Document:

Lenox Group Inc Exhibit 10.1

Exhibit 10.1  

[Date]

 

Dear ______:

In recognition of your contributions to Lenox Group Inc (“formerly known as Department 56, Inc. and referred to herein as “LGI or the “Company”), and the Company’s desire to assure your continued services in your current position in the event of a pending or actual Change in Control (as defined) of LGI, the Company’s Board of Directors is pleased to offer you the Change of Control protection outlined in this letter agreement (“Agreement”).

1.            Term Of Agreement.  The Term of this Agreement shall commence on the date of this letter (the “Effective Date”) and end on the third anniversary of such date (the “Original Term”). The Original Term shall be automatically renewed for successive one-year terms (the “Renewal Terms”) unless at least 180 days prior to the expiration of the Original Term or any Renewal Term, either of us notifies the other in writing that you or we are electing to terminate this Agreement at the end of the then current Term. “Term” shall mean the Original Term and all Renewal Terms. If a Change in Control occurs during the Term, the Term shall not expire earlier than one year from the date of the Change in Control.

2.            Entitlement to Severance Benefits.

(a)           Cash Severance Benefit.  In the event your employment terminates under the circumstances specified below in this Section 2(a) (a “Termination”), you shall be entitled to receive the sum of the following, payable in a cash lump sum no earlier than the six-month anniversary of the Termination Date and no later than 15 days after the six-month anniversary of the Termination Date (the “Cash Severance Benefit”):  (i) your Base Salary through the Termination Date; (ii) an amount equal to 200% of the sum of (x) your Base Salary plus (y) the highest annual cash bonus earned by you during the most recent three (3) completed fiscal years of the Company; and (iii) your pro rata annual incentive award at target for the
year in which the Termination occurs.

A Termination shall occur and the Cash Severance Benefit shall be payable only if your employment Termination occurs without Cause or for Good Reason (other than due to death, disability or retirement at or after age 65), in either case within one year following a Change in Control.

Notwithstanding anything in this Agreement to the contrary, if (1) your employment is involuntarily Terminated (x) within four weeks prior to a public announcement by LGI of an agreement with a third party to effect a Change in Control, which agreement is approved by the LGI Board of Directors in force immediately prior to such announcement or (y) at any time from the time of such announcement through the closing of such agreement (or through the consummation of a Change in Control with or by a party competing with such third party) and (2) such Termination is under circumstances that would have entitled you to the Cash Severance Benefit if they had occurred following a Change in Control, then a Change in Control shall be deemed to have occurred on the date immediately prior to the date of such involuntary Termination for all purposes of this Agreement. Written notice
of involuntary Termination shall be given to you by hand or overnight courier delivery to your most recent address contained in the Company’s personnel records and shall set forth in reasonable detail the relevant facts, circumstances and effective date of such Termination.

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(b)          Other Severance Benefits. In addition to the benefits provided in Section 2(a), you shall also be entitled to the following:  (i) elimination of all restrictions on vesting and exercise of any restricted or deferred stock awards outstanding on the Termination date; (ii) immediate vesting of all outstanding stock options and, to the extent permitted under Section 409A of the Code, the right to exercise such stock options for 36 months (or the remainder of the exercise period, if less); (iii) immediate vesting of all nonqualified retirement benefits; (iv) the current value of continued participation in all LGI benefit plans (described on annexed sheet) at the same benefit level at which you were participating on the Termination Date,
assuming you were to continue participating in such plans for a period of 24 months, which amount shall be added to the Cash Severance Benefit and paid in accordance with the six-month delay set forth Section 2(a) above. Your right to continued participation in the D 56, Inc. 401(k) Retirement Savings Plan, D 56, Inc. Executive Compensation Exchange Plan (“KEYSOP”) and the Executive Nonqualified Excess Plan of Department 56, Inc. shall be subject to the eligibility and other terms and conditions of such plans (other than as modified or amended by this Section 2(b)) as they are in effect immediately prior to the Change in Control giving rise to the Cash Severance Benefit becoming payable to you under this Agreement.

(c)          Benefits Tax Gross-Up.  The amounts described in Section 2(b)(iv) regarding benefit plans shall be grossed up for taxes. The amount of the tax gross-up for this purpose shall include the amount of all federal, state and local income taxes imposed on the amounts received for such benefit plan payment at the maximum marginal rates then in effect and shall be calculated by LGI’s independent auditors. 

(d)          Section 280(G) Gross-Up Protection. In the event you become entitled to payments or benefits, all or a portion of which become subject to tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any other similar tax, but not income tax of any nature (collectively, “Excise Tax”), LGI shall pay you an additional amount (“Gross-Up Payment”) such that the amount retained by you after reduction for any Excise Tax (including penalties or interest thereon) equals the amount to be paid to you by LGI hereunder prior to the imposition of such Excise Tax (“Total Payments”); provided that, in the event the amount to be retained after
imposition of the Excise Tax is equal to or exceeds 80% of the Total Payments, no such Gross-Up Payment shall be made to you by LGI. The amount of the Gross-Up Payment shall include the amount of all federal, state and local income taxes (including, without limitation, Excise Tax) imposed on the Gross-Up Payment at the maximum marginal rates then in effect and shall be calculated by LGI’s independent auditors. In the event that such Gross-Up Payment is finally determined to be less than the amount necessary to achieve the purposes of this paragraph, LGI shall pay an additional amount to you in respect of such deficiency (including any interest and penalties). In the event that such Gross-Up Payment is finally determined to exceed the amount necessary to achieve the purposes of this paragraph, you must promptly repay the entire amount of such excess Gross-Up Payment to LGI.

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(e)          No Mitigation; No Offset. In the event of any Termination, you shall be under no obligation to seek other employment; and no amounts due to you under this Agreement shall be subject to offset due to any remuneration attributable to subsequent employment that you may obtain.

(f)           Release. Termination payments and benefits to be made to you hereunder are conditioned upon your execution of a release in the form attached as Exhibit A to this Agreement. Upon the Company’s receipt of such release executed by you, the Company will provide to you an executed copy of the release attached as Exhibit B to this Agreement.

3.            Definitions.  For purposes of this Agreement, the following terms shall have the meanings ascribed to them.

(a)          “Base Salary” means the annualized rate of pay in effect on the Termination Date; provided that, if a reduction in Base Salary is the basis for a Termination for Good Reason, then “Base Salary” shall mean the rate of pay in effect immediately prior to such reduction.

(b)          “Cause” shall exist if:  (i) you are convicted of, or plead nolo contendere to, any felony which materially and adversely impacts LGI’s financial condition or reputation, (ii) you engage in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out your duties which materially and adversely impacts LGI’s financial condition or reputation, or (iii) you violate Section 4 of this Agreement prior to Termination and that is the sole basis for your involuntary Termination.

(c)          A “Change in Control” shall be deemed to occur upon any of the following:  (i) acquisition by any one “person” (as such term is defined in §3(a)(9) of the Securities and Exchange Act of 1934, as amended, and used in §13(d) and §14(d) thereof, including “group” as defined in §13(d) thereof) of 20% or more of LGI’s voting shares, (ii) directors elected to the LGI Board of Directors over any 24 month period not nominated by the LGI Nominating Committee represent 30% or more of the total number of directors constituting the LGI Board of Directors at the beginning of the period (for these purposes, a director “not nominated by the LGI Nominating Committee” shall include,
without limitation, any individual(s) whose nomination results from an actual or threatened proxy contest or whose initial assumption of office as a director occurs as a result of an actual or threatened proxy contest or other actual or threatened solicitation or execution of proxies or consents by or on behalf of any “person(s)” other than the Company or the LGI Board of Directors); (iii) any merger, consolidation or other corporate combination upon the completion of which LGI shares do not represent more than 50% of the combined voting power of the resulting entity; and (iv) upon the sale of all or substantially all of the consolidated assets of LGI, other than a distribution to shareholders.

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(d)          “Confidential Information” shall mean all information concerning the business of LGI relating to any of its products, product development, trade secrets, customers, suppliers, finances, and business plans and strategies. Excluded from the definition of “Confidential Information” is information (i) that is or becomes part of the public domain, other than through your breach of this Agreement, or (ii) regarding LGI’s business or industry properly acquired by you in the course of your career as an employee in LGI’s industry and independent of your employment by LGI. For this purpose, information known or available generally within the trade or industry of LGI shall be deemed to be known or available to the public.

(e)          “Good Reason” shall mean your termination of your employment based upon one or more of the following events (except as a result of a prior Termination):  (i) any material change (except a change in reporting relationship) in your position, responsibilities or assignment of duties materially inconsistent with your status prior to the Change of Control; (ii) any decrease in your Base Salary, target annual incentive or long term incentive award opportunity, or equity grants; (iii) any material reduction in health, welfare, pension or deferred compensation benefits as in effect immediately prior to the Change in Control; (iv) any breach of the terms of this Agreement by LGI after receipt of written notice from you and a
reasonable opportunity to cure such breach; (v) LGI fails to obtain any successor entity’s assumption of its obligations to you hereunder; or (vi) upon relocation of you to a location more than 50 miles from our current headquarters.

(f)           “Separation From Service” shall have the meaning as set forth in Section 409A of the Code and the regulations  and guidance issued thereunder.

(g)          “Termination” shall mean a “Separation From Service” as such phrase is defined above.

(h)          “Termination Date” shall mean the date on which there is a Termination.

	
             
 	
            4.
 	
            Non-Disclosure; Non-Solicitation; Non-Disparagement.
 

(a)          During the Term and thereafter, you shall not, without LGI’s prior written consent disclose to anyone (except in good faith in the ordinary course of business) or make use of any Confidential Information except in the performance of your duties hereunder or when required to do so by law. In the event that you are so ordered, you shall give prompt written notice to LGI sufficient to allow LGI the opportunity to object to or otherwise resist such order.

(b)          During the Term and for a period of 24 months thereafter, you shall not, without LGI’s prior written consent, solicit for employment, whether directly or indirectly, any person who at the time is employed by LGI or any affiliate.

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(c)          You agree that, during the Term and thereafter (including following any Termination for any reason) you will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to LGI or its respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude you from making truthful statements or disclosures that are required by applicable law, regulation or legal process.

5.            Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof shall be resolved by binding arbitration, to be held at an office closest to LGI’s principal offices in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Pending the resolution of any arbitration or court proceeding, LGI shall continue payment of all amounts and benefits due you hereunder. All reasonable costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be promptly paid on your behalf by LGI; provided, however, that
no such expense reimbursement shall be made if and to the extent the arbitrator(s) determine(s) that any of your litigation assertions or defenses were in bad faith or frivolous.

6.            Effect of Agreement on Other Benefits; Complete Agreement.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to prohibit or restrict your participation in any other employee benefit or other plans or programs in which you currently participate. This is the entire agreement between you and LGI with respect to, and supersedes all prior arrangements concerning, the subject matter of this Agreement. [For the avoidance of doubt, this Agreement specifically supercedes your existing letter agreement with the Company, dated ____________, which is of no further force or effect.]

7.            Not an Employment Agreement.  This Agreement is not a contract of employment between you and LGI. LGI may terminate you at any time, subject to the terms of any employment agreement between you and LGI that may then be in effect.

8.            Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs (as applies to you) and permitted assigns. LGI agrees that in the event of a sale or transfer of assets, it shall take whatever action it legally can to cause such assignee or transferee to expressly assume LGI’s liabilities, obligations and duties hereunder.

9.          Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Minnesota without reference to principles of conflict of laws.

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10.        Tax Compliance. Notwithstanding anything to the contrary herein, if either LGI or you determine in good faith that any payment or benefit due to you under this Agreement is subject to Section 409A(a)(2)(B)(i) of the Code, as amended (the six month distribution delay requirement for certain payments to key employees of publicly traded companies), such payment or benefit shall not be made or provided sooner than permitted under such Section 409A(a)(2)(B)(i) of the Code and shall be made or provided on the date that is the first business day after the date that is six months after the date of Separation From Service. LGI shall consult with you before making any such determinations.

 

Please acknowledge your acceptance of the terms of this Agreement by executing below and returning a copy to LGI.

 

	
             
 	
             
 	
            LENOX GROUP INC  
 
	 
	
              
 	
             
 	
            By: 
 	
              
 
	
             
 	
             
 	
             
 	
            Stewart M. Kasen, Chairman
 

 

	
             
 	
             
 	
            Accepted:  
 
	 
	
              
 	
             
 	
             
 
	
             
 	
             
 	
             
 

Lenox Group Inc

Benefit Plans referred to in

Executive Continuity Agreements

	
            •
 	
            Group Medical Plan
 

	
            •
 	
            Group Dental Plan
 

	
            •
 	
            Group Vision Plan
 

	
            •
 	
            Section 125 Healthcare Reimbursement Plan (HCRA)
 

	
            •
 	
            Section 125 Dependent Care Reimbursement Plan (DCRA)
 

	
            •
 	
            Group Life Insurance, including option to purchase supplemental for self and/or dependent(s)
 

	
            •
 	
            Group AD&D Insurance, including option to supplemental coverage for self and/or dependent(s)
 

	
            •
 	
            Short-Term Disability Income Plan (self-insured)
 

	
            •
 	
            Long-Term Disability Income Individual and Group Policies (Northwestern Mutual), including imputation to current income of employer-paid premium and corresponding tax reimbursement (“gross-up”)
 

	
            •
 	
            D 56, Inc. 401k Retirement Savings Plan, including employer-paid match contribution (100% of first 3% of eligible compensation deferred, 50% of 4th% and 5th%) and employer-paid profit-sharing contribution (recent historical and future anticipated at 8% to 10% of cash compensation)
 

	
            •
 	
            Executive Compensation Exchange Plan (“KEYSOP”), including employer-paid match contribution (2% of gross amount deferred by participant) and employer-paid profit-sharing contribution (restoring the percentage profit-sharing contribution contemplated of the D 56, Inc. 401k plan to the extent prohibited by the 401k rules under that plan or applicable law or regulation (eg, 415 limitation))
 

	
            •
 	
            The Executive Nonqualified Excess Plan of Department 56, Inc.
 

Exhibit A to Executive Continuity Agreement

between __________ and Lenox Group Inc

 

EMPLOYEE RELEASE

_______________ (“Employee”), in consideration for the payment of monies and benefits by Lenox Group Inc (the “Company) pursuant to the Letter Agreement to which this Release is annexed as Exhibit A (the “Executive Continuity Agreement”), does hereby confirm her/his agreement and delivery of this Release by setting forth her/his signature in the space provided below.

Employee, on behalf of herself/himself and her/his heirs and representatives, hereby releases Company and all of its affiliates, predecessors, subsidiaries, successors, employees, officers, directors, agents, insurers, representatives, counsel, shareholders, and all other persons, entities, and corporations affiliated or related with any of them, from all liability for damages, claims, and demands, whether known or unknown, of any kind, including all claims for costs, expenses, and attorneys’ fees arising out of any events, acts, decisions, or omissions occurring prior to execution of this Release (including, but not limited to, Employee’s termination from employment with Company). Employee understands that this Release is a full, final, and complete settlement and release of all her/his claims whatsoever.

Employee further agrees that s/he will not institute any claim for damages, by charge or otherwise, nor otherwise authorize any other party, governmental or otherwise, to institute any claim for damages via administrative or legal proceedings against Company, its affiliates, predecessors, subsidiaries, successors, employees, officers, directors, agents, insurers, representatives, counsel, shareholders, and all other persons, entities, and corporations affiliated or related with any of them based on any events, acts, decisions, or omissions occurring prior to execution of this Release. Employee also waives the right to money damages or other legal or equitable relief awarded by any governmental agency related to any such claim.

ADDITIONALLY, THIS RELEASE SPECIFICALLY WAIVES ALL OF EMPLOYEE’S RIGHTS AND CLAIMS ARISING UNDER TITLE VII OF THE CIVIL RIGHTS ACT, AS AMENDED (42 U.S.C. § 2000e, et seq.); THE AMERICANS WITH DISABILITIES ACT (42 U.S.C. § 12101 et seq.); THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (29 U.S.C. § 621 et seq.), AS AMENDED; THE OLDER WORKERS’ BENEFIT PROTECTION ACT, AS AMENDED; AND THE MINNESOTA HUMAN RIGHTS ACT (MN STATUTES § 363A.01 et seq.). In connection with this waiver, Employee acknowledges and agrees to the following:

	
             
 	
            a.
 	
            Employee is not waiving any rights or claims under the Age Discrimination in Employment Act of 1967, as amended, that may arise after this Release is executed.
 

	
             
 	
            b.
 	
            Employee can waive rights or claims under the Age Discrimination in Employment Act only in exchange for consideration that this is in addition to anything of value to which Employee is already entitled.
 

	
             
 	
            c.
 	
            Employee has been informed of her/his right to rescind this Agreement as far as it extends to potential claims under the Minnesota Human Rights Act, § 363A.01 et seq., by written notice to the Company within fifteen (15) calendar days following her execution of this Release. To be effective, such written notice must be delivered either by hand or by mail to the Chief Executive Officer, Lenox Group Inc, 6436 City West Parkway Eden Prairie, MN 55344 , within the fifteen (15)-day period. If a notice of rescission is delivered by mail, it must be: 1) postmarked within the fifteen (15)-day period; 2) properly addressed to the Chief Executive Officer, as set forth above; and 3) sent by certified mail, return receipt requested.
 

	
             
 	
            d.
 	
            Employee has been informed of her/his right to revoke this Release as far as it extends to potential claims under the Age Discrimination in Employment Act, 29 U.S.C.§ 621 et seq., by informing the Company, through the Chief Executive Officer at the above referenced address, of her/his  intent to revoke this Agreement within seven (7) calendar days following her execution of this Release.
 

	
             
 	
            e.
 	
            Employee understands that, in the event she/he timely delivers a notice of rescission and/or revocation hereunder, the Company may, at its discretion, either enforce the remaining provisions of the Executive Continuity Agreement, or void the entire Executive Continuity Agreement and require any payments made and/or benefits conferred as of that date to Employee be immediately repaid by Employee to the Company.
 

	
             
 	
            f.
 	
            Employee has carefully read and fully understands all of the provisions and effects of this Release and Employee knowingly and voluntarily entered into all of the terms set forth herein.
 

Employee’s signature below evidences Employee’s understanding and voluntary waiver of all claims against the Company, including but not limited to those pursuant to each of the statutes identified above in this Release.

Notwithstanding anything in this Release to the contrary, Employee does not release the Company of any of its obligations or any of Employee’s claims or demands (1) under any of the Company’s applicable insurance policies or any applicable indemnification agreement or law with respect to suits, demands, proceedings, or other claims arising out of events, occurrences, or conduct in connection with Employee’s conduct as a director, officer, or employee of the Company or any of its subsidiaries so long as, with respect to the events, occurrences, or conduct which give rise to any such suit, demand, proceeding, or other claim, Employee acted in good faith in the reasonable belief that Employee’s acts or omissions were in (or not opposed to) the best interest of the Company, (2) under the Executive Continuity Agreement or (3) under any employee pension benefit plan or employee
welfare benefit plan under ERISA (“Employee Retirement Income Security Act”, 29 U.S.C. Sec 1001 et seq.), which rights shall be governed by the terms of any such plans maintained by the Company.

	
             
 	
             
 	
            Date:
 	
             
 

Exhibit B to Executive Continuity Agreement

between _______ and Lenox Group Inc

 

COMPANY RELEASE

Lenox Group Inc (the “Company”), in consideration for the release by ______________(“Employee”) pursuant to the Letter Agreement to which this Release is annexed as Exhibit B (the “Executive Continuity Agreement”), does hereby confirm its agreement and delivery of this Release by setting forth the signature of its duly authorized officer in the space provided below.

Company hereby releases Employee from all liability for damages, claims, and demands, whether known or unknown, of any kind, including all claims for costs, expenses, and attorneys’ fees, which the Company, its successors or assigns may have against Employee; provided, however, that the foregoing release shall not extend to, and the Company expressly does not release, any claim, known or unknown, which the Company, its successors, or assigns may have against Employee relating in any way to any misconduct by Employee prior to Employee’s termination of employment which constitutes “Cause” as such term is defined in the Executive Continuity Agreement.

Lenox Group Inc

 

 

	
             
 	
             
 	
            Date:
 	
             
 
	
            Authorized Officer
 	
             
 	
             
 	
             
 

 

 

4821-5236-5569\41/10/2007Exhibit 10.1 to Pace Health Management Systems, Inc. Form 8-K dated January 12, 2007

Exhibit 10.1

 

PACE HEALTH MANAGEMENT SYSTEMS, INC.

 

January 12, 2007        

 

 

	 
	
            RE:
 	
            Amendment of Stock Purchase Agreement
 

 

To the parties listed 

on the signature page hereto:

 

Reference is hereby made to the STOCK PURCHASE AGREEMENT (the “Agreement”), dated August 2, 2006 by and among Pace Health Management Systems, Inc., an Iowa corporation (“Purchaser”), ConMed, Inc., a Maryland corporation (“Company”) and the stockholders identified on Schedule I thereto (each a “Stockholder” or “Company Stockholder” and collectively, the “Company Stockholders”). All capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

1.  Section 2.2 (a) of the Agreement shall be deleted in its entirety and replaced with the following:

 

(a)          The Closing.  The parties shall endeavor to effect the closing of the Sale and the other transactions contemplated hereby (the “Closing”) with a view towards closing on or before January 31, 2007, or at such other time as the Parties hereto agree (the “Closing Date”). The Closing shall take place at the offices of Ellenoff Grossman & Schole LLP located at 370 Lexington Avenue, New York, New York unless otherwise agreed by the Parties. Purchaser has previously paid to the Company a non-refundable cash deposit of $250,000 upon execution of this Agreement (“Forfeited Cash Deposit”); such
Forfeited Cash Deposit was released from escrow pursuant to its terms on November 3, 2006 and was paid to the Company. As of today’s date, and intending to reinstate and readopt this Agreement (except as otherwise expressly provided by this Amendment), Purchaser shall pay $250,000 to the Company as a non-refundable cash deposit (“New Cash Deposit”), to be held in escrow by Jackson & Campbell, P.C., counsel to the Company; provided, however, that such New Cash Deposit shall be released from escrow and returned to Purchaser in the event the Company and/or any of the Company Stockholders, fail to satisfy the closing conditions and any other required obligations hereunder; provided, further, that such New Cash Deposit shall be released
from escrow and distributed to the Company Stockholders in the event that the Closing does not occur by January 31, 2007, in the event the Purchaser fails to satisfy the closing conditions and any other required obligations hereunder. In the event that the Closing is consummated on or before January 31, 2007, the New Cash Deposit of $250,000 shall be deducted from the Cash Consideration (as defined below) owed to the Company Stockholders at the Closing of the Sale. Notwithstanding anything herein to the contrary and subject to the termination provisions of this Agreement, in the event the Closing does not occur by January 31, 2007, (i) this Agreement shall become null and void, and (ii) the parties shall have no further obligation pursuant to this Agreement, except for the confidentiality provisions that will survive this Agreement.

2.  Section 2.2(c) of the Agreement shall be deleted in its entirety and replaced with the following:

 

 (c)         Closing Deliveries.  At the Closing:   (i) the Purchaser will pay to the Company Stockholders the Purchase Price (as defined below) minus the New Cash Deposit as provided above, and subject to the Holdback as provided below; (ii) the Company Stockholders will deliver the stock certificates representing the Company Stock, duly endorsed for transfer or accompanied by stock powers duly executed in blank, free and clear of all Liens, and any other documents that are necessary to transfer to the Purchaser good title to all the Company Stock; (iii) the Purchaser, the Company and the Company Stockholders will each execute and deliver the documents required to be delivered by each of them pursuant to this Agreement hereunder; and (iv) the Purchaser, the Company and the
Company Stockholders will either:  (A) confirm in writing the satisfaction of all closing conditions, as described below, or (B) expressly waive in writing the fulfillment of any such closing condition, in each of their sole discretion.

 

3.  Section 2.4(a) of the Agreement shall be deleted in its entirety and replaced with the following:

 

(a)          Consideration.  As consideration in full for the Sale of the Company Stock, the Purchaser will pay to the Company Stockholders, as set forth in Section 2.4 of the Company Disclosure Schedule:  (i) Eight Million ($8,000,000) in cash (the “Cash Consideration”), less the New Cash Deposit (as defined above) and (ii) 8,000 shares of a newly created preferred stock (the “Pace Stock”) which shall be convertible into 800,000 post-split shares of the Purchaser’s common stock, no par value (“Pace Common Stock”) (the Pace Stock, together with the Cash Consideration; collectively, the
“Purchase Price”).

 

4.  (a)    The Company affirms each of the representations and warranties contained in Article III and that the representations and warranties therein are true, correct, and not misleading as of the date of this Amendment. The Company Disclosure Schedule and any Disclosure Schedule Updates provided to the Purchasers and accepted by the Purchaser (i) are true, accurate and complete in all respects as of the date hereof and (ii) will be true, accurate and complete in all respects as of the Closing. 

 

(b)          Section 3.4(a) of the Agreement is hereby amended to add the Company’s financial statements for the periods ending June 30, 2006 and September 30, 2006, and the Company’s unaudited financial statements for the nine (9) month periods ended September 30, 2005 and 2006 to the definition of “Company Financial Statements”.

 

5.  In addition, Company and Company Stockholders, jointly and severally, represent and warrant to Purchaser all of the representations and warranties contained in Annex A of this Amendment. Such representations and warranties (i) are true, accurate and complete in all respects as of the date hereof and (ii) will be true, accurate and complete in all respects as of the Closing.

 

6.  Section 8.3 (b) of the Agreement shall be deleted in its entirety and replaced with the following:

Section 8.3       (b)       By Purchaser, Company or Company Stockholders, if (i) this Agreement shall not have been consummated on or before January 31, 2007; provided, however, that the right to terminate this Agreement pursuant to this Section shall not be available to any party if such party’s action or failure to act has been the principal cause of or resulted in the failure of the Agreement to be consummated on or before such date, or if (ii) any permanent injunction or other order of a court or other competent authority preventing the consummation of the Agreement shall have become final and nonappealable;

 

7.  Simultaneous with the execution of this side letter, a letter agreement, in the form attached hereto as Exhibit I, relating to the personal guarantees made out in favor of Liberty Mutual Insurance Company by each of the Guarantors identified therein on the bonds posted for Sedgwick County, Kansas and Howard County, Maryland shall be executed by Purchaser and each such Guarantor.

 

[The remainder of this page is intentionally left blank.]

                Other than as set
forth above, the Agreement shall be unchanged, shall continue to bind the parties and shall remain in full force and effect. This
side letter and the transactions contemplated hereby, and all disputes between the parties under or related to this side letter or
the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed
in accordance with the internal laws of the State of Delaware, applicable to contracts executed in and to be performed entirely
within the State of Delaware.

 

	
             
 	
             
 	
            Very truly yours,
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            PACE HEALTH MANAGEMENT SYSTEMS, INC.
 
	 
	
              
 	
             
 	
            By: 
 	
            /s/ John Pappajohn 
 
	
             
 	
             
 	
             
 	
            Name:  John Pappajohn
    Title:    Acting Chief Executive Officer
 

 

AGREED TO AND ACCEPTED BY:

 

COMPANY:

 

CONMED, INC.

 

	
            By: 
 	
            /s/ Ronald Grubman
 
	
             
 	
            Name:  Ronald Grubman
    Title:    President
 

 

COMPANY STOCKHOLDERS:

 

YANKEE PARTNERS, LLC

 

	
            By: 
 	
            /s/ Ronald Grubman
 
	
             
 	
            Name:  Ronald Grubman
    Title:    Member
 

 

RSO, LLC

 

	
            By: 
 	
            /s/ Richard Olson
 
	
             
 	
            Name:  Richard Olson
    Title:    Member
 

 

HAFT VOYAGE, LLC

 

	
            By: 
 	
            /s/ Howard Haft
 
	
             
 	
            Name:  Howard Haft
    Title:    Member
 

 

	
            /s/ Ronald Grubman
 
	
            Ronald Grubman
 

 

	
            /s/ Richard Olson
 
	
            Richard Olson
 

 

	
            /s/ Howard Haft
 
	
            Howard Haft
 

ANNEX A

 

Representations and Warranties of ConMed, Inc. (“Company”). Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof and to qualify any representation or warranty otherwise made herein to the extent of such disclosure, the Company hereby makes the following representations and warranties to the Purchaser. Additionally, the placement agent and the investors in the Private Placement, as defined in Section 7.1(d) of the Agreement, shall be entitled to rely on all of the representations, warranties and covenants made by the Company to the Purchaser hereunder, as if such representations, warranties and covenants were made directly to the placement agent and such investors. Unless otherwise set forth herein, capitalized terms shall have the meanings set forth in the Agreement. 

(a)          Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, then all other references to the Subsidiaries or any of them in the Agreement, any other agreement entered into therewith, and the transactions contemplated thereby shall be disregarded.

(b)          Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or enforceability of any of the Agreement or any of the agreements
entered into therewith, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its obligations under any of the Agreement or any of
the agreements entered into therewith (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no suit, action, investigation or proceeding (“Proceeding”)
has been institut ed in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power
and authority or qualification.

 

(c)          Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Agreement and the transactions contemplated thereby and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Agreement and the agreements entered into therewith by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of directors or its stockholders in connection therewith other than in connection with all necessary third-party approvals, waivers and consents (the
“Required Approvals”). The Agreement and each of the agreements entered into therewith has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d)          No Conflicts. The execution, delivery and performance of the Agreement and the agreements entered into therewith by the Company, the sale of the Company Stock and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(e)          Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Agreement and the agreements entered into therewith.

 

(f)           Material Changes; Undisclosed Events, Liabilities or Developments. Except as specifically disclosed in writing (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.

(g)          Litigation. Except as disclosed in Schedule 3(g) hereto, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Agreement and the agreements entered into therewith or the Company Stock or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by any governmental or regulatory authority or agency involving the Company or any current or former director or officer of the Company.   

(h)          Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or Subsidiary which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company, and neither the Company or any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure
or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

(i)           Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

(j)           Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

(k)          Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

(l)           Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a notice (written or otherwise) that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(m)         Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(n)          Transactions With Affiliates and Employees. None of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in
each case in excess of $10,000 other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company or Subsidiary and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company or any Subsidiary.

(o)          Certain Fees. All brokerage or finder’s fees or commissions that are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Agreement and the agreements entered into therewith are as set forth on Schedule 3.1(o). The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Agreement and the agreements entered into therewith.

(p)          Investment Company. The Company is not, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. 

(q)          Registration Rights. No Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

(r)          Solvency. Based on the financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Company Stock hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the

current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(r) sets forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or
any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $10,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $10,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 (s)         Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

 (t)         Anti Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company or Subsidiary has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) or any Subsidiary which is in violation of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery/kickback law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject.

(u)          Accountants. The Company’s accounting firm is set forth on Schedule 3.1(u) of the Disclosure Schedule. To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act.

 

 (v)         No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers.

 (w)         FDA.  Neither the Company nor its Subsidiaries manufacture, package, label, test, distribute, sell, and/or market any products subject to the jurisdiction of the U.S. Food and Drug Administration under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder.

 (x)         Manufacturing and Marketing Rights.   Neither the Company nor its Subsidiaries manufacture, produce, assemble, license, market, or sell any products to any Person.

 (y)         Obligations of Management.   Each officer and key employee of the Company and its Subsidiaries is currently devoting substantially all of his or her business time to the conduct of business of the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries is aware that any officer or key employee of the Company or any Subsidiary is planning to work less than full time at the Company or any Subsidiary, as applicable, in the future. No officer or key employee is the currently working or, to the Company’s knowledge, plans to work for a competitive enterprise, whether or not such officer of key employee is or will be compensated by such enterprise.

 (z)         Minute Books.   The minute books of the Company and its Subsidiaries made available to the Purchasers contain a complete summary of all meetings of directors and stockholders since the time of incorporation.

 (aa)       Elections.   To the Company’s knowledge, all elections and notices permitted by Section 83(b) of the Internal Revenue Code and any analogous provisions of applicable state tax laws have been timely filed by all employees who have purchased shares of the Common Stock under agreements that provide for the vesting of such shares of Common Stock.

 (bb)       Accounts Receivable.   All accounts receivable of the Company and its Subsidiaries that are reflected on the Company’s and its Subsidiaries’ balance sheets or interim balance sheets or on the accounting records of the Company and its Subsidiaries as of the Closing Date (collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date current and collectible net of the respective reserves shown on the balance sheet or interim balance sheet or on the accounting records of the Company and its
Subsidiaries as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the Accounts Receivable as of the Closing Date than the reserve reflected in the interim balance sheet represented of the Accounts Receivable reflected therein and will not represent a material 

 

adverse change in the composition of such Accounts Receivable in terms of aging). Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full without any set-off, within ninety days after the day on which it must becomes due and payable. There is no contest, claim, or right of set-off, other than returns in the ordinary course of business, under any agreement and/or contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. Schedule 3.1(bb) contains a complete and accurate list of all Accounts Receivable as of the date of the interim balance sheet, which list sets forth the aging of such Accounts Receivable.

(cc)       Inventory.    All inventory of the Company and the Subsidiaries, whether or not reflected in the balance sheet or interim balance sheet, consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below standard quality, all of which have been written off or written down to net realizable value in the balance sheet or interim balance sheet or on the accounting records of the Company and the Subsidiaries as of the Closing Date, as the case may be. All inventories not written off have been priced at the lower of cost or market on the last in, first out basis. The quantities of each item of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable in the present
circumstances of the Company and the Subsidiaries.

(dd)       Complaints.    Neither the Company nor any Subsidiary has received any material client complaints concerning its services.

(ee)       Employee Benefits.    Except as set forth on Schedule 3.1(ee), neither the Company nor any Subsidiary has (nor for the two years preceding the date hereof has had) any plans which are subject to ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974 or any successor law and the regulations and rules issued pursuant to that act or any successor law.

(ff)       Potential Claims.    The representations, warranties, covenants and statements contained herein and in the certificates, exhibits and schedules related hereto do not contain (i) any untrue statement of a fact which could give rise to a Material Adverse Effect with respect to the Company or its business or operations, and (ii) do not omit any fact which could give rise to a Material Adverse Effect with respect to the Company or its business or operations.

 

 

 

EXHIBIT I

 

PACE HEALTH MANAGEMENT SYSTEMS, INC.

 

	 
	
            January 12, 2007

 

 

	 
	
            RE:
 	
            Performance Bond Guarantees
 

 

To the parties listed 

on the signature page hereto:

 

Reference is hereby made to that certain personal guaranty dated March 21, 2005 made out in favor of Liberty Mutual Insurance Company (“Liberty”) by each of Ronald Grubman, Joyce Grubman, Richard Olson, Susan Olson, Howard M. Haft and Becky Ann Haft (the “Guarantors”) on the bond (with Liberty acting as surety thereunder) posted for Sedgwick County, Kansas (the “Kansas Personal Guaranty”, such bond, the “Kansas Bond”), and that certain personal guaranty dated March 21, 2005 made out in favor of Liberty by the Guarantors on the bond (with Liberty acting as surety thereunder) posted for Howard County, Maryland (the “Maryland Personal
Guaranty”, such bond, the “Maryland Bond”, collectively, the “Personal Guaranties” and the “Bonds”).

 

Pace Health Management Systems, Inc. (the “Company”) agrees that, following the consummation of its purchase of and merger with ConMed, Inc. (“ConMed”), the Company shall use commercially reasonable best efforts to either:

 

	
             
 	
            (i)
 	
            replace the Bonds with performance bonds not containing Personal Guaranties;
 

 

	
             
 	
            (ii)
 	
            renew or otherwise amend the Bonds, so that the Bonds no longer contain or require the Personal Guaranties.
 

 

If the Company is unable to effect either (i) or (ii) above using its commercially reasonable best efforts, Guarantors agree to maintain the Personal Guaranties in full force and effect until the expiration of the Bonds, pursuant to the terms of such Bonds.

 

This side letter and the transactions contemplated hereby, and all disputes between the parties under or related to this side letter or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the internal laws of the State of Delaware, applicable to contracts executed in and to be performed entirely within the State of Delaware.

 

[remainder of page intentionally left blank]

 

 

	 
	
            Very truly yours,

	 
	 
	
            PACE HEALTH MANAGEMENT SYSTEMS, INC.

	 
	 
	 
	
            By:  ______________________________________

	 
	
                       Name:  

	 
	
                       Title:

 

AGREED TO AND ACCEPTED BY:

 

___________________________________

Ronald Grubman

 

___________________________________

Joyce Grubman

 

___________________________________

Richard Olson

 

___________________________________

Susan Olson

 

___________________________________

Howard M. Haft

 

___________________________________

Becky Ann Haft

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