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EXHIBIT 10.1
DJ ORTHOPEDICS LLC
AND
XXXX XXXXX XXXXXXX
AND
DJ ORTHOPAEDICS PTY LTD
SHAREHOLDERS AGREEMENT
XXXXXX XXXXXXX
Lawyers
Rialto Towers
000 Xxxxxxx Xxxxxx
XXXXXXXXX XXX 0000
DX 000 Xxxxxxxxx
Telephone (00) 0000 0000
Facsimile (00) 0000 0000
JFF 1371372
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SHAREHOLDERS AGREEMENT
AGREEMENT 5 April 2001
BETWEEN DJ ORTHOPEDICS LLC of 0000 Xxxxx Xxxxxx, Xxxxx, Xxxxxxxxxx 00000,
Xxxxxx Xxxxxx of America (a Delaware limited liability company
registered in the United States of America) ('DJO')
AND XXXX XXXXX XXXXXXX of 0 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XXX 0000
Xxxxxxxxx ('XXXXXXX')
AND DJ ORTHOPAEDICS PTY LTD ACN 094 431 473 of Xxxx 0, 00 Xxxxxxxx Xxxx,
Xxxxxxxxxx, Xxx Xxxxx Xxxxx 0000 Xxxxxxxxx ('NEWCO')
RECITALS
A. DJO manufactures and supplies surgical bracing and other orthopaedic
products.
X. Xxxxxxx is the sole director and shareholder of Timax. Timax has agreed
to grant to Newco the right to distribute Oral Maxillo Facial Products
worldwide pursuant to the Timax Distribution Agreement.
C. DJO has acquired the right to distribute ASDM worldwide pursuant to the
ASDM Terms Sheet.
D. DJO has agreed to grant to Newco the right to distribute the DJO Products
in the Territory pursuant to the DJO Distribution Agreement.
X. Xxxxxxx has incorporated Newco to operate the Business, subject to the
parties completing the steps set out in clause 3.2.
F. The parties wish to record in this agreement the commercial terms of
their agreement for the funding, activities and management of Newco, the
conduct of the Business and related matters.
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AGREEMENT
1. DEFINITIONS
In this agreement, unless the context otherwise requires:
'ASDM' means the ASDM orthopaedic knee sets, details of which are set out
in the ASDM Terms Sheet.
'ASDM TERMS SHEET' means the basic terms of agreement set out in the term
sheet set out in Schedule 6A.
'ASDM PRICING' means the pricing at which DJO has agreed to purchase the
ASDM under the ASDM Terms Sheet.
'BOARD' means the board of Directors.
'BUDGET' means the annual budget for Newco adopted by the Board in
accordance with clause 9.2.
'BUSINESS' means the business of marketing, distributing, selling and
servicing:
(a) the DJO Products in the Territory; and
(b) the Oral Maxillo Facial Products worldwide.
'BUSINESS DAY' means a day on which banks are open for general banking
business in Sydney, New South Wales, Australia, excluding weekends and
public holidays.
'BUSINESS PLAN' means the business plan for Newco attached as Schedule 4,
as amended by the parties, in accordance with clause 7.3.
'CONSTITUTION' means the constitution set out in Schedule 1.
'CHANGE IN CONTROL' means a change in the ownership of 51% of the share
capital in a party (where appropriate) from the date of this agreement,
or a change in the effective control, or ability to make or influence
decisions, of a party from the date of this agreement.
'COMMENCEMENT DATE' means March 5, 2001 or such other date as the parties
hereto agree in writing.
'CREDIT AGREEMENT' means agreement of that name between DJO, Donjoy LLC
and certain lenders and dated 30 June 1999 (as amended from time to
time).
'DEED OF ACCESSION' means a deed substantially in the form set out in
Schedule 2.
'DIRECTOR' means a director of Newco.
`DJO DISTRIBUTION AGREEMENT' means the distribution agreement set out in
Schedule 6B.
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`DJO PRODUCTS' means the surgical bracing, ASDM and all other orthopaedic
products manufactured or distributed by DJO.
'EBITDA' means earnings of Newco (excluding the earnings derived from the
Oral Maxillo Facial Products) before interest, tax, depreciation and
amortisation as determined in accordance with accounting standards and
generally accepted accounting principles in the United States of America
and otherwise subject to the overriding provisions set out in Schedule 8.
'ENCUMBRANCE' means an interest or power:
(a) reserved in or over any interest in any asset including any
retention of title; or
(b) created or otherwise arising in or over any interest in any asset
under a xxxx of sale, mortgage, charge, lien, pledge, trust or
power, and whether existing or agreed to be granted or created.
'ENGAGE IN' means to participate, assist in (except in an immaterial way)
or otherwise be directly or indirectly involved as a member, shareholder,
unit holder, director, consultant, adviser, licensor, licensee,
contractor, principal, agent, manager, employee, beneficiary, partner,
associate, trustee or financier.
'FINANCIAL YEAR' means each period of 12 months commencing on 1 January
and ending on 31 December or such other period as the Board determines
and includes:
(a) the period from the Commencement Date to 31 December 2001
(inclusive of both dates); and
(b) the period commencing on the last 1 January before the date of
termination of this agreement and ending on that date of
termination (inclusive of both dates).
'FORCE MAJEURE' means in relation to a party, an act, event or cause that
is beyond the reasonable control of that party, including:
(a) act of God, war, sabotage, riot, insurrection, civil commotion,
national emergency (whether in fact or law), martial law, fire,
lightning, flood, cyclone, earthquake, landslide, storm or other
adverse weather conditions, explosion, power shortage, strike,
lockout or other industrial action, epidemic, quarantine,
radiation or radioactive contamination;
(b) action or inaction of a government or other competent authority
(including a court of competent jurisdiction) including
expropriation, restraint, prohibition, intervention, requisition,
requirement, direction or embargo by legislation, regulation,
decree or other legally enforceable order; and
(c) breakdown of plant, machinery or equipment or shortages of labour,
transportation, fuel, power, machinery, equipment or material,
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but excludes any consequences of either party failing to make a payment
as and when due to any person (whether a party to this agreement or not).
'INDENTURE' means the document of that name dated 30 June 1999 between
DJO, Donjoy LLC and the Bank of New York, as trustee, (as amended from
time to time).
'MANAGING DIRECTOR' means the person appointed as managing director of
Newco in accordance with clause 8.2.
'MONTH' means a calendar month unless otherwise agreed by the parties in
writing.
`ORAL MAXILLO FACIAL PRODUCTS' means the oral maxillo facial products
distributed by Timax.
`ORAL MAXILLO FACIAL PRODUCTS BUSINESS' means the business of marketing,
distributing, selling and servicing the Oral Maxillo Facial Products as
carried on by Timax as at the date of this agreement.
'PARTY' means a party to this agreement and any other person that
executes a Deed of Accession and becomes a party to this agreement from
time to time.
'PRODUCT' means any product marketed, supplied or sold by the Business.
'RESTRAINT PERIOD' means the term of this agreement together with each of
the following periods separately:
(a) two years from the date of termination of this agreement;
(b) 18 months from the date of termination of this agreement;
(c) one year from the date of termination of this agreement.
'RESTRAINT REGION' means each of the following areas separately:
(a) the Territory;
(b) Australia, New Zealand, Singapore, Indonesia, New Guinea and
Thailand;
(c) Australia, New Zealand, Singapore, Indonesia and Thailand;
(d) Australia, New Zealand, Singapore and Indonesia;
(e) Australia, New Zealand and Singapore;
(f) Australia and New Zealand;
(g) Australia.
'SERVICES AGREEMENT' means the agreement set out in Schedule 3.
'SHARE' means a fully paid ordinary share in Newco.
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'SHAREHOLDER' means the registered holder of at least one Share.
'SIMPLE MAJORITY VOTE' means a vote or resolution passed by:
(a) in the case of a vote or resolution of Shareholders, Shareholders
who together hold more than 50% of the total voting rights of
those Shareholders present and entitled to vote at a meeting of
Shareholders; and
(b) in the case of a resolution of the Board, Directors who together
hold more than 50% of the total voting rights of those Directors
present and entitled to vote at a Board meeting.
'SUBSIDIARY' has the meaning given in Division 6 of Part 1.2 of the
Corporations Law.
'SUPPLEMENTARY AGREEMENT' means the Services Agreement, the DJO
Distribution Agreement, the Timax Distribution Agreement, the ASDM Terms
Sheet and all other agreements necessary to give effect to this
agreement.
'TERRITORY' means Australia, New Zealand, Malaysia, Singapore, Indonesia,
New Guinea and Thailand.
'TIMAX' means Timax Surgical Pty Ltd ACN 094 508 693.
`TIMAX DISTRIBUTION AGREEMENT' means the distribution agreement set out
in Schedule 7 between Timax and Newco pursuant to which Timax grants
Newco the exclusive worldwide distribution rights to the Oral Maxillo
Facial Products.
'TRANSFER' means to sell, transfer, assign, pledge, hypothecate or
otherwise dispose of, whether voluntarily or not and whether or not for
consideration.
'UNANIMOUS VOTE' means a vote or resolution passed by:
(a) in the case of a vote or resolution of Shareholders, Shareholders
who together hold all of the Shares; and
(b) in the case of a resolution of the Board, all Directors.
2. OBJECTIVES
2.1 OBJECTIVES
The objectives of DJO and Xxxxxxx in entering into this agreement are:
(a) to regulate the funding, management and control of Newco and their
dealings as Shareholders in Newco;
(b) to ensure that the Business is supported by the Shareholders and
continues as provided for in this agreement;
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(c) to use their respective business skills, know how and experience
and expertise to manage and conduct the Business; and
(d) to ensure that the Business is managed to maximise the
profitability of Newco.
2.2 CARRYING OUT THE OBJECTIVES
To carry out the objectives, each party must (as appropriate):
(a) be just and faithful and provide full information to each other in
relation to the affairs and activities of the Business;
(b) do or cause to be done all things necessary or desirable to carry
out this agreement including casting votes as Shareholders and
causing their nominees to the Board to carry out this agreement;
(c) not unreasonably delay any action, approval, direction,
determination or decision required under this agreement;
(d) not do anything which may prejudice Newco or the Shareholders; and
(e) use all reasonable endeavours to obtain marketing and sales
opportunities to enable Newco to carry on the Business.
3. ESTABLISHMENT OF NEWCO
3.1 XXXXXXX WARRANTY - INCORPORATION OF NEWCO
Xxxxxxx represents and warrants to DJO that Newco:
(a) was incorporated in New South Wales as a proprietary company
limited by shares on 11 September 2000 by Xxxxxxx, with issued
capital comprising 100 ordinary shares, fully paid; and
(b) between the date of incorporation of Newco and the date of this
agreement, Newco has not carried on any business or incurred any
liability of any kind except that which would be, as contemplated
by this agreement, in the ordinary course of business for Newco.
3.2 DEALING WITH NEWCO
(a) On or before the date of this Agreement:
(i) Xxxxxxx must procure that Timax enters into, and Newco must
enter into, the Timax Distribution Agreement;
(ii) DJO and Newco will enter into the DJO Distribution
Agreement;
(iii) DJO will enter into the ASDM Terms Sheet; and
(iv) Xxxxxxx and Newco will enter into the Services Agreement.
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(b) Within 15 days following the date of this agreement:
(i) Xxxxxxx will subscribe to Newco for the issue and allotment
by Newco of 39,900 Shares in consideration for his payment
of A$300,000, to Newco and procuring Timax to enter into
the Timax Distribution Agreement provided that Xxxxxxx must
substantiate to the reasonable satisfaction of DJO that he
has incurred not less than A$200,000 in establishing and
operating Newco since its incorporation, such costs to
exclude all legal expenses associated with negotiating this
agreement;
(ii) DJO will subscribe to Newco for the issue and allotment by
Newco of 60,000 Shares in consideration for the promise to
transfer to Newco ASDM to the value of A$1,574,520 based on
the ASDM Pricing; and
(iii) Newco must issue and allot the Shares referred to in
clauses 3.2(b)(i) and (ii).
3.3 FURTHER ISSUES OF SHARES
Other than as provided in clause 3.2, the parties agree to procure that
the Board does not cause the issue of, and Newco does not issue, any
Shares or securities in Newco to any person except in accordance with
this agreement.
4. COMMENCEMENT OF BUSINESS
4.1 TIMAX
Following the entering into of the Timax Distribution Agreement, and
subject to the terms of this agreement and the Timax Distribution
Agreement, the business of marketing, distributing, selling and servicing
the Oral Maxillo Facial Products will be operated as a division of Newco.
4.2 [DELIBERATELY BLANK]
4.3 [DELIBERATELY BLANK]
4.4 COMMENCEMENT OF BUSINESS BY NEWCO
(a) The parties acknowledge that Newco will carry on the Business on
and from the date of its incorporation.
(b) The parties agree to procure that Newco will not carry on any
business other than the Business without the approval of the Board
by Unanimous Vote (including at least one director appointed by
each of DJO and Xxxxxxx).
(c) The parties agree that DJO will be able to consolidate any
business results related to the sale of the DJO Products by Newco
following the Commencement Date based on its ownership of Shares
as contemplated by this agreement.
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5. NON-COMPETE
5.1 PERIOD AND REGION
Subject to clauses 5.2 to 5.4 inclusive, in consideration of the mutual
obligations undertaken by the parties:
(a) each Shareholder covenants with the other Shareholder and Newco
that it will not during the Restraint Period in the Restraint
Region engage in any business or activity that is the same as, or
competes in a material way with, the Business or any material part
of it; and
(b) DJO and its related bodies corporate and Newco each covenant with
Xxxxxxx that they will not for a period of two years from the date
of termination of the Timax Distribution Agreement in the
Restraint Region, engage in any business or activity that is the
same as, or competes in a material way with, the business of Timax
while Timax remains under the ownership and control of Xxxxxxx.
5.2 INTERPRETATION
Clause 5.1 has effect as if it consisted of several separate and
independent covenants and restraints consisting of each separate covenant
and restraint set out in the clause combined with each separate Restraint
Period and of each such separate combination combined with each separate
Restraint Region.
5.3 SEVERABILITY
If any of:
(a) the several separate and independent covenants and restraints in
clause 5.1 are or become invalid or unenforceable for any reason,
then that invalidity or inability to enforce will not affect the
validity or enforceability of any of the other separate and
independent covenants and restraints in clause 5.1; and
(b) the prohibitions and restrictions in clause 5.1 are judged to go
beyond what is reasonable in the circumstances and necessary to
protect the goodwill of the Business and the respective interests
of the parties, but would be judged reasonable and necessary if
any activity were deleted, or any period or area were reduced,
then the prohibitions or restrictions apply with that activity
deleted, or that period or area reduced by the minimum amount
necessary.
5.4 PROVISOS
(a) A Shareholder together with its associates may hold in the
aggregate up to 5% of the shares in a listed company even though
the company carries on any of the activities referred to in clause
5.1.
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(b) Nothing in clause 5.1 will prevent a party from giving effect to
its obligations under this agreement or any Supplementary
Agreement.
(c) Nothing in clause 5.1 will prevent Xxxxxxx from distributing,
selling or otherwise dealing with the Oral Maxillo Facial Products
if the Timax Distribution Agreement is properly terminated.
6. BOARD OF DIRECTORS OF NEWCO
6.1 NUMBER OF DIRECTORS
The parties agree that Newco will have not less than two and not more
than three Directors.
6.2 NOMINEES
(a) While it holds any Shares (but not otherwise), DJO:
(i) is entitled to appoint up to two Directors, one of which
will be Xxx Xxxxx unless otherwise determined by DJO; and
(ii) may require the removal or substitution of any Director so
appointed,
(b) While he holds any Shares (but not otherwise), Xxxxxxx:
(i) is entitled to be appointed a Director; and
(ii) may require his substitution as a Director by any person he
so nominates,
provided that no other Shareholder from time to time has the right
to appoint or remove Directors except as provided in the
Corporations Law.
(c) Each Shareholder, to the extent allowed at law, must vote all
Shares held by it for the election to the Board of all individuals
nominated in accordance with clause 6.2 and for the removal from
the Board of all Directors proposed to be removed in accordance
with clause 6.2.
6.3 CHAIRPERSON
The parties agree that at each Board meeting a Director appointed by DJO
will be appointed Chairperson of the Board meeting.
6.4 VOTES
The voting entitlements of the Directors are as follows:
(a) the Directors appointed by DJO in accordance with clause 6.2 will
have:
(i) in the case of one Director, two votes; or
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(ii) in the case of two Directors, one vote each.
(b) Xxxxxxx or his substitute permitted under clause 6.2, is entitled
to one vote; and
(c) the Chairperson will not have a casting vote.
6.5 ALTERNATE DIRECTORS
(a) Each Director may appoint an alternate director.
(b) A person may be appointed as the alternate for more than one
Director, in which case that person will be entitled to cast such
number of votes as the number of Directors he or she represents
(having regard to clause 6.4).
6.6 BOARD MEETINGS
The parties agree that:
(a) at least two meetings of the Board will take place in the first
Financial Year and thereafter the number of meetings will be
agreed by the Board;
(b) additional Board meetings will be convened at the written request
of any Shareholder holding, or Shareholders that together hold,
not less than 5% of the Shares;
(c) Board meetings may be conducted by telephone conference, video
conference or any similar means of audio or audio-visual
communication;
(d) before the closure of each Board meeting the Chairperson will
prepare and distribute the notice and agenda for the following
Board meeting in accordance with clause 6.6(e), unless otherwise
agreed in writing by the Directors by Unanimous Vote;
(e) at least 10 Business Days' prior written notice of Board meetings,
together with an agenda, must be given to all Directors, unless
otherwise agreed in writing by the Directors or so resolved (and
recorded at any meeting) by Unanimous Vote;
(f) the agenda for Board meetings must be prepared with the
consultation of the other Directors, except for Board meetings
convened at the request of a Shareholder under clause 6.6(b),
where the agenda must be prepared by that Shareholder;
(g) no resolution of the Board can be passed in respect of any matter
of which notice was not given in the agenda for that meeting,
unless otherwise agreed in writing by the Directors or so resolved
(and recorded at any meeting) by Unanimous Vote; and
(h) no resolution of the Board can be passed in respect of any action
to be taken or not taken (as the case may be) unless the Board has
confirmed with DJO
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that the action to be taken or not taken (as the case may be) does
not constitute a default under the Credit Agreement and/or
Indenture.
6.7 DIRECTORS' EXPENSES
Unless the Shareholders otherwise determine by Unanimous Vote, Directors
will be reimbursed by Newco for any expenses properly incurred by any
Director solely in connection with preparing for, travelling to or
attending Board meetings but excluding any consequential costs or loss of
attending such meetings, provided that such reimbursable amounts do not
exceed those provided for in the Budget for the relevant Financial Year.
6.8 QUORUM
A quorum for meetings of the Board will be constituted by the attendance
(in person or by alternate) of one nominee Director appointed by each of
DJO and by Xxxxxxx.
6.9 QUORUM NOT PRESENT
If a quorum is not present within 30 minutes of the time specified for a
meeting of the Board, the meeting will be adjourned to the date and time
five Business Days after the original time of the meeting and at the same
place or by the same means if so elected under clause 6.6(c) as the
original meeting and no notice of such adjourned meeting is required to
be given to Directors. Any Directors in attendance (in person or by
alternate) at that adjourned meeting will constitute a quorum.
7. AUTHORISATION POLICY
7.1 GENERAL
Except as otherwise specified in this agreement or the Corporations Law:
(a) the Board will have full power to direct the activities of Newco;
and
(b) all decisions of the Shareholders and Board will be made by Simple
Majority Vote.
7.2 DECISIONS BY UNANIMOUS VOTE
Subject to clause 7.4, all decisions with respect to the matters set out
in clause 7.3 must be made only by a Unanimous Vote of the Shareholders
provided that no matter set out in clause 7.3 will be referred to the
Shareholders unless a Unanimous Vote of the Board first authorises that
referral. For the avoidance of doubt, unless there is a Unanimous Vote of
the Board and a Unanimous Vote of the Shareholders in relation to a
matter set out in clause 7.3, no decision will have been made and no
action is authorised to be taken in relation to such a matter.
7.3 DECISIONS
Subject to clauses 7.2 and 7.4, the parties agree that the following
matters must be put to the Shareholders for decision by Unanimous Vote:
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(a) any amendment to the Constitution of Newco;
(b) winding up of Newco other than as provided for in this agreement;
(c) reorganisation, reclassification, reconstruction, consolidation or
subdivision of the capital of Newco (including any buy-back or
redemption of shares in the capital of Newco) or the creation of
any different class of securities in the capital of Newco;
(d) the issue or allotment of any securities (including Shares) by
Newco, other than in accordance with clauses 3.2 or 12(d);
(e) the delegation of any power of the Board, including the
establishment of any committee of the Board;
(f) the incorporation or establishment of any subsidiary of Newco;
(g) the entry by Newco into any joint venture or partnership;
(h) approval or amendment of the Budget;
(i) approval or amendment of the Business Plan;
(j) declaring any dividend;
(k) the purchase by Newco of any assets (excluding office equipment
and supplies and loan kits and instruments) or the making of any
investment with a value of $100,000 (or where the value is
expressed in currency other than Australian dollars, the
equivalent of USD50,000) or more or a commitment to purchase in
any one year a number of assets (excluding office equipment and
supplies and loan kits and instruments) or make a number of
investments with an aggregate value of $200,000 or more (or where
the value is expressed in currency other than Australian dollars,
the equivalent of USD100,000);
(l) the sale of the Business or major undertaking of Newco;
(m) the sale of any asset of Newco with a value of $100,000 (or where
the value is expressed in currency other than Australian dollars,
the equivalent of USD50,000) or more or entry into of a commitment
to sell in any period of 12 months a number of assets of Newco
with an aggregate value of $200,000 (or where the value is
expressed in currency other than Australian dollars, the
equivalent of USD100,000) or more (excluding the sale of Products
in the ordinary course of business);
(n) subject to clauses 7.3(k) and 7.3(m), Newco entering into,
amending or terminating any contract other than as part of the
conduct of the Business in the ordinary course;
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(o) any item of expenditure not otherwise specifically provided for in
clause 7.3 or the Budget in excess of $100,000 (or where the value
is expressed in currency other than Australian dollars, the
equivalent of USD50,000);
(p) the provision of any mortgage, charge, debenture, pledge, lien or
other encumbrance by Newco over any or all of its assets,
property, undertaking or uncalled capital or Newco giving any
guarantee or indemnity;
(q) other than in the ordinary course of the Business, Newco making
any loan or providing any financial accommodation;
(r) Newco borrowing any amount from any person other than normal trade
terms in respect of materials purchased by Newco in the ordinary
course of the Business;
(s) any change in the strategic direction of Newco or the commencement
by Newco of any new business other than the Business, as carried
on at the time of the proposed change;
(t) subject to clause 11.3, the appointment or removal of the auditors
of, and legal advisers to, Newco.
(u) the entry by Newco into any agreement or arrangement (whether in
writing or otherwise) with a Shareholder or any associate of a
Shareholder; and
(v) any subsidiary of Newco formed in accordance with this agreement
doing any act (or the equivalent of any act) outlined in clause
7.3(a) to (u) inclusive.
7.4 APPROVAL IN BUDGET
Clauses 7.3(k) and 7.3(m) do not apply to a specific decision in a
Financial Year if that decision has been expressly approved (including as
to the quantum of the item concerned) in the Budget for that Financial
Year.
7.5 SHAREHOLDER MEETING QUORUM
The quorum necessary for any meeting of the members of Newco will be a
representative of DJO and a representative of Xxxxxxx. If a quorum is not
so present, the meeting shall be adjourned to the same time and place on
the same Business Day in the following week and at that adjourned meeting
the quorum will be a representative of either DJO or Xxxxxxx.
8. MANAGEMENT AND STAFF
8.1 DAY TO DAY CONTROL
Subject to clause 7, the management of the Business will, on a day to day
basis, be under the direction of the Managing Director (in accordance
with the Business Plan and Budget, as appropriate), who will report and
be responsible to the Board for the activities and operations of the
Business provided that the Managing Director must
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not permit or allow Newco to do or refrain from doing (as the case may
be) anything that would cause Newco or DJO to be in default under the
Credit Agreement and/or Indenture.
8.2 MANAGING DIRECTOR
(a) The first Managing Director, will be Xxxxxxx, who will (subject to
clause 8.2(b)) hold office until Xxxxxxx ceases to hold Shares.
(b) In the event of Xxxxxxx'x death, retirement, resignation, removal
in accordance with the Services Agreement or inability to serve,
the Board may appoint a successor or replacement Managing Director
by a Simple Majority Vote.
9. BUSINESS PLAN, BUDGET AND FINANCIAL REPORTS
9.1 BUSINESS PLAN
(a) The Business Plan for the Financial Year ending 31 December 2001
is set out in Schedule 4.
(b) The parties must review the Business Plan on an annual basis at
the same time as the Budget.
9.2 BUDGET
(a) The Budget for the Financial Year ending on 31 December 2001
(which is hereby approved by DJO and Xxxxxxx) and the basic
principles to be applied in developing the financial projections
for the period 2001 to 2005 are set out in Schedule 5.
(b) The parties must use all reasonable endeavours to agree on the
financial projections for the period 2001 to 2005 as soon as is
practicable after the date of this agreement.
(c) The parties will procure that, for each Financial Year after 31
December 2001, the Board considers and submits for approval by the
Shareholders a Budget (including a profit and loss statement,
balance sheet, cash flow statement and budgeted capital
expenditure statement) in accordance with the following procedure:
(i) at least three months before the relevant Financial Year,
the Managing Director must submit to the Shareholders a
draft Budget; and
(ii) the Shareholders must consider and seek to approve the
Budget (with or without amendments) by Unanimous Vote
before the commencement of the relevant Financial Year.
(d) If the Board fails to adopt a Budget before the commencement of
any Financial Year, the parties agree that the Budget from the
previous
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Financial Year will continue to apply on an annual basis in
respect of each following Financial Year until the Board adopts a
new Budget provided that each Budget's total expenditure amount
will be increased by the percentage change in the Australian
Consumer Price Index (weighted average of eight capital cities)
index published by the Australian Bureau of Statistics or any
successor index ('CPI') over that Financial Year (being the
quotient of the level of CPI at the end of the relevant Financial
Year divided by the level of CPI at the end of the previous
Financial Year, which quotient will be multiplied by the Budget
amount for the relevant Financial Year and then payable in the
next Financial Year) provided always that if the quotient is less
than one it is deemed to be one).
9.3 REPORTING
The Managing Director must provide the Board with sufficient management
and financial information and reports to allow the other Directors
appointed in accordance with clause 6.2(a) to monitor the conduct of the
Business, including:
(a) monthly operating and financial reports, incorporating an
unaudited profit and loss statement, cash flow statement and
balance sheet for each of the Oral Maxillo Facial Products
Business, the part of the Business relating to the DJO Products as
a whole and the part of the Business relating to the ASDM. These
reports must conform to DJO's internal consolidated reporting
requirements from time to time and comply with generally accepted
accounting principles in the United States of America;
(b) within one month after the end of each Financial Year:
(i) a profit and loss statement and cash flow statement for
that Financial Year;
(ii) a balance sheet and a statement of equity as at the end of
that Financial Year,
all conforming to DJO's internal consolidated reporting
requirements from time to time, complying with generally accepted
accounting principles in the United States of America and having
been audited by Newco's auditors; and
(c) any other reports, reviews or statements that the Board may
reasonably require.
9.4 DJO PLANS
DJO undertakes to provide Newco with copies of DJO's strategic plans as
in force from time to time and the parties must ensure that the Business
Plan and Budget take DJO's plans into account as appropriate.
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10. FORCE MAJEURE
10.1 OBLIGATIONS SUSPENDED
If a party becomes unable wholly or in part by reason of the occurrence
of an event of Force Majeure to carry out any of its duties or
obligations under this agreement:
(a) it must promptly give the other party written notice of:
(i) the occurrence of the event of Force Majeure and as many
details concerning it as are then known;
(ii) so far as can be estimated, the probable extent to which it
will be unable to perform or will be delayed in performing
the duty or obligation;
(b) the relevant duty or obligation, so far as it is affected by the
event of Force Majeure, will be suspended during the continuance
of the event of Force Majeure; and
(c) the party affected by the event of Force Majeure must use all
reasonable efforts to overcome or remove that event as quickly as
possible.
10.2 SETTLEMENT OF DISPUTE
Clause 10.1 does not require a party to settle any labour or other
dispute, on terms contrary to its wishes or to contest the validity or
enforceability of any law, regulation or decree by way of legal
proceedings.
11. ACCOUNTS, AUDIT AND TAX RETURNS
11.1 ACCOUNT AND RECORDS
The Managing Director must ensure that the accounts, records and
accounting information of Newco:
(a) are maintained in accordance with the Corporations Law and all
other applicable laws;
(b) reflect generally accepted accounting principles and approved
accounting standards; and
(c) are audited annually.
11.2 ACCESS TO RECORDS
(a) Each Shareholder or its nominee appointed in writing is entitled,
on giving reasonable notice, to full access during normal business
hours and to inspect and copy (at its own cost) all of the
accounts, records and accounting information of Newco.
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(b) Access may be exercised through an employee of, or consultant or
adviser to, the Shareholder, subject to the requirements of
confidentiality set out in clauses 16 and 17.
11.3 AUDITOR
(a) Any auditor of Newco:
(i) must be a registered company auditor and a chartered
accounting firm in Australia;
(ii) must be willing to undertake the audit at a cost that is
reasonably acceptable to DJO and Xxxxxxx;
(iii) must not be the auditor of either DJO or Xxxxxxx unless
otherwise agreed in writing by DJO and Xxxxxxx; and
(iv) must be approved by the auditor of DJO from time to time
(such approval not to be unreasonably withheld).
(b) The parties agree that the first auditor of Newco will be
determined by the Board promptly after the date of this agreement.
11.4 TAX RETURNS
(a) Subject to clause 16.2, in respect of each Financial Year, Newco
must provide each Shareholder with:
(i) a draft of any proposed income tax return of Newco for
comment before that return is submitted to the Board for
review; and
(ii) copies of such tax related material as is reasonably
necessary for the Shareholders to:
(A) review the draft income tax return of Newco; and
(B) assist with the preparation of their and their
associates' respective income tax returns.
(b) The parties agree that all income tax returns of Newco must be
submitted to the Board for review and approval before being lodged
with the Commissioner of Taxation.
(c) If there is any dispute as to the basis on which the tax return
should be prepared and lodged and the dispute is not resolved by
the date which is one month before the due date for lodgement of
the return, the auditor of Newco will (with such technical
assistance as it requires) resolve the dispute and the return will
be lodged on the basis determined by the auditor.
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11.5 REVIEW BY SHAREHOLDERS
Each Shareholder is entitled to seek the review by, or advice from, its
auditor or financial advisers from time to time concerning all accounting
and income tax records, reports and returns of Newco and to consult with
Newco's auditors or other relevant advisers concerning any matter arising
from that process.
12. FINANCING ARRANGEMENTS
(a) The objective of the Shareholders is that capital additional to
that provided for in the Business Plan and the Budget will only be
sought if necessary for the purpose of working capital or an
agreed investment and to the extent that Newco cannot borrow from
third parties (including financial institutions) on terms
reasonably acceptable to all parties.
(b) Any additional capital may be provided by way of equity and/or
loans from Shareholders in proportions equal to their holding of
Shares, or any other means that is determined, as agreed by
Unanimous Vote of the Shareholders.
(c) Subject to clause 12(d), the parties agree that all funding by the
Shareholders will be contributed in the proportions:
(i) DJO - 60%; and
(ii) Xxxxxxx - 40%.
(d) If funding is needed by Newco for the purposes of ensuring its
solvency or otherwise following a resolution in accordance with
clause 7.3, and one Shareholder is unable or unwilling to
contribute in proportion to its holding of Shares, the other
Shareholder may instead make such contribution by way of:
(i) in the case of ensuring solvency, fully paid preferred
equity contribution (with preferred rights to a return on
winding up but otherwise having the same rights as Shares)
and the non-contributing Shareholder's holding of equity in
Newco will be proportionally diluted; and
(ii) otherwise, by way of intercompany note (which note may be
convertible into equity) or fully paid preferred equity
contribution provided that the form of funding must first
be approved by Unanimous Vote of the Board.
For the avoidance of doubt:
(iii) all fully paid preferred equity is to be valued on the
basis that it is equal in value to a Share (the value of
which must be assessed by the auditor of Newco);
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(iv) if funding is required to ensure the solvency of Newco, a
Simple Majority Vote of the Board and Shareholders will be
sufficient to authorise the raising of funding in
accordance with this clause up to an amount determined by
the auditor of Newco as being necessary to ensure such
solvency and allow Newco to continue to conduct its
Business without either Newco or its Directors breaching
any laws concerning insolvent trading; and
(v) in no circumstances may an issue of securities occur if
such issue would result in a default under the Credit
Agreement or Indenture by any person bound by the Credit
Agreement or Indenture.
13. TRANSFER OF SHARES
13.1 ENCUMBRANCES
A Shareholder must not provide security over its Shares in favour of any
person nor allow any such security or encumbrance to subsist, except:
(a) with the written approval of all other Shareholders; or
(b) as expressly provided in this agreement.
13.2 TRANSFERS OF SHARES
The Shareholders must not sell or transfer any legal or beneficial
interest in any Shares to any person except:
(a) with the written approval of all other Shareholders (but subject
to clause 14); or
(b) in the case of a Shareholder being a company, to a company that is
ultimately a 100% wholly owned subsidiary of the ultimate holding
company of that Shareholder (but subject to clause 14); or
(c) in accordance with clauses 13.3, 13.4, or 18.
13.3 PUT OPTION
(a) DJO grants to Xxxxxxx a put option under which Xxxxxxx may require
DJO to acquire all of the Shares held by Xxxxxxx for a purchase
price per Share calculated in accordance with clause 13.3(b) with
completion to occur following satisfaction of the conditions set
out in clause 13.3(c) and otherwise in accordance with clauses
13.3(d), (e) and (f). The put option is exercisable in respect of
all, but not part only, of the Shares held by Xxxxxxx and is
exercisable by notice in writing to DJO and Newco on Xxxxxxx
becoming aware of any of the following after the date of this
agreement and for a period of 40 Business Days following Xxxxxxx
becoming aware (inclusive of both dates):
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(i) if DJO incorporates or acquires a subsidiary in addition to
Newco in Australia that carries on business in competition
to the Business; or
(ii) if any two of the right of DJO to distribute the ASDM
orthopaedic knee sets under the ASDM Terms Sheet, the right
of Newco to distribute the Oral Maxillo Facial Products
under the Timax Distribution Agreement and the right of
Newco to distribute the surgical bracing products under the
DJO Distribution Agreement are terminated; or
(iii) if Xxxxxxx'x employment with Newco is terminated by Newco
otherwise than in accordance with the terms of the Services
Agreement; or
(iv) if DJO proposes to sell its Shares in Newco; or
(v) on the third anniversary of the date of this agreement and
each successive anniversary of that date; or
(vi) if a Relevant Default by DJO that adversely affects Xxxxxxx
occurs, as defined in clause 18.1, and is not rectified
within the period therein provided.
(b) The purchase price per Share payable on the exercise of the option
granted in clause 13.3(a) is the greater of:
(i) the amount calculated by applying the formula:
P = 7 X RE X 1
--
Y
where: P means the price per Share;
RE means the EBITDA for the last completed four
quarter period of audited business results prior to
Xxxxxxx exercising the put option; and
Y means the number of Shares on issue; and
(ii) an amount equal to (x) A$300,000 plus all expenses
substantiated by Xxxxxxx in accordance with clause
3.2(b)(i), plus interest compounded monthly calculated on
this amount from the Commencement Date until the date of
exercise of the put option at the rate of 10% per annum
divided by (y) the number of Shares held by Xxxxxxx at the
time of exercise.
(c) Any acquisition of Shares pursuant to the exercise of the put
option referred to in clause 13.3(a) is conditional on
satisfaction of all of the following (and the put option exercise
may not be completed unless all of these conditions are either
satisfied or waived by DJO):
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(i) DJO obtaining all requisite governmental and third party
consents or waivers that are necessary for it to acquire
the Shares (including any waivers or consents that are
necessary for DJO or Newco to comply with their respective
obligations under the Credit Agreement and Indenture and
approval, if required, of the Foreign Investment Review
Board);
(ii) Xxxxxxx obtaining all requisite governmental and third
party consents or waivers that are necessary for him to
sell the Shares;
(iii) negotiation in good faith of a sale agreement and all
necessary transfer documents, comprising the provision by
Xxxxxxx as vendor of customary representations and
warranties regarding his ownership of the Shares and
ability to transfer them unencumbered; and
(iv) the parties complying with all laws and regulations and any
applicable rules of any recognised stock exchange
applicable to the acquisition of the Shares including all
state and federal securities laws and anti-trust (or
competition) laws applicable in both Australia and the
United States of America.
(d) Any acquisition of Shares pursuant to the exercise of the put
option referred to in clause 13.3(a) will be completed within 45
Business Days of service on DJO of the notice of exercise of the
put option subject to a reasonable extension of time to permit
both the conditions precedent set out in clause 13.3(c) to be
satisfied and the accounts of Newco to be prepared and audited to
facilitate the calculation of the price under clause 13.3(b).
(e) Upon the acquisition of Shares pursuant to the exercise of the put
option referred to in clause 13.3(a) above, in addition to
receiving the purchase price per Share payable under clause
13.3(b) above, Xxxxxxx is also entitled to receive an amount equal
to the sum of (i) A$250,000 (which represents the paid in capital
with respect to the Oral Maxillo Facial Products Business) and
(ii) forty percent (40%) of any retained earnings attributable to
the Oral Maxillo Facial Products Business, which retained earnings
shall be calculated in a manner consistent with the past practices
of Newco.
(f) If, in accordance with clause 13.3(a), Xxxxxxx serves notice on
DJO and Newco exercising his put option, but pursuant to clause
13.3(c)(i) DJO is unable to acquire the Shares under the put
option within 45 Business Days of that notice because of the
operation of the Credit Agreement and/or Indenture ('BLOCKED PUT
EXERCISE') then (i) DJO will immediately provide Xxxxxxx with a
written notice, advising Xxxxxxx of the restrictions in the Credit
Agreement and/or Indenture which prohibit the acquisition of the
Shares and (ii) the purchase price per share payable upon the
exercise of such put option once it is permitted under the Credit
Agreement and/or Indenture will be calculated for the purposes of
clause 13.3(b)(i) as of the date on which Xxxxxxx gave notice of
the Blocked Put Exercise.
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13.4 CALL OPTION
(a) Xxxxxxx grants to DJO a call option under which DJO may require
Xxxxxxx to sell to it all the Shares held by Xxxxxxx for a
purchase price per share calculated in accordance with clause
13.3(b) (but subject to clause 13.4(b)) with completion to occur
following satisfaction of conditions equivalent to those set out
in clause 13.3(c) and otherwise in accordance with clauses 13.3(d)
and (e). The call option is exercisable in respect of all, but not
part, of the Shares held by Xxxxxxx and is exercisable by notice
in writing by DJO to Xxxxxxx and Newco on DJO becoming aware of
any of the following after the date of this agreement and for a
period of 40 Business Days following DJO becoming aware (inclusive
of both dates):
(i) if a Relevant Default by Xxxxxxx that adversely affects DJO
or Newco occurs, as defined in clause 18.1, and is not
rectified within the period therein provided; or
(ii) if any two of the right of DJO to distribute the ASDM
orthopaedic knee sets under the ASDM Terms Sheet, the right
of Newco to distribute the Oral Maxillo Facial Products
under the Timax Distribution Agreement and the right of
Newco to distribute the surgical bracing products under the
DJO Distribution Agreement are terminated; or
(iii) following the date on which Xxxxxxx terminates his
employment with Newco other than in accordance with the
terms of the Services Agreement; or
(iv) during the period commencing on the fourth anniversary of
the date of this agreement and concluding 40 Business Days
thereafter (inclusive of both dates) or any equivalent
period in respect of each succeeding anniversary of that
date.
(b) If, in accordance with clause 13.4(a), DJO serves notice on
Xxxxxxx and Newco exercising its call option, but pursuant to
clause 13.3(c)(i), DJO is unable to acquire the Shares under the
call option within 45 Business Days of that notice because of the
operation of the Credit Agreement and/or Indenture ('BLOCKED CALL
EXERCISE'), then (i) DJO will immediately provide Xxxxxxx with a
written notice, advising Xxxxxxx of the restrictions in the Credit
Agreement and/or Indenture which prohibit the acquisition of the
Shares and (ii) the purchase price per share payable upon the
exercise of such call option by DJO once it is permitted under the
Credit Agreement and/or Indenture will be calculated for purposes
of clause 13.3(b)(i) as of the date on which DJO gave notice of
the Blocked Call Exercise.
13.5 TIMAX DISTRIBUTION AGREEMENT
(a) The parties agree that despite any contrary provision in the Timax
Distribution Agreement, the Timax Distribution Agreement shall
terminate on the
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completion of the acquisition of Shares pursuant to the exercise
of the options referred to in clauses 13.3 and 13.4 or the
acquisition of Shares pursuant to clause 26.
(b) On termination of the Timax Distribution Agreement, Xxxxxxx must
at that time procure the purchase from Newco of all Oral Maxillo
Facial Products on the terms as to price and payment set out in
the Timax Distribution Agreement (but subject to clause 21).
(c) If, in accordance with clause 13.3(a) or 13.4(a), Xxxxxxx or DJO,
as applicable, serves notice exercising its put option or call
option, as applicable, but pursuant to clause 13.3(c)(i), DJO is
unable to acquire the Shares within 45 Business Days of that
notice because of the operation of the Credit Agreement and/or the
Indenture, then:
(i) Xxxxxxx may elect to terminate the Timax Distribution
Agreement by notice in writing to DJO and Newco at any time
after the expiration of 45 Business Days from the date on
which he or DJO served notice exercising its option; and
(ii) if Xxxxxxx elects to terminate the Timax Distribution
Agreement in accordance with clause 13.5(c)(i), the parties
agree that the Timax Distribution Agreement shall terminate
immediately.
14. DEED OF ACCESSION
The parties must procure that the Board does not register a person as a
Shareholder, whether pursuant to a transfer of Shares or otherwise,
unless that person has first entered into a Deed of Accession agreeing to
be bound by this agreement.
15. RESOLUTION OF DISPUTES
15.1 NO PROCEEDINGS
A party must not start court proceedings (except proceedings seeking
interlocutory relief) in respect of a dispute arising out of this
agreement or any Supplementary Agreement ('DISPUTE') unless it has first
complied with clause 15.
15.2 NOTIFICATION OF DISPUTE
A party claiming that a Dispute has arisen must promptly notify each
other party to the Dispute giving details of the basis of the Dispute.
15.3 REASONABLE ENDEAVORS TO RESOLVE DISPUTE
During the 15 Business Days period after a notice is given under clause
15.2 (or any longer period agreed in writing by the parties to the
Dispute) ('INITIAL PERIOD'), each
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party to the Dispute ('DISPUTANT') must use all reasonable endeavors to
resolve the Dispute.
15.4 REFERRAL OF DISPUTES
If the Disputants are unable to resolve the Dispute within the Initial
Period, each Disputant agrees that the Dispute must be referred, at the
request of any Disputant, to the chief executive officer of DJO, Xxxxxxx,
the chairperson of Newco and the most senior officer of any other party
acceding to this agreement, who must try and resolve the Dispute within a
period of 10 Business Days. Any such request for referral must be made
within five Business Days of the conclusion of the Initial Period.
15.5 TERMINATION OF DISPUTE RESOLUTION PROCESS
If, following a request for referral under clause 15.4, the Dispute has
not been resolved within 10 Business Days after the date of the request,
a Disputant that has complied with clause 15.4 may terminate the dispute
resolution process under clause 15 by giving notice to each other
Disputant.
15.6 BREACH OF CLAUSE 15
If, in relation to a Dispute, a Disputant breaches any provision of
clauses 15.1 to 15.4, each other Disputant need not comply with clauses
15.1 to 15.4 in relation to that Dispute.
16. RIGHTS TO INFORMATION
16.1 RIGHTS TO INFORMATION
Subject to clause 16.2, the parties agree that:
(a) each Shareholder is entitled to copies of any information in
relation to the Business received by the Board ('BOARD
INFORMATION'); and
(b) they will procure that Newco provides to each Shareholder all
information reasonably requested by that Shareholder.
16.2 CONFIDENTIALITY
The parties agree that the Board Information and information disclosed
under clauses 11.4(a) or 16.1 (collectively the 'DISCLOSED INFORMATION')
is confidential and each Shareholder must:
(a) keep confidential the Disclosed Information;
(b) use the Disclosed Information solely in relation to, or in the
best interests of, Newco and the Business; and
(c) disclose the Disclosed Information only to those of its employees,
advisers, related entities, shareholders, banks, insurers and
rating agencies who have
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a need to know (and only to the extent each has a need to know)
and who are aware and agree that the Board Information must be
kept confidential and, if reasonably required by Newco sign an
undertaking of confidentiality in favour of the Owner in a form
reasonably approved by the Owner from time to time.
16.3 EXCEPTIONS
The obligations of confidentiality under clause 16 do not extend to
information that (whether before or after this agreement is executed):
(a) is disclosed to a party under this agreement, but at the time of
disclosure is rightly known to that party and not subject to an
obligation of confidentiality on that party;
(b) at the time of disclosure is within the public domain or after
disclosure comes into the public domain other than by a breach or
breaches of any obligation under this clause 16;
(c) is required, in the reasonable opinion of a party, by law or the
rules of any recognised securities exchange (whether in Australia,
the United States of America or elsewhere) to be disclosed and the
party required to make the disclosure ensures that information is
disclosed only to the extent required; or
(d) is required, in the reasonable opinion of a party, to be disclosed
as part of any capital raising or attempt to become listed on any
recognised stock exchange of that party or any direct or indirect
shareholder in that party.
17. PROTECTION OF CONFIDENTIAL INFORMATION
17.1 MEANING OF CONFIDENTIAL INFORMATION
In clause 17, 'CONFIDENTIAL INFORMATION' of a party means all
confidential information given or made available by that party to another
party or to Newco, including:
(a) industry information, plans, intellectual property, trade secrets,
client lists, commercially sensitive information and confidential
know-how; and
(b) financial information.
17.2 CONFIDENTIALITY
Each party (referred to in this clause as the 'RECIPIENT') agrees in
relation to the Confidential Information of each other party ('OWNER'):
(a) to keep confidential the Confidential Information;
(b) to use the Confidential Information solely in relation to, or in
the best interests of, Newco and the Business; and
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(c) to disclose the Confidential Information only to those of its
employees, consultants, advisers and shareholders who have a need
to know (and only to the extent each has a need to know) and who:
(i) in the case of employees, are aware and agree that the
Confidential Information must be kept confidential; and
(ii) in the case of consultants, advisers and shareholders, are
aware and agree that the Confidential Information must be
kept confidential.
17.3 OTHER INFORMATION
Clause 17 is subject to the provisions of any agreement or arrangement
between the Owner and the Recipient relating to any Confidential
Information, its use or disclosure.
17.4 EXCEPTIONS
The obligations of confidentiality under clause 17 do not extend to
information that (whether before or after this agreement is executed):
(a) is disclosed to a party under this agreement, but at the time of
disclosure is rightly known to that party and not subject to an
obligation of confidentiality on that party;
(b) at the time of disclosure is within the public domain or after
disclosure comes into the public domain other than by reason of a
breach or breaches of any obligation under clause 17; and
(c) is required by law or the rules of any recognised securities
exchange (whether in Australia, the United States of America or
elsewhere in the world) to be disclosed and the party required to
make the disclosure has taken all reasonable steps to oppose or
prevent the disclosure and to limit, as far as reasonably
possible, the extent of the disclosure.
18. DEFAULT
18.1 RELEVANT DEFAULTS
(a) If any party ('DEFAULTING PARTY') is in default of any of its
obligations under this agreement or any Supplementary Agreement
(collectively 'RELEVANT AGREEMENTS'), any other party to this
agreement ('NOTIFYING PARTY'), whether a party to the Relevant
Agreement or not, may, within 20 Business Days of it becoming
aware that the default occurred, by notice to the Defaulting
Party, require the Defaulting Party to institute remedial action
in respect of that default.
(b) If the Defaulting Party fails to reasonably commence remedial
action within 20 Business Days after the date of the notice or the
default is not remedied within 40 Business Days after the date of
the notice, the default is a 'RELEVANT DEFAULT'.
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(c) The Notifying Party may recover from the Defaulting Party all loss
and damage which the Notifying Party incurs as a consequence of
the Relevant Default and may (but is not required to) within 40
Business Days of the occurrence of the Relevant Default terminate
all Relevant Agreements with immediate effect by giving notice to
that effect to all other parties to such agreements and exercising
the put or call options granted under clauses 13.3 or 13.4 (as
appropriate).
(d) All other parties including the Defaulting Party shall do all
things necessary to procure the termination of all Relevant
Agreements if the Notifying Party exercises its rights under
clause 18.1(c).
18.2 DEFAULTS
Without in any way limiting clause 18.1, a party will be deemed to have
committed a default under this agreement and all Supplementary Agreements
to which it is a party if that party has:
(a) a bona fide petition presented against it, an application is made
to a Court for an order or an order is made that it be wound up,
and such application is not withdrawn or such order is not set
aside or stayed within 10 Business Days of the date of the
application or the order, as appropriate;
(b) a bona fide resolution passed or a meeting summoned or convened to
consider a resolution for its winding up;
(c) a receiver appointed over its assets or undertakings or any part
of them;
(d) a bona fide application made to a Court for an order appointing an
official manager, trustee, voluntary administrator, liquidator or
provisional liquidator, or similar officer in respect of the
Defaulting Party, or one of them is appointed and such application
is not withdrawn or such appointment is not set aside or stayed
within 10 Business Days of the date of the application or the
appointment, as appropriate;
(e) entered into, or resolved to enter into, a scheme of arrangement
or composition with, or assignment for the benefit of all, or any
class, of its creditors, or proposes a reorganisation, moratorium
or other administration involving the Defaulting Party other than
for the purpose of a bona fide scheme of solvent reconstruction or
amalgamation;
(f) ceased, or is unable, to pay its debts as and when they fall due;
(g) any of the events set out in section 459C(2) of the Corporations
Law occur in relation to it;
(h) become, or been deemed, under any legislation to be insolvent or
unable to pay its debts; or
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(i) anything having a substantially similar effect to any of the
events set out in clauses 18.2(a) to (h) inclusive occur in
respect of it under the law of any applicable jurisdiction.
19. TERMINATION
19.1 PERIOD OF AGREEMENT
(a) This agreement will remain in force and effect until the first to
occur of the following:
(i) the agreement of all parties in writing to terminate the
agreement;
(ii) the winding up of Newco; or
(iii) at any time following the issuance of the Shares referred
to in clauses 3.2(b)(i) and (ii), the date on which there
is only one Shareholder.
(b) This agreement (subject to clause 20.2) will cease to have any
force and effect, in respect of a party that is a Shareholder,
when that party ceases to be a Shareholder in accordance with this
agreement.
19.2 TERMINATION GENERALLY
If this agreement is terminated, all Supplementary Agreements (other than
the ASDM Terms Sheet) will terminate on the same date as this agreement
is terminated without the requirement to give notice to any party to the
Supplementary Agreements.
20. CONSEQUENCES OF TERMINATION
20.1 CONSEQUENCES OF TERMINATION GENERALLY
On termination of this agreement for any reason:
(a) if DJO controls Newco, the parties must procure that Newco ceases
to carry on any business relating to the Oral Maxillo Facial
Products, except as necessary to fulfil contractual obligations
arising prior to the date of termination;
(b) the parties must procure that Newco makes available to DJO and
Xxxxxxx, all information requested in relation to the customers of
Newco during the term of this agreement; and
(c) DJO and Xxxxxxx must either return or destroy (and certify to the
other the destruction of), and must procure that Newco does the
same, all Confidential Information provided to each other.
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20.2 CONTINUING OBLIGATIONS
The provisions of clauses 5, 16, 17, 19, 20 and 21 continue to apply
notwithstanding Termination of this agreement.
20.3 PRE-EXISTING RIGHTS
Termination of this agreement, or the cessation of the application of
this agreement to a former Shareholder (as envisaged by clause 19.1(b)),
will not affect any accrued rights of a party as at the date of
termination or cessation of application.
21. RIGHT OF FIRST REFUSAL - TIMAX
21.1 PERMITTED TRANSFER
From the date of this agreement and for the period ending 24 months after
the date of termination of the Timax Distribution Agreement, Xxxxxxx
agrees not to sell any shares (other than shares pursuant to the exercise
of options outstanding on the date of this agreement) in Timax without
the prior consent in writing of DJO, which consent will not be
unreasonably withheld, and undertakes that Timax will not dispose of its
assets or business ("TIMAX BUSINESS") otherwise than in accordance with
clause 21. Xxxxxxx hereby represents and warrants that the option plan
under which he has issued options that are outstanding as of the date of
this agreement will include a provision that will require the holders of
those options to transfer any shares of Timax that they acquire upon
exercise of such options along with Xxxxxxx'x shares in Timax if DJO
exercises its right of first refusal in accordance with this clause 21.
21.2 If within the period of 24 months after the date of termination of the
Timax Distribution Agreement Xxxxxxx proposes to sell any shares in Timax
(other than shares pursuant to the exercise of options outstanding on the
date of this agreement) or Timax proposes to dispose of the Timax
Business to any third party, Xxxxxxx shall before such transfer deliver
to DJO an offer to sell the Timax shares or the Timax Business (as the
case may be) to DJO. The offer must specify:-
(a) the consideration payable; and
(b) any other material terms and conditions.
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21.3 An offer made pursuant to clause 21.2 shall remain open and irrevocable
for a period of 40 Business Days ("ACCEPTANCE PERIOD") from the date of
its receipt by DJO. DJO may accept the offer by delivering to Xxxxxxx a
notice in writing within the Acceptance Period. Failure to advise of its
decision during the Acceptance Period is deemed to be a rejection of the
offer.
21.4 During the Acceptance Period, Xxxxxxx agrees not to sell or otherwise
dispose of (including by way of granting options or rights over) any
shares in Timax and undertakes that Timax will not dispose of any right,
title or interest in the Timax Business without the prior consent in
writing of DJO.
21.5 If DJO accepts the offer in accordance with clause 21.3, the sale of the
Timax Business or the sale of the shares in Timax (as the case may be)
must be made on a Business Day designated by Xxxxxxx, not less than 10
and not more than 30 days after the expiration of the Acceptance Period.
21.6 If DJO does not accept the offer in accordance with clause 21.3 or if the
sale does not complete in accordance with clause 21 due to a default by
DJO, Xxxxxxx may sell the shares in Timax or Timax may sell the Timax
Business (as the case may be) to a third party on terms and conditions no
less favourable than those set out in the offer to DJO.
22. ACKNOWLEDGMENT AND WARRANTIES
22.1 REPRESENTATIONS AND WARRANTIES - COMPANIES
Each party that is a company (including in the capacity of a trustee)
represents and warrants to the other parties that:
(a) (INCORPORATION) it is a company duly incorporated and validly
existing under the laws of the country of its incorporation;
(b) (CORPORATE POWER) it has the corporate power to enter into and
perform its obligations under this agreement and to carry out the
transaction contemplated in this agreement;
(c) (CORPORATE ACTION) it has taken all necessary corporate action to
authorise the entry into and performance of this agreement and to
carry out the transaction contemplated by this agreement;
(d) (BINDING OBLIGATION) this document is its valid and binding
obligation; and
(e) (NO CONTRAVENTION) neither the execution and performance by it of
this agreement nor any transaction contemplated under this
agreement will violate in any respect any provision of:
(i) its constituent documents; or
(ii) any other document, agreement or other arrangement binding
on it or its assets (other than the Credit Agreement and/or
Indenture)
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22.2 REPRESENTATIONS AND WARRANTIES - INDIVIDUALS
Each party that is an individual (including in the capacity of a trustee)
represents and warrants to the others that:
(a) (BINDING OBLIGATION) this document is its valid and binding
obligation; and
(b) (NO CONTRAVENTION) neither the execution and performance by it of
this agreement nor any transaction contemplated under this
agreement will violate in any respect any provision of any other
document, agreement or other arrangement binding on it or its
assets.
22.3 DISCLAIMER
Each party acknowledges that:
(a) it has relied on its own enquiries in respect of all matters
relating to this agreement and has not relied on any
representation, warranty, condition or statement made by or on
behalf of any other party other than as set out in this agreement;
(b) any conditions or warranties which may otherwise be implied by law
into this agreement are expressly excluded to the extent permitted
by law; and
(c) each party releases the other party from all actions, claims,
demands and liability which it may have or claim to have or, but
for this release, it might have had, against the other party
arising out of any representation, warranty, covenant or provision
not set out or referred to in this agreement.
23. CONFLICT WITH OTHER DOCUMENTS
23.1 If there is any conflict between the provisions of this agreement and
either:
(a) the Constitution; or
(b) any Supplementary Agreement,
('OTHER DOCUMENTS'), the provisions of this agreement prevail. On receipt
of a written request from any party, all parties must take all reasonable
steps to amend the other documents to remove that conflict.
23.2 If there is any conflict between the provisions of this agreement and
either:
(a) the Credit Agreement; or
(b) the Indenture,
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('FURTHER DOCUMENTS'), the provisions of the further document prevail. On
receipt of a written request from any party, all parties must take all
reasonable steps to amend this agreement to remove that conflict.
24. GST
24.1 Except where express provision is made to the contrary, any consideration
payable under any clause in this agreement or otherwise in respect of
this agreement is exclusive of GST. If GST is imposed on any supply made
by any party ('SUPPLIER') to another party ('RECIPIENT') under this
agreement, the supplier may recover from the recipient an amount
calculated by multiplying the relevant GST rate by the value of the GST
exclusive consideration, in addition to any GST exclusive consideration
paid or payable by the recipient to the supplier in respect of that
supply. Any amount recoverable from the recipient under this clause shall
be calculated without any deduction or set-off of any other amount.
24.2 Any amount recoverable under clause 24.1:
(a) is payable on demand by the supplier provided that the supplier
has first issued a tax invoice prior to that amount becoming
payable;
(b) is subject to adjustment (whether by increase or decrease) on
reasonable grounds and such adjustment is payable by the recipient
or refundable by the supplier (as appropriate) within five days of
the adjustment being determined and an adjustment note being
provided.
24.3 In clause 24, the terms 'adjustment note', 'GST', 'GST exclusive
consideration', 'GST rate', 'supply' and 'tax invoice' each have the
meaning set out in A New Tax System (Goods and Services Tax) Xxx 0000
(Cth).
25. NAMES
The parties acknowledge that Newco has the right to use all names,
trademarks, logos, marks and house styles, whether registered or
otherwise, of DJO and Timax (`NAMES') subject, in each case, to the terms
and conditions (including any limitations) set out in the DJO
Distribution Agreement and the Timax Distribution Agreement, as
appropriate.
26. DEATH OR CONTINUING DISABLEMENT OF XXXXXXX
(a) Subject to clause 26(b) and any other agreement that the
Shareholders subsequently reach by Unanimous Vote, Newco shall
take out and maintain term life insurance cover on the life of
Xxxxxxx (including a total and permanent trauma disablement
provision) with the level of such term life insurance cover being
determined annually in advance by the Board and with the
beneficiaries being those Shareholders in Newco other than Xxxxxxx
in proportion to their shareholding in Newco. In respect of the
first such policy, it must be effected within one month of the
date of the last person executing this agreement.
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(b) The parties agree that following the death or total and permanent
disablement of Xxxxxxx, Xxxxxxx'x personal representatives will
transfer Xxxxxxx'x shareholding in Newco to such remaining
Shareholders in the stated proportions in consideration of the
payment of the amount received by the remaining Shareholders
pursuant to the term life policy on the life of Xxxxxxx.
27. RELATIONSHIP BETWEEN PARTIES
This agreement does not create a relationship of employment, agency or
partnership between the parties.
28. FURTHER ACTION
Each party must:
(a) use reasonable efforts to do all things necessary or desirable to
give full effect to this agreement; and
(b) refrain from doing anything unreasonable that might hinder
performance of this agreement.
29. ASSIGNMENT
A party must not assign or otherwise deal with this agreement or any
right under this agreement without the prior written consent of the other
parties.
30. WAIVER
The failure of a party at any time to require performance of any
obligation under this agreement is not a waiver of that party's right:
(a) to insist on performance of, or claim damages for breach of, that
obligation unless that party acknowledges in writing that the
failure is a waiver; and
(b) at any other time to require performance of that or any other
obligation under this agreement.
31. GOVERNING LAW AND JURISDICTION
This agreement is governed by the law applicable in New South Wales,
Australia. Each party submits to the non-exclusive jurisdiction of the
courts of New South Wales, Australia.
32. NOTICE
32.1 METHODS OF SERVICE
A notice required or authorised to be given or served on a party under
this agreement must be in writing in the English language and must be
given or served by facsimile, prepaid first class post or airmail or hand
to that party at its address or facsimile
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number appearing below or such other address or facsimile number as the
party may have notified in writing to the other parties:
DJO: DJ Orthopedics LLC
0000 Xxxxx Xxxxxx
Xxxxx XX 00000
Xxxxxx Xxxxxx of America
Facsimile number: 1 760 734 3536
Attention: Chief Executive Officer.
XXXXXXX: Xxxx Xxxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxxxxx XXX 0000
Facsimile number: 61 2 9980 8958
Attention: Xxxx Xxxxxxx.
NEWCO: Notices are to be provided to both DJO and
Xxxxxxx as provided above.
32.2 TIME OF SERVICE
A notice will be deemed, in the absence of proof to the contrary, to have
been given or served on the party to whom it was sent:
(a) in the case of hand delivery, on delivery during business hours of
the recipient of the notice;
(b) in the case of prepaid airmail, ten Business Days after the date
of despatch; or
(c) in the case of facsimile transmission, at the time of despatch
provided that following transmission the sender receives a
transmission confirmation report.
32.3 TYPES OF NOTICE
In clause 32, 'notice' includes a demand, request, consent, approval,
offer and any other instrument or communication made, required or
authorised to be given under a provision of this agreement.
32.4 SIGNING OF NOTICES
A notice given or served under this agreement is sufficient if:
(a) in the case of a company, it is signed by a director or secretary
of that company; or
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(b) in the case of an individual it is signed by that party.
32.5 BUSINESS HOURS
In clause 32, 'business hours' means the hours from 9:00 am to 5:00 pm
Australian Eastern Standard Time on a Business Day.
33. SEVERABILITY
Part or all of any provision of this agreement that is illegal or
unenforceable may be severed from this agreement and the remaining
provisions of this agreement continue in force provided such severance
does not affect the commercial efficacy of this agreement or render it
void as against public policy.
34. ALTERATION
This agreement may be altered only in writing signed by each party.
35. COUNTERPARTS
This agreement may be executed in any number of counterparts which may be
exchanged by facsimile transmission. If this agreement is executed in
facsimile counterparts, each party must forward an original counterpart
executed by it to the other party as soon as possible after execution.
36. ENTIRE AGREEMENT
This agreement and the Supplementary Agreements are the entire agreement
between the parties concerning its subject matter and supersedes all
previous agreements, representations and understandings (if any).
37. INTERPRETATION
37.1 INTERPRETATION
In this agreement, unless the contrary intention appears:
(a) headings are for ease of reference only and do not affect the
meaning of this agreement;
(b) the singular includes the plural and vice versa and words
importing a gender include other genders;
(c) other grammatical forms of defined words or expressions have
corresponding meanings;
(d) a reference to a clause, paragraph, schedule or annexure is a
reference to a clause or paragraph of or schedule or annexure to
this agreement and a reference to this agreement includes any
schedules and annexures;
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(e) a reference to a document or agreement, including this agreement,
includes a reference to that document or agreement as novated,
altered or replaced from time to time;
(f) a reference to 'A$', '$A', 'dollar' or '$' is a reference to
Australian currency and a reference to 'US$' or 'USD' is a
reference to the United States of America's currency;
(g) a reference to a specific time for the performance of an
obligation is a reference to that time in the State, Territory or
other place where that obligation is to be performed;
(h) a reference to a party includes its executors, administrators,
successors and permitted assigns;
(i) use of the word 'includes' or 'including' is deemed to mean
'includes, without limitation,' or 'including, without
limitation,', as appropriate;
(j) words and expressions importing natural persons include
partnerships, bodies corporate, associations, governments and
governmental and local authorities and agencies;
(k) a reference to any legislation or statutory instrument or
regulation is construed in accordance with the Acts Interpretation
Xxx 0000 (Cth) or the equivalent State legislation, as applicable;
(l) words and expressions defined in the Corporations Law as at the
date of this agreement have the meanings given to them in the
Corporations Law at that date; and
(m) a reference to writing includes typewriting, printing,
lithography, photography and any other method of representing or
reproducing words, figures or symbols in a permanent and visible
form.
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EXECUTED as an agreement
EXECUTED by DJ ORTHOPEDICS LLC in )
accordance with its constitution in )
the presence of: )
)
-------------------------------------- ---------------------------------------
Director/secretary Director
-------------------------------------- ---------------------------------------
Name of director/secretary (print) Name of director (print)
SIGNED by XXXX XXXXX XXXXXXX in )
the presence of )
)
-------------------------------------- ---------------------------------------
Signature of witness Xxxx Xxxxx Xxxxxxx
--------------------------------------
Name of witness (print)
EXECUTED by DJ ORTHOPAEDICS )
PTY LTD in accordance with its )
constitution in the presence of: )
)
-------------------------------------- ---------------------------------------
Director/secretary Director
-------------------------------------- ---------------------------------------
Name of director/secretary (print) Name of director (print)
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SCHEDULE 1
CONSTITUTION
Refer to attached document.
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SCHEDULE 2
DEED OF ACCESSION
DEED dated #
by
of
('ACCEDING PARTY')
RECITAL
This deed is supplemental to a shareholders agreement dated 5 April 2001 ('SA')
entered into between DJ Orthopedics LLC., Xxxx Xxxxx Xxxxxxx and DJ Orthopaedics
Pty Ltd ACN 094 431 473.
OPERATIVE PART
1. ACCEDING PARTY TO BE BOUND
The Acceding Party confirms that it has been supplied with a copy of the
SA and covenants with all present parties to the SA (whether original or
by accession) ('PARTIES') to observe, perform and be bound by all the
terms of the SA so that the Acceding Party is deemed, from the date on
which the Acceding Party is registered as a holder of Shares in Newco, to
be a party to the SA.
2. REPRESENTATIONS AND WARRANTIES
The Acceding Party represents and warrants to the parties that:
(a) (INCORPORATION) if a company it is duly incorporated and validly
existing under the laws of the country of its incorporation;
(b) (CORPORATE POWER) if a company it has the corporate power to enter
into and perform its obligations under this document and to carry
out the transactions contemplated by the SA;
(c) (CORPORATE ACTION) if a company it has taken all necessary
corporate action to authorise the entry into and performance of
this document and to carry out the transactions contemplated by
the SA;
(d) (BINDING OBLIGATION) this document is its valid and binding
obligations;
(e) (NO CONTRAVENTION) neither the execution and performance by it of
this document nor any transaction contemplated under the SA will
violate in any respect any provision of:
(i) its constituent documents; or
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(ii) any other document, agreement or other arrangement binding
on it or its assets.
3. ADDRESS FOR NOTICE
The address of the Acceding Party for the purposes of clause 31 of the SA
is, until substituted in accordance with clause 31:
#
4. GOVERNING LAW
This deed is governed by the laws applicable in New South Wales,
Australia.
5. ATTORNEYS
Where this deed is executed on behalf of a party by an attorney, that
attorney by executing declares and warrants that the attorney has been
duly appointed and has no notice of the revocation of the power of
attorney under the authority of which the attorney executes the deed on
behalf of that party.
EXECUTED in New South Wales as a deed.
EXECUTED by # in accordance with its )
constitution in the presence of: )
)
)
-------------------------------------- ---------------------------------------
Director/secretary Director
-------------------------------------- ---------------------------------------
Name of director/secretary (print) Name of director (print)
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SCHEDULE 3
SERVICES AGREEMENT
Refer to attached document.
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SCHEDULE 4
BUSINESS PLAN
Refer to attached document
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SCHEDULE 5
BUDGET
Refer to attached document
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SCHEDULE 6A
ASDM TERMS SHEET
Refer to attached document.
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SCHEDULE 6B
DJO DISTRIBUTION AGREEMENT
Refer to attached document.
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SCHEDULE 7
TIMAX DISTRIBUTION AGREEMENT
Refer to attached document.
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SCHEDULE 8
EBITDA AND NET OPERATING PROFIT CALCULATION PRINCIPLES
In determining the EBITDA and the net operating profit of Newco:
1. the calculation of earnings associated with the Oral Maxillo Facial
Products Business will be based on the gross profit dollars for the Oral
Maxillo Facial Products less an allocation of total sales, general and
administration expenses ('S,G & A'); and
2. the allocation of S,G & A expenses will be based on the following:
(a) where the cost is specifically identifiable as being incurred by the
Oral Maxillo Facial Products Business, then the expenses will be
allocated to the Oral Maxillo Facial Products Business; and
(b) where clause (a) does not apply, the allocation of S,G&A expenses
will be based on the proportion that gross revenue of sales attributable
to the Oral Maxillo Facial Products Business bears to the total gross
revenue earned by Newco in the last completed Financial Year.
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