization, should Debtor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or
any
significant part of Debtor’s property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or
returned by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
10. MISCELLANEOUS.
10.1 No
Waiver; Cumulative Remedies.
(a) Secured
Party shall not by any act, delay, omission or otherwise be deemed to have
waived any of its respective rights or remedies hereunder, nor shall any single
or partial exercise of any right or remedy hereunder on any one occasion
preclude the further exercise thereof or the exercise of any other right or
remedy.
(b) The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.
(c) None
of
the terms or provisions of this Security Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed by Debtor
and Secured Party.
-A-8-
10.2 Termination
of this Security Agreement. Subject
to Section 9 hereof, this Security Agreement shall terminate upon the payment
and performance in full of the Secured Obligations.
10.3 Successor
and Assigns. This
Security Agreement and all obligations of Debtor hereunder shall be binding
upon
the successors and assigns of Debtor, and shall, together with the rights and
remedies of Secured Party hereunder, inure to the benefit of Secured Party,
any
future holder of any of the indebtedness and their respective successors and
assigns. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Secured Obligations or any portion thereof or interest therein shall in any
manner affect the lien granted to Secured Party hereunder.
10.4 Governing
Law. In
all
respects, including all matters of construction, validity and performance,
this
Security Agreement and the Secured Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of
laws.
IN
WITNESS WHEREOF, each
of
the parties hereto has caused this Security Agreement to be executed and
delivered by its duly authorized officer on the date first set forth
above.
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INTEGRATED
SURGICAL SYSTEMS, INC.
(DEBTOR)
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| /s/ Dr. Ramesh Trivedi | ||
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By:
Dr. Ramesh Trivedi, CEO
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||
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ACCEPTED
AND ACKNOWLEDGED BY:
NOVATRIX
BIOMEDICAL, INC. (SECURED
PARTY)
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/s/
Dr. Soonkap Hahn
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By:
Dr. Soonkap Hahn, CEO
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-A-9-