Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VALLEY FORGE SCIENTIFIC CORP.
("Valley Forge"),
SYNERGETICS ACQUISITION CORPORATION
("MergerSub"),
AND
SYNERGETICS, INC.
("Synergetics")
dated May 2, 2005
TABLE OF CONTENTS
-----------------
1. Definitions 2
2. Basic Transaction 6
(a) The Merger 6
(b) The Closing 7
(c) Actions at the Closing 7
(d) Effect of Merger 7
3. Disposition of Synergetics Shares 9
(a) Conversion of Synergetics Shares 9
(b) Exchange of Certificates 9
(c) Lost, Mislaid, Stolen or Destroyed Certificates 10
(d) Dissenting Shares 10
(e) Fractional Shares 10
(f) Options 10
(g) Restrictions on Sale of Valley Forge Shares 11
(h) Conversion of MergerSub Shares 12
4. Representations, Warranties, Covenants and Agreements of
Synergetics 12
(a) Organization, Qualification and Corporate Power 12
(b) Capitalization 12
(c) Authorization of Transaction 13
(d) Non-contravention 13
(e) Brokers' Fees 13
(f) Tangible Assets 14
(g) Financial Statements 14
(h) Synergetics Disclosure Binder 14
(i) Absence of Material Changes 14
(j) Undisclosed Liabilities 16
(k) Permits, Licenses and Legal Compliance 16
(l) Tax Matters 17
(m) Real Property 18
(n) Intellectual Property 19
(o) Bank Accounts 20
(p) Inventory 20
(q) Contracts 20
(r) Notes and Accounts Receivable 21
(s) Powers of Attorney 21
(t) Insurance 21
(u) Litigation 22
(v) Product Warranty 22
(w) Product Liability 23
i
(x) Employees 23
(y) Employee Benefits 23
(z) Guaranties 23
(aa) Environment, Health, and Safety 24
(ab) Certain Business Relationships with Affiliates 24
(ac) Subsidiaries 25
(ad) Disclosure 25
(ae) Internal Controls; Information Provided 26
5. Representations, Warranties, Covenants and Agreements of the
MergerSub and Valley Forge 26
(a) Organization, Qualification and Corporate Power 27
(b) Capitalization 27
(c) The MergerSub's Status 27
(d) Authorization of Transaction 27
(e) Non-contravention 28
(f) Brokers' Fees 28
(g) Tangible Assets 28
(h) Financial Statements 29
(i) Valley Forge Disclosure Binder 29
(j) Absence of Material Changes 29
(k) Undisclosed Liabilities 31
(l) Permits, Licenses and Legal Compliance 31
(m) Tax Matters 32
(n) Real Property 33
(o) Intellectual Property 34
(p) Bank Accounts 34
(q) Inventory 35
(r) Contracts 35
(s) Notes and Accounts Receivable 36
(t) Powers of Attorney 36
(u) Insurance 36
(v) Litigation 37
(w) Product Warranty 37
(x) Product Liability 37
(y) Employees 38
(z) Employee Benefits 38
(aa) Guaranties 38
(ab) Environment, Health and Safety 38
(ac) Certain Business Relationships With Affiliates 39
(ad) Subsidiaries 39
(ae) Disclosure 40
(af) SEC Reports; Internal Controls; Information Provided 40
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6. Covenants Relating to Conduct of Business 42
(a) Covenants of Valley Forge 42
(b) Covenants of Synergetics 45
(c) Control of the other Party's Business 48
7. Additional Agreements 48
(a) Preparation of Proxy Statement; S-4 Registration
Statement; Valley Forge Shareholders Meeting
and Registration Expenses 48
(b) Reasonable Best Efforts 49
(c) Fees and Expenses 49
(d) Directors' and Officers' Indemnification and Insurance 50
(e) Public Announcements 50
(f) Assignment of Mails Trademark 51
(g) Supermajority Director Voting Requirements 51
(h) Section 16 Matters 51
(i) Nasdaq Listing 52
(j) Affiliate Letters 52
(k) Access to Information 52
8. Conditions Precedent 52
(a) Conditions Precedent to Each Party's Obligation to Effect
the Merger 52
(b) Additional Conditions to the Obligations of Valley Forge
and the MergerSub 53
(c) Additional Conditions to the Obligation of Synergetics 54
9. Items to be Delivered at Closing 55
(a) Items to be Delivered by Synergetics 55
(b) Items to be Delivered by Valley Forge and/or the
MergerSub 56
10. Break-up Fee 57
11. Termination 58
12. Miscellaneous 59
(a) No Third Party Beneficiaries 59
(b) Entire Agreement 59
(c) Succession and Assignment 59
(d) Counterparts 59
(e) Headings 59
(f) Notices 59
(g) Governing Law 61
(h) Amendments and Waivers 61
(i) Severability 61
(j) Construction 61
(k) Incorporation of Exhibits and Schedules 62
(l) Arbitration 62
(m) Future Assurances 62
iii
Exhibit "A" Certificate of Merger
Exhibit "B" Shareholders' Agreement
Exhibit "C" Synergetics Voting Agreement
Exhibit "D" Valley Forge Voting Agreement
Exhibit "E" Valley Forge & Xxxxxxx Xxxxx Option Agreement
Exhibit "F" Form of Affiliate Letter
Exhibit "G" Form of Employment Agreement
Exhibit "H" Form of Synergetics Opinion
Exhibit "I" Form of Valley Forge Opinion
Exhibit "J" New Synergetics Stock Option Plan
Synergetics Disclosure Binder--Exceptions to Representations and Warranties
Valley Forge Disclosure Binder--Exceptions to Representations and Warranties
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into this 2nd day of May,
2005, by and among SYNERGETICS ACQUISITION CORPORATION, a Delaware corporation
(the "MergerSub"), VALLEY FORGE SCIENTIFIC CORP., a Pennsylvania corporation and
corporate parent of the MergerSub ("Valley Forge"), and SYNERGETICS, INC., a
Missouri corporation ("Synergetics"). MergerSub, Valley Forge, and Synergetics
are sometimes hereinafter referred to individually as a "Party" or collectively
as "Parties."
WHEREAS, the Board of Directors of the MergerSub, Valley Forge and
Synergetics have each approved the merger of MergerSub with and into the
Synergetics in a transaction intended to qualify as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code"), under the terms and conditions
set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the representations, warranties, and mutual covenants herein
contained, the Parties agree as follows.
1. Definitions.
-----------
"Additional Valley Forge Shares" shall mean 612,000 Valley
Forge Shares to be delivered by Valley Forge to the Synergetics shareholders as
part of the Synergetics Merger Consideration.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"Certificate of Merger" has the meaning set forth in Section
2(c) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning
the businesses and affairs of Synergetics, its Subsidiaries and its Affiliates
and/or Valley Forge, its Subsidiaries and its Affiliates, if any, that is not
already generally available to the public.
2
"Delaware General Corporation Law" means the General
Corporation Law of the State of Delaware, as amended.
"Effective Date" has the meaning set forth in Section 2(d)(i)
below.
"Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-employer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental, Health and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder) of federal, state, local and foreign governments
(and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases, of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or waste.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Extremely Hazardous Substance" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21)
"GAAP" means United States generally accepted accounting
principles as in effect from time to time, consistently applied.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuance, continuations, continuations-in-part,
3
revisions, extensions, and reexaminations thereof; (b) all trademarks, service
marks, logos, and trade names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith; (c) all copyrightable works, all copyrights and all applications,
registrations, and renewals in connection therewith; (d) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, bills of
materials, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals; (e) all computer software (including
data and related documentation); (f) all other proprietary rights; and (g) all
copies and tangible embodiments thereof, in whatsoever form or medium.
"IRS" means the Internal Revenue Service.
"Knowledge" means (i) with respect to Synergetics, the actual
knowledge of the individuals listed in Section 1 of the Synergetics Disclosure
Binder and (ii) with respect to Valley Forge and Merger Sub, the actual
knowledge of the individuals listed in Section 1 of the Valley Forge Disclosure
Binder, in each case after reasonable investigation.
"Liability" means any liability of Synergetics, Valley Forge
or the MergerSub arising from the conduct of their respective business on or
prior to the Closing Date (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes and reasonable costs incurred in securing attorney,
accounting or other professional services.
"Material Adverse Effect" means any event which would
reasonably be expected to, individually or in the aggregate, result in a
material adverse effect on the business, assets, financial condition or results
of operations of either the MergerSub, Valley Forge or Synergetics.
"Merger" has the meaning set forth in Section 2(a) below.
"MergerSub Share" means any share of Common Stock, $0.01 par
value per share, of the MergerSub.
"Most Recent Synergetics Fiscal Year End" has the meaning set
forth in Section 4(g).
"Most Recent Synergetics Fiscal Month End" has the meaning set
forth in Section 4(g).
"New Synergetics" has the meaning set forth in Section 2(c)
below.
"New Synergetics Share" means any share of the Common Stock,
no par value per share, of Valley Forge following the Effective Date.
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"Option" shall mean each option to purchase or acquire
Synergetics' Shares, whether issued by Synergetics pursuant to the Option Plan
or otherwise.
"Option Plan" shall mean the Synergetics, Inc. Incentive Stock
Option Plan.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Proxy Statement/Prospectus" has the meaning set forth in
Section 7(a)(i) below.
"Reportable Event" has the meaning set forth in ERISA Sec.
4043.
"Requisite MergerSub Stockholder Approval" means the
affirmative vote of Valley Forge as the sole holder of MergerSub Shares in favor
of this Agreement and the Merger.
"Requisite Synergetics Stockholder Approval" means the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding Synergetics Shares in favor of this Agreement and the Merger and the
exercise of dissenters rights by the holders of not more than 4.9% of the issued
and outstanding Synergetics Shares.
"Requisite Valley Forge Stockholder Approval" means the
affirmative vote of the holders of at least a majority of the issued and
outstanding Valley Forge Shares in favor of this Agreement and the Merger and
the exercise of dissenters rights by the holders of not more than 4.9% of the
issued and outstanding Valley Forge Shares.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Tax not yet due and payable or
for Tax that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
5
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"Surviving Corporation" has the meaning set forth in Section
2(a) below.
"Synergetics Disclosure Binder" means that certain disclosure
binder provided by Synergetics to Valley Forge and the MergerSub and certified
by Synergetics to be true, accurate and complete in all material respects.
"Synergetics Share" means any share of the Common Stock, $0.01
2/3 par value per share, of Synergetics.
"Synergetics Voting Agreement" has meaning set forth in
Section 4(c) below.
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, mercantile license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including Tax under Code Sec. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or any other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Tax, including any
amendment thereof and any schedule or attachment thereto.
"Transfer Agent" means American Stock Transfer & Trust
Company.
"Valley Forge Disclosure Binder" means that certain disclosure
binder provided by Valley Forge to Synergetics and certified by Valley Forge to
be true, accurate and complete in all material respects.
"Valley Forge Share" means any share of the Common Stock, no
par value per share, of Valley Forge.
"Valley Forge Voting Agreement" has the meaning set forth in
Section 5(d) below.
2. Basic Transaction.
-----------------
(a) The Merger. On and subject to the terms and conditions of this
Agreement, MergerSub (the "Merger") will merge with and into Synergetics at the
Effective Date. Synergetics shall be the only corporation surviving the Merger
(the "Surviving Corporation").
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(b) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Valley Forge,
000 Xxxxx Xxxx Xxxx, Xxxxx 000, Xxxx, Xxxxxxxxxxxx 00000-0000, or at such other
place as may be mutually agreeable to the Parties, commencing at 10:00 a.m.
local time (or such other time as may be mutually agreeable to the Parties) on
the date one (1) business day after the satisfaction or waiver of all of the
conditions to the obligations of the parties to consummate the transactions
contemplated hereby other than the conditions that by their terms are to be
satisfied on the Closing Date, or such other date as may be mutually agreeable
to the Parties (the "Closing Date").
(c) Actions at the Closing. At the Closing the following shall
occur: (i) Valley Forge will undertake a F Reorganization in accordance with
Section 368(a)(1)(F) of the Code resulting in its reincorporation in the State
of Delaware (the "Reincorporation") and change its corporate name to
"Synergetics, Inc." (following the Closing Valley Forge will be sometimes
hereinafter referred to as "New Synergetics"); (ii) Synergetics will deliver to
the MergerSub and Valley Forge the various certificates, instruments, and
documents referred to in Section 9(a) below; (iii) the MergerSub and Valley
Forge will deliver to Synergetics the various certificates, instruments, and
documents referred to in Section 9(b) below; (iv) the MergerSub and Synergetics
will file with the Secretaries of State of the State of Delaware and the State
of Missouri a Certificate of Merger in the form attached hereto as
(the "Certificate of Merger"); and (v) the Parties shall take any and all other
actions consistent with this Agreement so as to effectuate the Closing,
including, but not limited to, changing the ticker symbol of New Synergetics.
(d) Effect of Merger.
----------------
(i) General. The Merger shall become effective at the
time (the "Effective Date") MergerSub and Synergetics file the Certificate of
Merger with the Secretary of State of the State of Missouri. The Merger shall
have the effect set forth in the General and Business Corporations Law of
Missouri. Upon the consummation of the Merger, the franchises and all the
property, real, personal and mixed, causes of action and every other asset of
MergerSub shall vest in the Surviving Corporation without further act or deed.
The Surviving Corporation may, at any time after the Effective Date, take any
action (including executing and delivering any document) in the name and on
behalf of MergerSub in order to carry out and effectuate the transactions
contemplated by this Agreement.
(ii) Certificate of Incorporation. The Certificate of
Incorporation of Synergetics in effect at and as of the Effective Date, a copy
of which is contained in Section 2(d)(ii) of the Synergetics Disclosure Binder,
will remain the Certificate of Incorporation of the Surviving Corporation
without any modification or amendment in the Merger except as provided for by
the Certificate of Merger.
(iii) Bylaws. Except as set forth below, the Bylaws of
Synergetics in effect at and as of the date this Agreement is executed, a copy
of which is contained in Section 2(d)(iii) of the Synergetics Disclosure Binder,
will remain the Bylaws of the Surviving Corporation without any modification or
7
amendment in the Merger. Upon the Closing Date, the Parties shall take all
corporate action necessary to amend the New Synergetics ByLaws (or in the event
the Reincorporation does not occur for any reason, the Valley Forge ByLaws) to
include the supermajority Board of Director voting provisions detailed in
Section 7(g) herein below.
(iv) Directors and Officers. From and after the date this
Agreement is executed until the Closing Date, (i) the directors of the MergerSub
shall be the directors of Valley Forge and (ii) the officers of the MergerSub
shall be the officers of Valley Forge. Valley Forge hereby agrees to take all
actions necessary for the Board of Directors of New Synergetics to be comprised
of the individuals specified below this Section 2(d)(iv) (each a "Director" and
collectively the "Directors") effective immediately upon consummation of the
Merger. The Board of Directors of Valley Forge shall take all actions necessary
to appoint Xxxxx X. Xxxxx as Executive Vice President and Chief Scientific
Officer, Xxxx X. Xxxxx, Xx. as the Chief Operating Officer and Xxxxx X. Xxxxxxxx
as the Chief Executive Officer and President of New Synergetics to be effective
upon and as of the Effective Date. Upon execution of this Agreement, Valley
Forge and certain of its shareholders shall become parties to the Valley Forge
Voting Agreement (as defined below) pursuant to which such shareholders shall
take all corporate action necessary, including, but not limited to, the
affirmative vote of all their respective Valley Forge Shares, to cause the New
Synergetics Board of Directors (effective upon consummation of the Merger) to
consist of seven (7) members divided by the Board of Directors into three (3)
classes with three year staggered terms with the term of office of the Class "A"
directors expiring at the annual meeting of the New Synergetics shareholders in
2006, (the "2006 Meeting") the term of office of the Class "B" directors
expiring at the annual meeting of the New Synergetics shareholders in 2007 and
the term of office of the Class "C" directors expiring at the annual meeting of
the New Synergetics shareholders in 2008. On the Closing Date, the members of
the New Synergetics Board of Directors shall be as follows: (i) Class "A"
directors shall be Xxxxx Xxxxxxxxx and Xxxxxx Xxxx; (ii) Class "B" directors
shall be Xxxxxxx Xxxxxxx and an independent individual who shall be designated
and approved as set forth below before the filing of the Proxy
Statement/Prospectus and is willing and able to serve, possessing relevant
experience in the medical product industry to be nominated by Valley Forge's
Nominating Committee and approved by the Valley Forge Board of Directors, and
subject to the consent of the Board of Directors of Synergetics, which consent
shall not be unreasonably withheld or delayed; and (iii) Class "C" directors
shall be Xxxxx X. Xxxxx, Xxxxx X. Xxxxxxxx and Xxxx X. Xxxxx, Xx. The Parties
agree that effective immediately upon consummation of the Merger, the
composition of the Board of Directors of the Surviving Corporation shall be
identical to the composition of the Board of Directors of New Synergetics.
Subject to compliance with applicable law, the Parties shall use their best
efforts to cause the New Synergetics Board of Directors to elect independent
members of the New Synergetics Board of Directors to each of the Audit
Committee, the Compensation Committee and the Nominating Committee of New
Synergetics so that such committees are constitute as described in Section
8(c)(viii). The Parties' further agree that the Nominating Committee of New
Synergetics shall, subject to the approval a majority of the members of the
Board of Directors of New Synergetics, designate two nominees to be elected at
the 2006 Meeting.
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(v) Final Tax Returns. New Synergetics shall prepare
final tax returns for Synergetics (including amended returns and any claims for
refunds) and information reports in accordance with GAAP and pay any Tax due as
reflected on such tax returns.
3. Disposition of Synergetics Shares.
---------------------------------
(a) Conversion of Synergetics Shares. At and as of the Effective
Date, by virtue of the Merger and without any action on the part of the holders
thereof:
(i) The holders of issued and outstanding Synergetics
Shares shall be entitled to receive, in the aggregate, such number of Valley
Forge Shares as is equal to the result obtained by (A) dividing (x) the issued
and outstanding Valley Forge Shares as of the date hereof (7,913,712 shares) by
(y) 0.34 minus (B) the issued and outstanding Valley Forge Shares as of the date
hereof (7,913,712 shares) plus (C) the Additional Valley Forge Shares
(collectively, the "Synergetics Merger Consideration"). Each outstanding
Synergetics Share shall be converted into the right to receive such number of
Valley Forge Shares as is equal to the quotient determined by dividing the
Synergetics Merger Consideration by the then issued and outstanding Synergetics
Shares.
(ii) All Synergetics Shares held by Synergetics as
treasury shares, if any, shall be cancelled.
(iii) After the Effective Date, there shall be no transfers
on the stock transfer books of Synergetics of shares that were outstanding
immediately prior to the Effective Date. If, after the Effective Date, any
Certificates (as defined below) are presented to Synergetics for transfer, they
shall be canceled and exchanged for the Synergetics Merger Consideration as
described in Section 3(a) hereof.
(b) Exchange of Certificates. Promptly on or after the Effective
Date, New Synergetics shall cause the Transfer Agent to mail to each holder of
record of Synergetics Shares as of the Effective Date the Transmittal Form (as
defined below) which shall specify that each Synergetics shareholder may
surrender to the Transfer Agent all outstanding certificates, which immediately
prior to the Effective Date represented Synergetics Shares (the "Certificate" or
"Certificates") in exchange for the Synergetics Merger Consideration. Delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Transfer Agent. Upon surrender to
the Transfer Agent of a Certificate and a duly executed and properly completed
Transmittal Form, the Certificate so surrendered shall forthwith be canceled.
Promptly thereafter, Valley Forge agrees to deliver, or cause to be delivered,
the Synergetics Merger Consideration to each Synergetics shareholder along with
such other transmittal materials that Valley Forge and the Transfer Agent
reasonably determines is necessary or appropriate (the "Transmittal Form"). From
the Effective Date until surrender in accordance with the provisions of this
Section 3(c), each Certificate shall represent, for all purposes, only the right
to receive a share of the Synergetics Merger Consideration provided in Section
3(a) and any dividends or other distributions payable thereon.
9
(c) Lost, Mislaid, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, Valley Forge shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shareholder's
share of the Synergetics Merger Consideration as may be required pursuant to
Section 3(a); provided, however, that Valley Forge may, in its sole and
unfettered discretion and as a condition precedent to such issuance, require the
owner of such lost, stolen or destroyed Certificate(s) to deliver an indemnity,
reasonably acceptable to Valley Forge, against any claim that may be made
against Valley Forge or the MergerSub with respect to the Certificate(s) alleged
to have been lost, stolen or destroyed.
(d) Dissenting Shares. To the extent that the availability of
appraisal rights are mandated under the General and Business Corporations Law of
Missouri, Synergetic Shares that have not been voted for adoption of the Merger
and with respect to which appraisal rights have been properly demanded in
accordance with the General and Business Corporations Law of Missouri (the
"Dissenting Shares") shall not be converted pursuant to this Article 3 at or
after the Effective Date unless and until the holder of such Dissenting Shares
becomes ineligible for such appraisal rights. If a holder of Dissenting Shares
becomes ineligible for appraisal, then, as of the Effective Date or the date
such Dissenting Shares become ineligible for appraisal rights, whichever occurs
later, such holder's Dissenting Shares shall cease to be Dissenting Shares and
shall be converted pursuant to this Article 3 (subject to all of the rights and
obligations of the Synergetics shareholders hereunder). Synergetics shall
immediately give Valley Forge and the MergerSub notice of any demand for
appraisal rights in connection with the Merger and Valley Forge and the
MergerSub shall have the right to participate in all negotiations and
proceedings with respect to any such demands at its sole cost and expense.
Synergetics shall not, except with the prior written consent of Valley Forge and
the MergerSub, voluntarily make any payment with respect to, or settle or offer
to settle, any such demand.
(e) Fractional Shares. No certificates or scrip representing
fractional Valley Forge Shares shall be issued to former Synergetics
shareholders upon the surrender for exchange of Certificates, and such former
Synergetics shareholders shall not be entitled to any voting rights, rights to
receive any dividends or distributions or other rights as a stockholder of
Valley Forge with respect to any fractional Valley Forge Shares that would have
otherwise been issued to such former Synergetics shareholders. In lieu of any
fractional Valley Forge Shares that would have otherwise been issued, each
former Synergetics shareholder that would have been entitled to receive a
fractional Valley Forge Share shall, upon proper surrender of such person's
Certificates, receive a cash payment equal to the last sale price per share of
the Valley Forge Shares on the Nasdaq SmallCap Market, on the business day
immediately preceding the Closing Date, multiplied by the fraction of a share
that such Synergetics shareholder would otherwise be entitled to receive.
(f) Options.
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(i) As of the Effective Date, all Options, whether vested
or unvested, and the Option Plan, insofar as it relates to Options outstanding
under such Plan as of the Closing, shall be assumed by Valley Forge. Immediately
after the Effective Date, each Option outstanding immediately prior to the
10
Effective Date shall be deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such Option at the Effective Date,
such number of shares as is equal to the number of Synergetics Shares subject to
the unexercised portion of such Option multiplied by a conversion ratio equal to
the ratio set forth in Section 3(a)(i) above (with any fraction resulting from
such multiplication to be rounded to the nearest whole number). The exercise
price per share of each such assumed Option shall be equal to the exercise price
of such Option immediately prior to the Effective Date, divided by the
conversion ratio equal to the ratio set forth in Section 3(a)(i) above (rounded
up to the nearest whole cent). The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all of the other terms of the Options shall otherwise remain
unchanged.
(ii) As soon as practicable after the Effective Date, New
Synergetics or the Surviving Corporation shall deliver to the holders of Options
appropriate notices setting forth such holders' rights pursuant to such Options,
as amended by this Section 3(f), and the agreements evidencing such Options
shall continue in effect on the same terms and conditions (subject to the
amendments provided for in this Section 3(f) and such notice).
(iii) New Synergetics shall take all corporate action
necessary to reserve for issuance a sufficient number of Valley Forge Shares for
delivery upon exercise of the Options assumed in Section 3(f). Promptly after
the Effective Date, but in no event later than thirty (30) days thereafter,
Valley Forge shall file a Registration Statement on Form S-8 (or any successor
form) under the Securities Act with respect to all New Synergetics Shares
subject to such Options that may be registered on a Form S-8, and shall use its
reasonable best efforts to maintain the effectiveness of such Registration
Statement for so long as such Options remain outstanding.
(iv) Synergetics shall obtain, prior to the Closing, the
consent from each holder of an Option to the amendment of such Option pursuant
to this Section 3(f) (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
(v) As soon as practicable after the Effective Date, if
required, New Synergetics shall deliver a notice to the holders of options to
acquire Valley Forge Shares that the agreements evidencing such options shall
continue in effect on the same terms and conditions as in effect prior to the
Effective Date. Such notice shall also state that such options shall not be
subject to any anti-dilution protections that may be set forth in the agreements
evidencing such options.
(g) Restrictions on Sale of New Synergetics Shares. The Parties
shall use their best efforts to cause certain of the Shareholders of New
Synergetics to become parties to a Shareholders' Agreement, substantially in the
form attached hereto as Exhibit "B" (the "Shareholders' Agreement")(1), pursuant
to which the parties thereto shall agree to certain restrictions on the transfer
-------------------------------
(1) The following parties and their respective affiliates will be parties to
the Shareholders' Agreement: Xxxxx X. Xxxxxxxx, Xxxx X. Xxxxx, Xx., Xxxxx
X. Xxxxx and Xxxxxxx X. Xxxxx.
11
of their respective Synergetics Merger Consideration and/or Valley Forge Shares
for a period of twelve (12) months after the Closing, notwithstanding the
registration of such Synergetics Merger Consideration. Such persons shall not,
except as otherwise permitted in accordance with the Shareholders' Agreement,
sell, or enter into any agreement, arrangement or negotiations relating to the
sale of, any of their respective Valley Forge Shares or the Synergetics Merger
Consideration.
(h) Conversion of MergerSub Shares. Each MergerSub Share issued
and outstanding immediately prior to the Effective Date shall be converted into
and thereafter evidence one share of Common Stock, $0.01 par value per share, of
the Surviving Corporation.
4. Representations, Warranties, Covenants and Agreements of
Synergetics. Synergetics represents and warrants to the MergerSub and Valley
Forge that the statements contained in this Section 4 are true and correct as of
the date of this Agreement. To the extent applicable, Synergetics makes the
representations and warranties contained in this Section 4 to the MergerSub and
Valley Forge on behalf of each Subsidiary of Synergetics. The Synergetics
Disclosure Binder shall be arranged in sections and subsections corresponding to
the numbered and lettered sections and subsections contained in this Section 4.
The disclosures in any section or subsection of the Synergetics Disclosure
Binder shall qualify other sections and subsections in this Section 4 only to
the extent it is clear from a reading of the disclosure that such disclosure is
applicable to other sections and subsections.
(a) Organization, Qualification and Corporate Power. Synergetics
is a corporation duly organized, validly existing, and subsisting under the laws
of the State of Missouri. Synergetics is duly authorized to conduct business and
subsisting under the laws of each jurisdiction where such qualification is
required, except for the jurisdiction in which the failure to be so qualified
has not had and would not reasonably be expected to have a Material Adverse
Effect on Synergetics. Synergetics has full corporate power and authority to
carry on the business in which it is engaged and to own and use the properties
owned and used by it. Synergetics' Certificate of Incorporation and all
amendments thereto to date, By-laws as amended to date and minutes and stock
books, have been delivered to the MergerSub for review prior to execution of
this Agreement, and are full, complete and correct to the date of this
Agreement. Synergetics is not in violation of any of the provisions of its
Certificate of Incorporation, as amended, or By-laws, as amended. The said
minutes accurately and fully reflect all meetings, actions, proceedings and
other matters properly includable therein. Except as reflected in said minutes,
there are no minutes of meetings or consents in lieu of meetings of the Board of
Directors or shareholders of Synergetics.
(b) Capitalization. The authorized capital stock of Synergetics
and the issued and outstanding shares of capital stock of Synergetics are set
forth in Section 4(b) of the Synergetics Disclosure Binder. Section 4(b) of the
Synergetics Disclosure Binder also sets forth a true and complete list of all of
the Synergetics shareholders, the number of shares of capital stock owned by
each of them, and as set forth in the Synergetics' books and records, the date
such shares were transferred or issued to said shareholders and each
shareholder's address. Except as detailed in Section 4(b) of the Synergetics
Disclosure Binder, there are no outstanding or authorized Options, warrants,
12
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Synergetics to issue, sell, or
otherwise cause to become outstanding any capital stock. The maturity date and
exercise price for each Option is listed in Section 4(b) of the Synergetics
Disclosure Binder. All of Synergetics' issued and outstanding shares of capital
stock have been duly authorized and validly issued, are fully paid and
non-assessable, are not subject to preemptive rights, and have been issued in
compliance with all applicable federal and state securities laws. Furthermore,
the Synergetics Share repurchase program has been conducted in compliance with
all applicable federal and state securities laws. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to Synergetics.
(c) Authorization of Transaction. Synergetics has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement. Prior to or contemporaneous with the execution of this
Agreement, certain of the Synergetics shareholders will deliver a voting
agreement (the "Synergetics Voting Agreement")(2) pursuant to the terms of which
they shall covenant and agree not to transfer or otherwise dispose of any of
their Synergetics Shares prior to the Effective Date and to vote all their
Synergetics Shares and any other shares of capital stock of Synergetics obtained
following the date of this Agreement in favor of the Merger. A copy of the
Synergetics Voting Agreement is attached hereto as Exhibit "C". The Board of
Directors of Synergetics has duly authorized the execution, delivery, and
performance of this Agreement by Synergetics, and Synergetics has received any
and all approvals required by any government authority to enter into this
Agreement and effect the transactions contemplated hereby. This Agreement
constitutes the valid and legally binding obligation of Synergetics, enforceable
in accordance with its terms and conditions.
(d) Non-contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, or other restriction of any government, governmental agency, or
court to which Synergetics is subject or any provision of the charter or Bylaws
of Synergetics or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Synergetics is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Other than in connection with the provisions of the Missouri general
corporation law, Synergetics does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(e) Brokers' Fees. Synergetics has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which MergerSub or Valley Forge
could become liable or obligated.
-------------------------------
(2) The following Synergetics shareholders and their respective affiliates will
be parties to the Synergetics Voting Agreement: Xxxxx X. Xxxxxxxx, Xxxx X.
Xxxxx, Xx. and Xxxx X. Xxxxx.
13
(f) Tangible Assets. Synergetics has good and marketable title to,
or a valid leasehold interest in, the buildings, machinery, equipment and other
tangible assets used by it, located on or off its premises, or shown on the
Synergetics' Financial Statements (as defined below) or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the Most
Recent Synergetics Fiscal Month End (as defined below). Without limiting the
generality of the foregoing, Synergetics has good and marketable title to all of
the tangible assets necessary for the conduct of its businesses as presently
conducted. Each such tangible asset is free from defects of which any director
or officer of Synergetics has Knowledge, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used and presently is proposed to be used.
(g) Financial Statements. Synergetics has delivered to the
MergerSub prior to the execution of this Agreement true and complete copies of:
(i) audited financial statements for Synergetics last five (5) fiscal years
ended July 31, 2004 (hereinafter referred to as the "Most Recent Synergetics
Fiscal Year End"); and (ii) unaudited financial statements for the six (6)
months ended January 31, 2005 (the "Most Recent Synergetics Fiscal Month End")
(collectively, the "Synergetics Financial Statements"). Except as set forth in
Section 4(g) of the Synergetics Disclosure Binder, the Synergetics Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of Synergetics, as of the respective dates thereof, and the results of
operations of Synergetics for such periods, are correct and complete, and are
consistent with the books and records of Synergetics (which books and records
are correct and complete).
(h) Synergetics Disclosure Binder. Synergetics has delivered to
the MergerSub prior to the execution of this Agreement the Synergetics
Disclosure Binder which contain certain information and material regarding
Synergetics. The Synergetics Disclosure Binder is, in all material respects, a
true, accurate and complete description of Synergetics and Synergetics'
business. The Synergetics Disclosure Binder does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements so made or information so delivered not misleading.
Synergetics hereby covenants and agrees to provide Valley Forge and the
MergerSub with updates to the Synergetics Disclosure Binder from the date of
this Agreement through the Closing Date. Synergetics further covenants and
agrees to immediately notify Valley Forge and the MergerSub upon any event
(whether or not insured against), which is reasonably likely to have a Material
Adverse Effect.
(i) Absence of Material Changes. Except as otherwise described in
Section 4(i) of the Synergetics Disclosure Binder, since the Most Recent
Synergetics Fiscal Year End, there has not been any material adverse change in
the business, financial condition, operations or results of operations of
Synergetics. Without limiting the generality of the foregoing, since that date:
14
(i) Synergetics has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) Synergetics has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) outside the Ordinary Course of Business;
(iii) except as disclosed in the Synergetics Disclosure
Binder, no party (including Synergetics) has accelerated, terminated, modified,
or cancelled any material agreement, contract, lease, or license (or series of
related material agreements, contracts, leases, and licenses) to which
Synergetics is a party or by which it is bound;
(iv) Synergetics has not granted any Security Interest
upon any of its assets, tangible or intangible;
(v) Synergetics has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of Business;
(vi) Synergetics has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business;
(vii) Synergetics has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation outside the Ordinary Course of
Business;
(viii) Synergetics has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) Synergetics has not cancelled, compromised, waived,
or released any right or claim (or series of related rights and claims) outside
the Ordinary Course of Business;
(x) Synergetics has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(xi) Synergetics has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) Synergetics has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
15
(xiii) Synergetics has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xiv) Synergetics has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xv) Synergetics has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvi) except as disclosed in the Synergetics Disclosure
Binder, Synergetics has not adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(xvii) Synergetics has not made any other change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) Synergetics has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xix) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving Synergetics and Synergetics has not altered the
terms and conditions of firm purchase orders, commitments, or contracts for its
services and products (the "Backlog"), and the dollar amount of orders in the
Backlog is not materially less than it was as of such date, except as increased
or decreased in the Ordinary Course of Business, and the Backlog which is
outstanding and as of the date hereof contains terms and conditions that are
consistent with Synergetics' practices over the past year and as described in
the Synergetics Disclosure Binder; and
(xx) Synergetics has not committed to any of the foregoing.
(j) Undisclosed Liabilities. Except as set forth in Section 4(j)
of the Synergetics Disclosure Binder, Synergetics has no Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against either of them giving
rise to any Liability), except for (i) Liabilities set forth in the Synergetics
Financial Statements and (ii) Liabilities which have arisen after the Most
Recent Synergetics Fiscal Month End in the Ordinary Course of Business (none of
which is material, or results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
(k) Permits, Licenses and Legal Compliance. Section 4(k) of the
Synergetics Disclosure Binder sets forth all material permits, licenses,
franchises and approvals from all Federal, state, local and foreign governmental
16
and regulatory bodies held by Synergetics. Synergetics has all permits,
licenses, franchises and approvals of all Federal, state, local and foreign
governmental or regulatory bodies required to carry on its businesses as
presently conducted, except for those the absence of which, individually or in
the aggregate, have not had and would not reasonably be expected to have, a
Material Adverse Effect; all such permits, licenses, franchises and approvals
are in full force and effect, and Synergetics has no Knowledge of any threatened
suspension or cancellation of any of them. Synergetics and its Affiliates, if
any, have complied with all applicable laws (including rules, regulations,
codes, injunctions, judgments, orders, decrees and rulings, thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
(l) Tax Matters.
-----------
(i) Synergetics has filed all Tax Returns that it was
required to file on or prior to the date hereof except the final tax returns
referred to in Section 2(d)(v) above. All such Tax Returns were correct and
complete in all material respects. All Tax owed by Synergetics (whether or not
shown on any Tax Return) have been paid. Synergetics currently is not the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where Synergetics
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
Synergetics that arose in connection with any failure (or alleged failure) to
pay any Tax.
(ii) Synergetics has withheld and paid all Tax required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) Synergetics does not expect any authority to assess
any additional Tax for any period for which Tax Returns have been filed. There
is no dispute or claim concerning any Tax Liability of Synergetics either (A)
claimed or raised by any authority in writing or (B) as to which Synergetics has
Knowledge based upon personal contact with any agent of such authority. Section
4(l)(iii) of the Synergetics Disclosure Binder lists all federal, state, local,
and foreign income Tax Returns filed with respect Synergetics for taxable
periods ended on or before July 31, 2004. No Tax Returns have been audited or
are currently the subject of audit. Synergetics has delivered to MergerSub
correct and complete copies of all federal and state income Tax Returns.
(iv) Synergetics has not waived any statute of limitations
in respect of Tax or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Synergetics Financial Statements for the Most
Recent Synergetics Fiscal Month End reflect an adequate reserve for all Taxes
payable by Synergetics for all taxable periods and portions thereof through the
date of such financial statements. No deficiency with respect to any Taxes has
17
been proposed, asserted or assessed against Synergetics, and no requests for
waivers of the time to assess any such Taxes are pending.
(vi) Synergetics has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
Synergetics is not a party to any Tax allocation or sharing agreement.
Synergetics (A) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return, and (B) has no Liability for the Tax of
any Person (other than Synergetics) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vii) It is the intent of the Parties hereto that the
transactions hereunder qualify as a tax-free reorganization within the meaning
of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code ("Tax-Free Status").
Synergetics will take all such action as is required in order to give effect to
the intent of the Parties for Federal, state and local Tax purposes to the
greatest extent permitted by law.
(m) Real Property.
-------------
(i) Except for the Synergetics Subsidiary property
located at 0000 Xxxxxxxxx Xxxxxx Xxxxx, Xx. Xxxxxxx, Xxxxxxxx 00000-0000 (the
"Missouri Property") as detailed in Section 4(m) of the Synergetics Disclosure
Binder, Synergetics owns no real property. Section 4(m) of the Synergetics
Disclosure Binder lists and describes all real property leased by Synergetics.
There are no subleases with respect to such real property. Synergetics has
delivered to the MergerSub correct and complete copies of any and all title
binders and/or the leases (the "Leases") relative to the real property listed in
Section 4(m) of the Synergetics Disclosure Binder. With respect to the Leases:
(A) the Leases are legal, valid, binding and
enforceable in accordance with their terms, and are in full force and effect,
against Synergetics, and to its Knowledge, the landlord thereunder;
(B) subject to the consent of the landlord
thereunder, the Leases will continue to be legal, valid, binding and enforceable
in accordance with their respective terms, and in full force and effect, against
Synergetics, and to its Knowledge, the landlord thereunder, following the
consummation of the transactions contemplated hereby;
(C) Synergetics is not in breach or default,
under the Leases, and no event has occurred which, with notice or lapse of time,
would constitute a breach or default thereunder by Synergetics or permit
termination, modification, or acceleration thereunder by the landlord
thereunder, and to the Knowledge of Synergetics, the landlord thereunder is not
in breach or default under any of the Leases, and no event has occurred which,
with notice or lapse of time, would constitute a breach or default by the
landlord or permit termination, modification, or acceleration thereunder by
Synergetics;
18
(D) neither Synergetics nor, to its Knowledge,
the landlord thereunder, has repudiated any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the Leases;
(F) Synergetics has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or other real property;
(G) except as set forth in Section 4(m) of the
Synergetics Disclosure Binder, Synergetics has received all approvals of
governmental authorities (including licenses and permits) required in connection
with the current operation of each building on the real property leased or owned
by Synergetics and each such building has been operated and maintained by
Synergetics in accordance with the Leases and all applicable laws, rules, and
regulations; and
(H) all buildings have access to water, sewer,
electric, gas and telephone utilities necessary for the current operation of
Synergetics within such buildings.
(n) Intellectual Property.
---------------------
(i) Synergetics owns all Intellectual Property used or
currently contemplated to be used in the future in the operation of the business
of Synergetics as presently conducted, including, but not limited to, all
Intellectual Property identified in Section 4(n) of the Synergetics Disclosure
Binder. Each such item of Intellectual Property owned or used by Synergetics or
any Affiliate immediately prior to the Closing hereunder will be owned or
available for use by the MergerSub or Valley Forge on identical terms and
conditions immediately subsequent to the Closing hereunder. Synergetics has
taken all necessary and desirable action to maintain and protect each such item
of Intellectual Property that it owns.
(ii) To the Knowledge of Synergetics, Synergetics has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and Synergetics
has not received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including any
claim that Synergetics or any Affiliate must license or refrain from using any
Intellectual Property rights of any third party).
(iii) To the Knowledge of Synergetics, Synergetics will not
interfere with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result of the
continued operation of its businesses as presently conducted. Synergetics has no
Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties
(including any employee, independent contractor, director or officer of
19
Synergetics) have developed which reasonably could be expected to supersede or
make obsolete any product or process of Synergetics. To the Knowledge of
Synergetics, no third party (including any employee, independent contractor,
director or officer of Synergetics) has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of Synergetics or any Affiliate.
(o) Bank Accounts. Section 4(o) of the Synergetics Disclosure
Binder sets forth all the banks in which Synergetics has an account, credit line
or safety deposit box and a brief description of each such account, credit line
or safety deposit box, including the names of all persons currently authorized
to draw thereon or having access thereto.
(p) Inventory. Section 4(p) of the Synergetics Disclosure Binder
lists all the Synergetics inventory, supplies, manufactured and purchased parts,
all of which are merchantable and fit for the purpose for which it was procured
or manufactured, and none of which is obsolete, damaged, or defective.
(q) Contracts. Section 4(q) of the Synergetics Disclosure Binder
lists the following contracts and other agreements to which Synergetics is a
party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, or under which it has
imposed a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
non-competition of Synergetics or any of its employees, independent contractors,
officers or directors;
(vi) any agreement involving any Synergetics shareholders,
Affiliates or Subsidiary;
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis or providing severance
benefits;
20
(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, employees or independent
contractors;
(xi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on Synergetics; or
(xii) any other agreement with an annual value in excess of
$10,000.
Synergetics has delivered to MergerSub a correct and complete copy of each
written agreement listed in Section 4(q) of the Synergetics Disclosure Binder
(as amended to date) and a written summary setting forth the terms and
conditions of any oral agreement. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither Synergetics, nor to its Knowledge,
any other party thereto is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) neither
Synergetics, nor to its Knowledge, any other party thereto has repudiated any
provision of the agreement.
(r) Notes and Accounts Receivable. All notes and accounts
receivable of Synergetics reflected in the Synergetics Financial Statements for
the Most Recent Synergetics Fiscal Month End are valid receivables subject to no
set-offs or counterclaims, are current and collectible, net of the applicable
reserve for bad debts on the balance sheet for the Most Recent Synergetics
Fiscal Month End.
(s) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Synergetics.
(t) Insurance. Section 4(t) of the Synergetics Disclosure Binder
sets forth the following information with respect to each insurance policy
(including policies providing property, directors and officers indemnification,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which Synergetics has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past three (3)
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
21
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage;
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements; and
(vi) a list of all claims made under said policies.
With respect to each such insurance policy that has not, by its terms, lapsed:
(A) the policy is legal, valid, binding, enforceable, and in full force and
effect; (B) the policy will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby; (C) neither Synergetics, nor to its
Knowledge, any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (D) neither Synergetics, nor to its Knowledge, any other party to
the policy has repudiated any provision thereof. Synergetics has been covered
during the past three (3) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period.
(u) Litigation. Except as set forth in Section 4(u) of the
Synergetics Disclosure Binder, there is not pending against Synergetics or, to
the Knowledge of Synergetics, threatened against Synergetics, its Affiliates or
Subsidiaries any claim, action, suit, arbitration proceeding, governmental
proceeding or other proceeding of any character (each, a "Proceeding"). All of
the items set forth on Section 4(u) of the Synergetics Disclosure Binder are
fully covered by insurance except as indicated on such section of the
Synergetics Disclosure Binder. Except as set forth on Section 4(u) of the
Synergetics Disclosure Binder, (i) all pending Proceedings relating to or
involving the Synergetics, its Subsidiaries or Affiliates (or any of their
respective officers or directors as such) are adequately provided for in the
Synergetics Financial Statements in accordance with GAAP, (ii) except as
detailed on Section 4(u) of the Synergetics Disclosure Binder, Synergetics, its
Subsidiaries or Affiliates are not engaged in or otherwise prosecuting any legal
action to recover monies due it or for damages sustained by it, and (iii)
Synergetics, its Subsidiaries or Affiliates are not subject to any judgment,
decree, injunction, rule or order of any court, and Synergetics, its
Subsidiaries or Affiliates are not subject to any governmental restriction which
is reasonably likely (a) to have a Material Adverse Effect or (b) to cause a
material limitation on Synergetics' ability to operate its business after the
Closing. There are no Proceedings pending, nor to Synergetics' Knowledge,
threatened, under or pursuant to any warranty, whether expressed or implied, on
products or services sold by Synergetics, its Subsidiaries or Affiliates.
(v) Product Warranty. Each product manufactured, sold, leased, or
delivered by Synergetics has been in conformity with all applicable contractual
commitments and all express and implied warranties, and Synergetics has no
Liability (and there is no Basis for any present or future Proceeding against
any of them giving rise to any Liability) for replacement or repair thereof or
22
other damages in connection therewith. No product manufactured, sold, leased, or
delivered by Synergetics or any Affiliate is subject to any guaranty, warranty,
or other indemnity. Section 4(v) of the Synergetics Disclosure Binder includes
copies of the standard terms and conditions of sale or lease for each of
Synergetics products.
(w) Product Liability. Neither Synergetics nor any Affiliate has
any Liability (and there is no Basis for any present or future Proceeding
against any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by Synergetics or any
Affiliate.
(x) Employees. Section 4(x) of the Synergetics Disclosure Binder
lists the names, titles, date of hire, last salary increase and current salary
rates of, bonus, commission, employee benefit, health insurance, pension,
retirement, vacation, and sick pay commitments to all employees and independent
contractors of Synergetics. The accrued liability for the foregoing commitments
shall be included in the Synergetics Financial Statements. To the Knowledge of
Synergetics, no executive, employee, or independent contractor has any plans to
terminate their relationship with Synergetics. Synergetics is not a party to or
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Synergetics has not committed any unfair labor practice.
Synergetics has no Knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
Synergetics. Neither Synergetics, nor any of its officers, directors or
employees are subject to any claim or potential claim, currently or as a result
of the transaction described herein, of employment discrimination, wrongful
termination, sexual harassment or other employment related claims by any present
or past employee or independent contractor of Synergetics.
(y) Employee Benefits. Except as disclosed in Section 4(y) of the
Synergetics Disclosure Binder, Synergetics does not currently and has never in
the past maintained, and has never contributed to, any Employee Benefit Plan or
Employee Welfare Benefit Plan.
(z) Guaranties. Synergetics is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other Person.
(aa) Environment, Health, and Safety.
-------------------------------
(i) Synergetics has complied in all material respects
with all Environmental, Health, and Safety Laws, and no Proceeding or written
notice has been filed or commenced against any of them alleging any failure so
to comply. Without limiting the generality of the preceding sentence,
Synergetics has obtained and been in material compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
23
(ii) Synergetics has no Liability (and Synergetics has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual or Person to any substance
or condition, or owned or operated any property or facility in any manner that
could form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against Synergetics
giving rise to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any employee
or other individual or Person, or for any reason under any Environmental,
Health, and Safety Law, except for any Liability which has not had and would not
reasonably be expected to have a Material Adverse Effect.
(iii) All properties and equipment used in the business of
Synergetics are free of asbestos, PCB's, methylene chloride, trichloroethylene,
1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances, except to the extent reasonable amounts of such substances are used
in compliance with applicable Environmental, Health and Safety Laws.
(ab) Certain Business Relationships With Affiliates. Except for the
business arrangements and relationships between Synergetics and any Affiliate
which are set forth in Section 4(ab) of the Synergetics Disclosure Binder, none
of the Synergetics shareholders or their Affiliates has been involved in any
business arrangement or relationship with Synergetics within the past 24 months,
and none of the Synergetics shareholders or their Affiliates owns any asset,
tangible or intangible, which is used in the business of Synergetics, as
modified by the Synergetics disclosure Binder.
(ac) Subsidiaries.
------------
(i) Each Subsidiary of Synergetics is a corporation duly
organized, validly existing, and in subsisting under the laws of the
jurisdiction of its incorporation. Each Subsidiary of Synergetics is duly
authorized to conduct business and subsisting under the laws of each
jurisdiction where such qualification is required, except for the jurisdiction
in which the failure to be so qualified has not had and would not reasonably be
expected to have a Material Adverse Effect on Synergetics or such Subsidiary.
Each Subsidiary of Synergetics has full corporate power and authority to carry
on the business in which it is engaged and to own and use the properties owned
and used by it. The Certificate of Incorporation of each Subsidiary of
Synergetics and all amendments thereto to date, By-laws as amended to date and
minutes and stock books, have been delivered to the MergerSub for review prior
to execution of this Agreement, and are full, complete and correct to the date
of this Agreement. No Subsidiary of Synergetics is in violation of any of the
provisions of its Certificate of Incorporation, as amended, or By-laws, as
amended. The said minutes accurately and fully reflect all meetings, actions,
proceedings and other matters properly includable therein. Except as reflected
in said minutes, there are no minutes of meetings or consents in lieu of
meetings of the Board of Directors or shareholders of any such Subsidiary of
Synergetics.
(ii) The authorized capital stock of each Subsidiary of
Synergetics and the issued and outstanding shares of capital stock of each such
Subsidiary are set forth in Section 4(ac) of the Synergetics Disclosure Binder.
24
Section 4(ac) of the Synergetics Disclosure Binder also sets forth a true and
complete list of all of the shareholders of each such Subsidiary, the number of
shares of capital stock owned by each of them, and as set forth in the
Synergetics' books and records, the date such shares were transferred or issued
to said shareholders and each shareholder's address. Except as detailed in
Section 4(ac) of the Synergetics Disclosure Binder, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any such Subsidiary to issue, sell, or otherwise cause to become outstanding any
capital stock. All of the issued and outstanding shares of capital stock of each
Subsidiary of Synergetics have been duly authorized and validly issued, are
fully paid and non-assessable, are not subject to preemptive rights, and have
been issued in compliance with all applicable federal and state securities laws.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of Synergetics.
(iii) Synergetics does not control directly or indirectly
or have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association or entity which is not a Subsidiary.
(ad) Disclosure. The representations and warranties contained in
this Section 4, as modified by the Synergetics Disclosure Binder, do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements and information contained in this
Section 4 not misleading.
(ae) Internal Controls; Information Provided.
---------------------------------------
(i) Each of the consolidated financial statements
included in the Synergetics Disclosure Binder, together with the notes and
schedules related thereto, as of their respective dates, (A) were prepared in
accordance with GAAP, applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim financial statements) and (B) fairly
presented in all material respects the consolidated financial position of
Synergetics and its Subsidiaries as of the respective dates of the balance
sheets included therein and the results of operations and changes in financial
position for the respective periods indicated, except that the unaudited interim
financial statements are subject to lack of footnotes and normal and recurring
year-end adjustments and any other adjustments described therein not material in
amount.
(ii) Each of Synergetics and its Subsidiaries maintains
accurate books and records reflecting its assets and liabilities and maintains
proper and adequate internal accounting controls which provide reasonable
assurance that (A) transactions are executed with management's authorization;
(B) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of Synergetics in accordance with GAAP and to
maintain accountability for Synergetics' consolidated assets; (C) access to
Synergetics' assets is permitted only in accordance with management's
authorization; (D) the reporting of Synergetics' assets is compared with
existing assets at regular intervals; (E) accounts, notes and other receivables
25
and inventory are recorded accurately; and (F) there are adequate procedures
regarding prevention or timely detection of unauthorized acquisition, use of
disposition of Synergetics' assets. As of the date of this Agreement, (i) there
are no significant deficiencies in the design or operation of Synergetics'
internal controls over financial reporting which could adversely affect in any
material respect Synergetics' ability to record, process, summarize and report
finance data or material weaknesses in internal controls over financial
reporting and (ii) there has been no fraud, whether or not material, that
involved management or other employees of Synergetics or any of its Subsidiaries
who have a significant role in Synergetics' internal controls over the financial
reporting.
(iii) The information to be supplied by or on behalf of
Synergetics for inclusion or incorporation by reference in the Form S-4 to be
filed by Valley Forge pursuant to which Valley Forge Shares issuable in
connection with the Merger shall be registered under the Securities Act, shall
not at the time the Form S-4 is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The information to be supplied by or on behalf of Synergetics for
inclusion in the Proxy Statement/Prospectus to be sent to the shareholders of
Synergetics in connection with the Synergetics shareholders meeting and to
shareholders of Valley Forge in connection with the Valley Forge shareholders
meeting, in each case being held to approve the Merger and other matters
contemplated by this Agreement, shall not, on the date the Proxy
Statement/Prospectus is first mailed to shareholders of Valley Forge and
Synergetics, or at the time of the respective shareholder meetings or as of the
Effective Date, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement/Prospectus not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the respective shareholder meetings which has become false or
misleading. If at any time prior to the Effective Date, any fact or event
relating to Synergetics or any of its Affiliates should be discovered by
Synergetics or should occur which should be set forth in an amendment to the
Form S-4 or a supplement to the Proxy Statement/Prospectus, Synergetics shall
promptly inform Valley Forge of such fact or event. Notwithstanding anything to
the contrary, Synergetics makes no representation or warranty with respect to
the information to be supplied by or on behalf of Valley Forge for inclusion in
the Form S-4 or the Proxy Statement/Prospectus.
5. Representations, Warranties, Covenants and Agreements of the
MergerSub and Valley Forge. The MergerSub and Valley Forge represent and
warrant, jointly and severally, to Synergetics that the statements contained in
this Section 5 are true and correct as of the date of this Agreement. To the
extent applicable, the MergerSub and Valley Forge, jointly and severally, make
the representations and warranties contained in this Section 5 to Synergetics on
behalf of each Subsidiary of Valley Forge. The Valley Forge Disclosure Binder
shall be arranged in sections and subsections corresponding to the numbered and
lettered sections and subsections contained in this Section 5. The disclosures
in any section or subsection of the Valley Forge Disclosure Binder shall qualify
other sections and subsections in this Section 5 only to the extent it is clear
26
from a reading of the disclosure that such disclosure is applicable to such
other sections or subsections.
(a) Organization, Qualification and Corporate Power. Valley Forge
is a corporation duly organized, validly existing, and subsisting under the laws
of the Commonwealth of Pennsylvania. Valley Forge is duly authorized to conduct
business and subsisting under the laws of each jurisdiction where such
qualification is required, except for those jurisdictions in which the failure
to be so qualified has not had and would not reasonably be expected to have a
Material Adverse Effect on Valley Forge. Valley Forge has full corporate power
and authority to carry on the business in which it is engaged and to own and use
the properties owned and used by it. Valley Forge's Articles of Incorporation
and all amendments thereto to date, By-laws as amended to date and minutes and
stock books, have been delivered to Synergetics for review prior to execution of
this Agreement, and are full, complete and correct to the date of this
Agreement. Valley Forge is not in violation of any of the provisions of its
Articles of Incorporation, as amended, or By-laws, as amended. The said minutes
accurately and fully reflect all meetings, actions, proceedings and other
matters properly includable therein. Except as reflected in said minutes, there
are no minutes of meetings or consents in lieu of meetings of the Board of
Directors or shareholders of Valley Forge.
(b) Capitalization. The authorized capital stock of Valley Forge
and the issued and outstanding shares of capital stock of Valley Forge are set
forth in Section 5(b) of the Valley Forge Disclosure Binder. Except as detailed
in Section 5(b) of the Valley Forge Disclosure Binder, there are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require Valley Forge to issue, sell, or otherwise cause to become outstanding
any capital stock. The maturity date and exercise price of each option is listed
in Section 5(b) of the Valley Forge Disclosure Binder. All of Valley Forge's
issued and outstanding shares of capital stock have been duly authorized and
validly issued, are fully paid and non-assessable, are not subject to preemptive
rights, and have been issued in compliance with all applicable federal and state
securities laws. Furthermore, the Valley Forge Share repurchase program has been
conducted in compliance with all applicable federal and state securities laws.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Valley Forge.
(c) The MergerSub's Status. The MergerSub was incorporated on
April 14, 2005, and is and will be at the Closing Date a wholly-owned subsidiary
of Valley Forge. It has, and will at the Effective Date have, no existing
business operations and no commitments, obligations, debts or liabilities of any
kind or nature whatsoever except its obligations arising under this Agreement,
the Exhibits hereto and other obligations existing under documents relating to
the transactions contemplated hereby.
(d) Authorization of Transaction. Valley Forge and the MergerSub
have full power and authority (including full corporate power and authority) to
execute and deliver this Agreement. Valley Forge and its officers and directors
agree to use their best efforts to obtain the Requisite MergerSub Stockholder
Approval and the Requisite Valley Forge Stockholder Approval prior to the
27
Effective Date. Prior to or contemporaneous with the execution of this
Agreement, certain Valley Forge shareholders will deliver a voting agreement
(the "Valley Forge Voting Agreement")(3) pursuant to the terms of which they
shall covenant and agree not to transfer or otherwise dispose of any of their
Valley Forge Shares prior to the Effective Date and to vote all their Valley
Forge Shares and any other shares of capital stock of Valley Forge obtained
following the date of this Agreement in favor of the Merger and they shall
further covenant and agree to vote such shares in favor of the election of the
New Synergetics Board of Directors slate described in Section 2(d)(iv) hereof. A
copy of the Valley Forge Voting Agreement is attached hereto as Exhibit "D". The
Board of Directors of Valley Forge has duly authorized the execution, delivery,
and performance of this Agreement by Valley Forge, and has approved the
Reincorporation, and Valley Forge has received any and all approvals required by
any government authority to enter into this Agreement and effect the
transactions contemplated hereby. This Agreement constitutes the valid and
legally binding obligation of Valley Forge and the MergerSub, enforceable in
accordance with its terms and conditions.
(e) Non-contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, or other restriction of any government, governmental agency, or
court to which Valley Forge or the MergerSub is subject or any provision of the
charter or Bylaws of Valley Forge or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Valley Forge is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets). Other than as otherwise set forth in this Agreement, Valley
Forge does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(f) Brokers' Fees. Valley Forge and the MergerSub have no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
Synergetics could become liable or obligated.
(g) Tangible Assets. Valley Forge has good and marketable title
to, or a valid leasehold interest in, the buildings, machinery, equipment and
other tangible assets used by it, located on or off its premises, or shown on
the Valley Forge Financial Statements (as defined below) or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business. Without limiting the
generality of the foregoing, Valley Forge has good and marketable title to all
of the tangible assets necessary for the conduct of its businesses as presently
conducted. Each such tangible asset is free from defects of which any director
-------------------------------
(3) The following Valley Forge shareholders and their respective affiliates
shall enter into the Valley Forge Voting Agreement: Xxxxx X. Xxxxx, Xxxxxxx
X. Xxxxx, the Xxxxxxx X. Xxxxxxxx Marital Trust and the Xxxxxxx X. Xxxxxxxx
Residue Trust.
28
or officer of Valley Forge has Knowledge, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used and presently is proposed to be used.
(h) Financial Statements. Valley Forge has delivered to the
MergerSub prior to the execution of this Agreement true and complete copies of:
(i) audited financial statements for Valley Forge's last five (5) fiscal years
ended September 30, 2004; and (ii) unaudited financial statements for the three
(3) months ended December 31, 2004 (collectively, the "Valley Forge Financial
Statements"). Except as set forth in Section 4(h) of the Valley Forge Disclosure
Binder, the Valley Forge Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of Valley Forge, as of the respective
dates thereof, and the results of operations of Valley Forge for such periods,
are correct and complete, and are consistent with the books and records of
Valley Forge (which books and records are correct and complete).
(i) Valley Forge Disclosure Binder. Valley Forge has delivered to
Synergetics prior to the execution of this Agreement the Valley Forge Disclosure
Binder which contains certain information and material regarding Valley Forge
and the MergerSub. The Valley Forge Disclosure Binder is a true, accurate and
complete description of Valley Forge and Valley Forge's business. The Valley
Forge Disclosure Binder does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements so
made or information so delivered not misleading. Valley Forge hereby covenants
and agrees to provide Synergetics with at least monthly updates to the Valley
Forge Disclosure Binder from the date of this Agreement through the Closing
Date. Valley Forge further covenants and agrees to immediately notify
Synergetics upon any event (whether or not insured against), which is reasonably
likely to have a Material Adverse Effect.
(j) Absence of Material Changes. Except as otherwise described in
Section 5(j) of the Valley Forge Disclosure Binder, since December 31, 2004,
there has not been any material adverse change in the business, financial
condition, operations or results of operations of Valley Forge. Without limiting
the generality of the foregoing, since that date:
(i) Valley Forge has not sold, leased, transferred, or
assigned any of their respective assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) Valley Forge has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) outside the Ordinary Course of Business;
(iii) except as disclosed in Section 5(j)(iii) of the
Valley Forge Disclosure Binder, no party (including Valley Forge) has
accelerated, terminated, modified, or cancelled any material agreement,
contract, lease, or license (or series of related material agreements,
contracts, leases, and licenses) to which Valley Forge is a party or by which it
is bound;
29
(iv) Valley Forge has not granted any Security Interest
upon any of its assets, tangible or intangible;
(v) Valley Forge has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of Business;
(vi) Valley Forge has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business;
(vii) Valley Forge has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation outside the Ordinary Course of
Business;
(viii) Valley Forge has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) Valley Forge has not cancelled, compromised, waived,
or released any right or claim (or series of related rights and claims) outside
the Ordinary Course of Business;
(x) Except as disclosed in Section 5(j)(x) of the Valley
Forge Disclosure Binder, Valley Forge has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(xi) Valley Forge has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) Valley Forge has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) Valley Forge has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xiv) Valley Forge has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
30
(xv) Valley Forge has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvi) except as disclosed in the Valley Forge Disclosure
Binder, Valley Forge has not adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(xvii) Valley Forge has not made any other change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) Valley Forge has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xix) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving Valley Forge and Valley Forge has not altered the
terms and conditions of its Backlog, and the dollar amount of orders in the
Backlog is not materially less than it was as of such date, except as increased
or decreased in the Ordinary Course of Business, and the Backlog which is
outstanding and as of the date hereof contains terms and conditions that are
consistent with Valley Forge's practices over the past year and as described in
Section 5(j)(xix) of the Valley Forge Disclosure Binder; and
(xx) Valley Forge has not committed to any of the
foregoing.
(k) Undisclosed Liabilities. Except as set forth in Section 5(k)
of the Valley Forge Disclosure Binder, Valley Forge has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against either of them giving
rise to any Liability), except for (i) Liabilities set forth in the Valley Forge
Financial Statements and (ii) Liabilities which have arisen after December 31,
2004, in the Ordinary Course of Business (none of which is material, or results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law).
(l) Permits, Licenses and Legal Compliance. Section 5(l) of the
Valley Forge Disclosure Binder sets forth all material permits, licenses,
franchises and approvals from all Federal, state, local and foreign governmental
and regulatory bodies held by Valley Forge. Valley Forge has all permits,
licenses, franchises and approvals of all Federal, state, local and foreign
governmental or regulatory bodies required to carry on its businesses as
presently conducted, except for those the absence of which, individually or in
the aggregate, have not had and would not reasonably be expected to have, a
Material Adverse Effect; all such permits, licenses, franchises and approvals
are in full force and effect, and Valley Forge has no Knowledge of any
threatened suspension or cancellation of any of them. Valley Forge and its
Affiliates, if any, have complied with all applicable laws (including rules,
regulations, codes, injunctions, judgments, orders, decrees and rulings,
00
xxxxxxxxxx) xx xxxxxxx, xxxxx, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(m) Tax Matters.
-----------
(i) Valley Forge has filed all Tax Returns that it was
required to file on or prior to the date hereof. All such Tax Returns were
correct and complete in all material respects. All Tax owed by Valley Forge
(whether or not shown on any Tax Return) have been paid. Valley Forge currently
is not the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where
Valley Forge does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any of the assets of
Valley Forge that arose in connection with any failure (or alleged failure) to
pay any Tax.
(ii) Valley Forge has withheld and paid all Tax required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) No director or officer of Valley Forge expects any
authority to assess any additional Tax for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability of Valley
Forge either (A) claimed or raised by any authority in writing or (B) as to
which any of the directors and officers of Valley Forge has Knowledge based upon
personal contact with any agent of such authority. Section 5(m)(iii) of the
Valley Forge Disclosure Binder lists all federal, state, local, and foreign
income Tax Returns filed with respect Valley Forge for taxable periods ended on
or before September 30, 2004. No Tax Returns have been audited or are currently
the subject of audit. Valley Forge has delivered to Synergetics correct and
complete copies of all federal and state income Tax Returns.
(iv) Valley Forge has not waived any statute of
limitations in respect of Tax or agreed to any extension of time with respect to
a Tax assessment or deficiency.
(v) The Valley Forge Financial Statements reflect an
adequate reserve for all Taxes payable by Valley Forge for all taxable periods
and portions thereof through the date of such Valley Forge Financial Statements.
No deficiency with respect to any Taxes has been proposed, asserted or assessed
against Valley Forge, and no requests for waivers of the time to assess any such
Taxes are pending.
(vi) Valley Forge has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
Valley Forge is not a party to any Tax allocation or sharing agreement. Valley
Forge (A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return, and (B) has no Liability for the Tax of any Person
32
(other than Valley Forge) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(vii) It is the intent of the Parties hereto that the
transactions hereunder qualify under Tax-Free Status. Valley Forge will take all
such action as is required in order to give effect to the intent of the Parties
for Federal, state and local Tax purposes to the greatest extent permitted by
law.
(n) Real Property.
-------------
(i) Section 5(n) of the Valley Forge Disclosure Binder
lists and describes all real property owned or leased by Valley Forge. Except as
set forth in Section 5(n) of the Valley Forge Disclosure Binder, there are no
subleases with respect to such real property. Valley Forge has delivered to the
Synergetics correct and complete copies of any and all title binders and/or the
leases (the "Leases") relative to the real property listed in Section 5(n) of
the Valley Forge Disclosure Binder. With respect to the Leases:
(A) the Leases are legal, valid, binding and
enforceable in accordance with their terms, and are in full force and effect,
against Valley Forge, and to its Knowledge, the landlord thereunder;
(B) the Leases will continue to be legal, valid,
binding and enforceable in accordance with their respective terms without
further consent of the landlord thereunder or any party claim by, through or
under such landlord, and in full force and effect, against the MergerSub and
Valley Forge, and to the Knowledge of Valley Forge, the landlord thereunder,
following the consummation of the transactions contemplated hereby;
(C) Valley Forge is not in breach or default,
under the Leases, and no event has occurred which, with notice or lapse of time,
would constitute a breach or default thereunder by Valley Forge or permit
termination, modification, or acceleration thereunder by the landlord
thereunder, and to the Knowledge of Valley Forge, the landlord thereunder is not
in breach or default under any of the Leases, and no event has occurred which,
with notice or lapse of time, would constitute a breach or default by the
landlord or permit termination, modification, or acceleration thereunder by
Valley Forge;
(D) neither Valley Forge nor, to its Knowledge,
the landlord thereunder, has repudiated any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the Leases;
(F) Valley Forge has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or other real property;
33
(G) except as set forth in Section 5(n) of the
Valley Forge Disclosure Binder, Valley Forge has received all approvals of
governmental authorities (including licenses and permits) required in connection
with the current operation of each building on the real property leased or owned
by Valley Forge and each such building has been operated and maintained by
Valley Forge in accordance with the Leases and all applicable laws, rules, and
regulations; and
(H) all buildings have access to water, sewer,
electric, gas and telephone utilities necessary for the current operation of
Valley Forge within such buildings.
(o) Intellectual Property.
---------------------
(i) Except as disclosed in Section 5(o) of the Valley
Forge Disclosure Binder, to the Knowledge of Valley Forge, Valley Forge owns all
Intellectual Property necessary for, used or currently contemplated to be used
in the future in the operation of the business of Valley Forge as presently
conducted, including, but not limited to, all Intellectual Property identified
in Section 5(o) of the Valley Forge Disclosure Binder. Each such item of
Intellectual Property owned or used by Valley Forge or any Affiliate immediately
prior to the Closing hereunder or to be acquired pursuant to the Option
Agreement will be owned or available for use on an exclusive basis by the New
Synergetics (or Valley Forge in the event the Reincorporation does not occur for
any reason) and MergerSub immediately subsequent to the Closing hereunder.
Valley Forge has taken all necessary and desirable action to maintain and
protect each such item of Intellectual Property that it owns.
(ii) To the Knowledge of Valley Forge, Valley Forge has
not interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and none of the
directors and officers of Valley Forge has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Valley Forge or any
Affiliate must license or refrain from using any Intellectual Property rights of
any third party).
(iii) To the Knowledge of Valley Forge, Valley Forge will
not interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a result of
the continued operation of its businesses as presently conducted. Valley Forge
has no Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties
(including any employee, independent contractor, director or officer of Valley
Forge) have developed which reasonably could be expected to supersede or make
obsolete any product or process of Valley Forge. To the Knowledge of Valley
Forge, no third party (including any employee, independent contractor, director
or officer of Valley Forge) has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of Valley Forge or any Affiliate.
(p) Bank Accounts. Section 5(p) of the Valley Forge Disclosure
Binder sets forth all the banks in which Valley Forge has an account, credit
line or safety deposit box and a brief description of each such account, credit
34
line or safety deposit box, including the names of all persons currently
authorized to draw thereon or having access thereto.
(q) Inventory. Section 5(q) of the Valley Forge Disclosure Binder
lists all the inventory, supplies, manufactured and purchased parts, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is obsolete, damaged, or defective.
(r) Contracts. Section 5(r) of the Valley Forge Disclosure Binder
lists the following contracts and other agreements to which Valley Forge is a
party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, or under which it has
imposed a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
non-competition of Valley Forge or any of its employees, independent
contractors, officers or directors;
(vi) any agreement involving Valley Forge shareholders,
Affiliates or Subsidiaries;
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis or providing severance
benefits;
(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, employees or independent
contractors;
(xi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on Valley Forge; or
35
(xii) any other agreement with an annual value in excess of
$10,000.
Valley Forge has delivered to Synergetics a correct and complete copy of each
written agreement listed in Section 5(r) of the Valley Forge Disclosure Binder
(as amended to date) and a written summary setting forth the terms and
conditions of any oral agreement. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither Valley Forge, nor to its
Knowledge, any other party thereto is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) neither Valley Forge, nor to its Knowledge, any other party
thereto has repudiated any provision of the agreement.
(s) Notes and Accounts Receivable. All notes and accounts
receivable of Valley Forge reflected in the Valley Forge Financial Statements
for December 31, 2004 are valid receivables subject to no set-offs or
counterclaims, are current and collectible, net of the applicable reserve for
bad debts on the balance sheet for Valley Forge as of December 31, 2004.
(t) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Valley Forge.
(u) Insurance. Section 5(u) of the Valley Forge Disclosure Binder
sets forth the following information with respect to each insurance policy
(including policies providing property, directors and officers indemnification,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which Valley Forge and/or the MergerSub has been a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past three (3) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage;
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements; and
(vi) a list of all claims made under said policies.
36
With respect to each such insurance policy that has not, by its terms, lapsed:
(A) the policy is legal, valid, binding, enforceable, and in full force and
effect; (B) the policy will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby; (C) neither Valley Forge, nor to its
Knowledge, any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (D) neither Valley Forge, nor to its Knowledge, any other party to
the policy has repudiated any provision thereof. Valley Forge has been covered
during the past three (3) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period.
(v) Litigation. Except as set forth in Section 5(v) of the Valley
Forge Disclosure Binder, there is not pending against Valley Forge or, to the
Knowledge of Valley Forge, threatened against Valley Forge, its Affiliates or
Subsidiaries any Proceeding. All of the items set forth in Section 5(v) of the
Valley Forge Disclosure Binder are fully covered by insurance except as
indicated on such section of the Valley Forge Disclosure Binder. Except as set
forth on Section 5(v) of the Valley Forge Disclosure Binder, (i) all pending
Proceedings relating to or involving Valley Forge, its Subsidiaries or
Affiliates (or any of their respective officers or directors as such) are
adequately provided for in the Valley Forge Financial Statements in accordance
with GAAP, (ii) except as detailed on Section 5(v) of the Valley Forge
Disclosure Binder, Valley Forge, its Subsidiaries or Affiliates are not engaged
in or otherwise prosecuting any legal action to recover monies due it or for
damages sustained by it, and (iii) Valley Forge, its Subsidiaries or Affiliates
are not subject to any judgment, decree, injunction, rule or order of any court,
and Valley Forge, its Subsidiaries or Affiliates are not subject to any
governmental restriction which is reasonably likely (a) to have a Material
Adverse Effect or (b) to cause a material limitation on Valley Forge's ability
to operate its business after the Closing. There are no Proceedings pending, nor
to the Valley Forge's knowledge, threatened, under or pursuant to any warranty,
whether expressed or implied, on products or services sold by Valley Forge, its
Subsidiaries or Affiliates.
(w) Product Warranty. Each product manufactured, sold, leased, or
delivered by Valley Forge has been in conformity with all applicable contractual
commitments and all express and implied warranties, and Valley Forge has no
Liability (and there is no Basis for any present or future Proceeding against
any of them giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith. No product manufactured, sold, leased, or
delivered by Valley Forge or any Affiliate is subject to any guaranty, warranty,
or other indemnity. Section 5(w) of the Valley Forge Disclosure Binder includes
copies of the standard terms and conditions of sale or lease for each of Valley
Forge products.
(x) Product Liability. Valley Forge nor any Affiliate has any
Liability (and there is no Basis for any present or future Proceeding against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by Valley Forge or any
Affiliate.
37
(y) Employees. Section 5(y) of the Valley Forge Disclosure Binder
lists the names, titles, date of hire, last salary increase and current salary
rates of, bonus, commission, employee benefit, health insurance, pension,
retirement, vacation, and sick pay commitments to all employees and independent
contractors of Valley Forge. The accrued liability for the foregoing commitments
shall be included in the Valley Forge Financial Statements. To the Knowledge of
Valley Forge, no executive, employee, or independent contractor has any plans to
terminate their relationship with Valley Forge. Valley Forge is not a party to
or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Valley Forge has not committed any unfair labor practice.
Valley Forge has no Knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
Valley Forge. Neither Valley Forge, nor any of its officers, directors or
employees are subject to any claim or potential claim, currently or as a result
of the transaction described herein, of employment discrimination, wrongful
termination, sexual harassment or other employment related claims by any present
or past employee or independent contractor of Valley Forge.
(z) Employee Benefits. Except as disclosed in Section 5(z) of the
Valley Forge Disclosure Binder, Valley Forge does not currently and has never in
the past maintained, and has never contributed to, any Employee Benefit Plan or
Employee Welfare Benefit Plan.
(aa) Guaranties. Valley Forge is not a guarantor or otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person.
(ab) Environment, Health, and Safety.
-------------------------------
(i) Valley Forge has complied in all material respects
with all Environmental, Health, and Safety Laws, and no Proceeding has been
filed or commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, Valley Forge has
obtained and been in material compliance with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under, and
has complied in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety Laws.
(ii) Valley Forge has no Liability (and Valley Forge has
not handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual or Person to any substance
or condition, or owned or operated any property or facility in any manner that
could form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against Valley Forge
giving rise to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any employee
or other individual or Person, or for any reason under any Environmental,
38
Health, and Safety Law, except for any Liability which has not had and would not
reasonably be expected to have a Material Adverse Effect.
(iii) All properties and equipment used in the business of
Valley Forge are free of asbestos, PCB's, methylene chloride, trichloroethylene,
1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances, except to the extent reasonable amounts of such substances are used
in compliance with applicable Environmental, Health and Safety Laws.
(ac) Certain Business Relationships With Affiliates. Except for the
business arrangements and relationships between Valley Forge and any Affiliate
which are set forth in Section 5(ac) of the Valley Forge Disclosure Binder, none
of the directors, officers or shareholders of Valley Forge have been involved in
any business arrangement or relationship with Valley Forge within the past 24
months, and none of the directors, officers or shareholders of Valley Forge owns
any asset, tangible or intangible, which is used in the business of Valley
Forge.
(ad) Subsidiaries.
------------
(i) Each Subsidiary of Valley Forge is a corporation duly
organized, validly existing, and in subsisting under the laws of the
jurisdiction of its incorporation. Each Subsidiary of Valley Forge is duly
authorized to conduct business and subsisting under the laws of each
jurisdiction where such qualification is required, except for the jurisdiction
in which the failure to be so qualified has not had and would not reasonably be
expected to have a Material adverse Effect on Valley Forge or such Subsidiary.
Each Subsidiary of Valley Forge has full corporate power and authority to carry
on the business in which it is engaged and to own and use the properties owned
and used by it. The Certificate of Incorporation of each Subsidiary of Valley
Forge and all amendments thereto to date, By-laws as amended to date and minutes
and stock books, have been delivered to Synergetics for review prior to
execution of this Agreement, and are full, complete and correct to the date of
this Agreement. No Subsidiary of Valley Forge is not violation of any of the
provisions of its Certificate of Incorporation, as amended, or By-laws, as
amended. The said minutes accurately and fully reflect all meetings, actions,
proceedings and other matters properly includable therein. Except as reflected
in said minutes, there are no minutes of meetings or consents in lieu of
meetings of the Board of Directors or shareholders of any such Subsidiary of
Valley Forge.
(ii) The authorized capital stock of each Subsidiary of
Valley Forge and the issued and outstanding shares of capital stock of each such
Subsidiary are set forth in Section 5(ad) of the Valley Forge Disclosure Binder.
Section 5(ad) of the Valley Forge Disclosure Binder also sets forth a true and
complete list of all of the shareholders of each such Subsidiary, the number of
shares of capital stock owned by each of them, and as set forth in the Valley
Forge's books and records, the date such shares were transferred or issued to
said shareholders and each shareholder's address. Except as detailed in Section
5(ad) of the Valley Forge Disclosure Binder, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any such Subsidiary to issue, sell, or otherwise cause to become outstanding any
capital stock. All of the issued and outstanding shares of capital stock of each
39
Subsidiary of Valley Forge have been duly authorized and validly issued, are
fully paid and non-assessable, are not subject to preemptive rights, and have
been issued in compliance with all applicable federal and state securities laws.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of Valley Forge.
(iii) Valley Forge does not control directly or indirectly
or have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association or entity which is not a Subsidiary.
(ae) Disclosures. The representations and warranties contained in
this Section 5, as modified by the Valley Forge Disclosure Binder, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements and information contained in this
Section 5 not misleading.
(af) SEC Reports; Internal Controls; Information Provided.
----------------------------------------------------
(i) Since October 1, 2001, Valley Forge has filed with
the SEC all forms, registration statements, prospectuses, proxy statements,
schedules and reports required to be filed by it with the SEC under each of the
Securities Act and the Exchange Act (together with all forms, statements,
reports and documents which shall be filed subsequent to the date hereof up to
the Closing Date, being referred to herein, collectively, as the "Valley Forge
SEC Reports"). As of their respective dates (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
the Valley Forge SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein, at the
time filed (and, in the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respectively), (i) were
prepared in accordance and compiled in all material respects with the
requirements of the Securities Act and/or the Exchange Act, as the case may be,
and the rules and the regulations of the SEC thereunder applicable to the Valley
Forge SEC Reports and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. None of Valley Forge's Subsidiaries is, and none of
Valley Forge's Subsidiaries at any time since October 1, 2001 has been, required
to file or otherwise furnish any form, report, registration statement or
prospectus with or to the SEC.
(ii) Each of the consolidated financial statements
included in the Valley Forge SEC Reports, together with the notes and schedules
related thereto, as of their respective dates (or if amended or supplemented in
a Valley Forge SEC Report filed prior to the date of this Agreement, as of the
date amended and supplemented), (A) compiled in all material respects with the
applicable accounting requirements as set forth in the published rules and
regulations of the SEC, (B) were prepared in accordance with GAAP, applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited interim
financial statements, as permitted by the SEC on Form 10-Q under the Exchange
40
Act) and (C) fairly presented in all material respects the consolidated
financial position of Valley Forge and its Subsidiaries as of the respective
dates of the balance sheets included therein and the results of operations and
changes in financial position for the respective periods indicated, except that
the unaudited interim financial statements are subject to lack of footnotes and
normal and recurring year-end adjustments and any other adjustments described
therein not material in amount.
(iii) Each of Valley Forge and its Subsidiaries maintains
accurate books and records reflecting its assets and liabilities and maintains
proper and adequate internal accounting controls which provide reasonable
assurance that (A) transactions are executed with management's authorization;
(B) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of Valley Forge in accordance with GAAP and to
maintain accountability for Valley Forge's consolidated assets; (C) access to
Valley Forge's assets is permitted only in accordance with management's
authorization; (D) the reporting of Valley Forge's assets is compared with
existing assets at regular intervals; (E) accounts, notes and other receivables
and inventory are recorded accurately; and (F) there are adequate procedures
regarding prevention or timely detection of unauthorized acquisition, use of
disposition of Valley Forge's assets. As of the date of this Agreement, (i)
there are no significant deficiencies in the design or operation of Valley
Forge's internal controls over financial reporting which could adversely affect
in any material respect Valley Forge's ability to record, process, summarize and
report finance data or material weaknesses in internal controls over financial
reporting and (ii) there has been no fraud, whether or not material, that
involved management or other employees of Valley Forge or any of its
Subsidiaries who have a significant role in Valley Forge's internal controls
over the financial reporting.
(iv) The information to be supplied by or on behalf of
Valley Forge for inclusion or incorporation by reference in the Form S-4 to be
filed by Valley Forge pursuant to which Valley Forge Shares issuable in
connection with the Merger shall be registered under the Securities Act, shall
not at the time the Form S-4 is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The information to be supplied by or on behalf of Valley Forge for
inclusion in the Proxy Statement/Prospectus to be sent to the shareholders of
Valley Forge in connection with the Valley Forge shareholders meeting and to
shareholders of Synergetics in connection with the Synergetics shareholders
meeting, in each case being held to approve the Merger and other matters
contemplated by this Agreement, shall not, on the date the Proxy
Statement/Prospectus is first mailed to shareholders of Valley Forge and
Synergetics, or at the time of the respective shareholder meetings or as of the
Effective Date, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement/Prospectus not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the respective shareholder meetings which has become false or
misleading. If at any time prior to the Effective Date, any fact or event
relating to Valley Forge or any of its Affiliates should be discovered by Valley
Forge or should occur which should be set for the in an amendment to the Form
41
S-4 or a supplement to the Proxy Statement/Prospectus, Valley Forge shall
promptly inform Synergetics of such fact or event. Notwithstanding anything to
the contrary, Valley Forge makes not representation or warranty with respect to
the information to be supplied by or on behalf of Synergetics for inclusion in
the Form S-4 or the Proxy Statement/Prospectus.
6. Covenants Relating to Conduct of Business.
-----------------------------------------
(a) Covenants of Valley Forge. During the period from the date of
this Agreement and continuing until the Effective Date, Valley Forge agrees as
to itself and the MergerSub that (except as expressly contemplated or permitted
by this Agreement or as required by a governmental entity of competent
jurisdiction or to the extent that Synergetics shall otherwise consent in
writing):
(i) Ordinary Course. Valley Forge shall carry on its
business in the Ordinary Course of Business in all material respects, and shall
use reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them; provided,
however, that no action by Valley Forge with respect to matters specifically
permitted by any other provision of this Agreement shall be deemed a breach of
this Section 6(a)(i) unless such action would constitute a breach of one or more
of such other provisions. Other than in connection with this Agreement, Valley
Forge shall not, and shall not permit any of its Affiliates to, (A) enter into
or terminate any "material contract" as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC or agreement or make any change in any material
lease or contract, other than in the Ordinary Course of Business; (b) enter into
any new line of business; (C) incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith, (D) enter into any contract,
agreement or other arrangement for the sale of products or inventories or for
the furnishing of services by Valley Forge or any of its Affiliates which
contract, agreement or other arrangement involves amounts or expenditures in
excess of $50,000 or which may give rise to commitments which may extend beyond
twelve (12) months from the date of such contract, agreement or arrangement.
(ii) Dividends. Valley Forge shall not, and shall not
permit any of its Affiliates to, and shall not propose to, declare or pay any
dividends or distributions on or make other distributions in respect of any of
its capital stock.
(iii) Issuance of Securities. Valley Forge shall not, and
shall not permit any of its Affiliates to, issue, deliver or sell, or authorize
or propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any voting debt or any securities convertible into or exercisable
for, or any rights, warrants, calls or options to acquire, any such shares of
Valley Forge, or enter into any commitment, arrangement, undertaking or
agreement with respect to any of the foregoing, other than (i) the issuance of
Valley Forge Shares upon the exercise of any Valley Forge stock options under
plans disclosed in the Valley Forge Disclosure Binder in accordance with their
42
present terms in the Ordinary Course of Business consistent with past practice
and (ii) options granted after the date hereof to acquire up to 30,000 Valley
Forge Shares pursuant to any of Valley Forge's stock option plans disclosed in
the Valley Forge Disclosure Binder.
(iv) Governing Documents. Except to the extent required to
comply with applicable law or their obligations in accordance with this
Agreement, Valley Forge shall not amend or propose to so amend their respective
certificates of incorporation, bylaws or other governing documents.
(v) No Acquisitions. Other than the acquisition detailed
in this Agreement, Valley Forge shall not, and shall not permit any of its
Affiliates to, acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business (including by acquisition of
assets) or any corporation, partnership, association or other business
organization or division, provided, however, that nothing in this Section
6(a)(v) shall prohibit (x) internal reorganizations or consolidations involving
existing Affiliates or (y) the creation of new Affiliates organized to conduct
or continue activities otherwise permitted by this Agreement.
(vi) No Dispositions. Other than (i) internal
reorganizations or consolidations as detailed above, (ii) as may be required by
or in conformance with law or regulation in order to permit or facilitate the
consummation of the transactions contemplated hereby or the transactions
disclosed in the Valley Forge Disclosure Binder, Valley Forge shall not, and
shall not permit any of its Affiliates to, sell, lease or otherwise dispose of,
or agree to sell, lease or otherwise dispose of, any of its assets (excluding
inventory in the Ordinary course of Business).
(vii) Investments, Indebtedness. Valley Forge shall not,
and shall not permit any of its Affiliates to, other than in connection with
actions permitted by this Agreement (i) make any loans, advances or capital
contributions to, or investments in, any other Person other than (x) by Valley
Forge pursuant to any contract or other legal obligation existing at the date of
this Agreement or (y) in the Ordinary Course of Business consistent with past
practice in an aggregate amount not in excess of $50,000 in the aggregate
(provided that none of such transactions referred to in this clause (y) presents
a material risk of making it more difficult to obtain any approval or
authorization required in connection with the Merger under any applicable
regulatory laws) or (ii) create, incur, assume or suffer to exist any
indebtedness, issuances of debt securities, guarantees, loans or advances not in
existence as of the date of this Agreement, except pursuant to the credit
facilities, indentures and other arrangements in existence on the date of this
Agreement or in the Ordinary Course of business consistent with past practice.
(viii) Compensation. Other than as contemplated by this
Agreement or disclosed in the Section 5(y) of the Valley Forge Disclosure
Binder, Valley Forge shall not increase the amount of compensation of any
director, executive officer or employee, make any increase in or commitment to
increase any employee benefits, issue any additional Valley Forge stock options,
adopt or make any commitment to adopt any additional employee benefit plan or
make any contribution, other than regularly scheduled contributions, to any
Valley Forge benefit plan and, in the case of any of the foregoing, except, in
any case, in the Ordinary Course of Business consistent with past practice or as
required by an existing agreement.
43
(ix) Accounting Methods. Except as disclosed in Valley
Forge's SEC reports filed prior to the date of this Agreement, or as required by
a governmental entity, Valley Forge shall not change its methods of accounting
in effect as of the date of this Agreement, except as required by changes in
GAAP as concurred in by Valley Forge's independent public accountants.
(x) Certain Agreements. Valley Forge shall not, and shall
not permit any of its Affiliates to, enter into any agreements or arrangements
that limit or otherwise restrict Valley Forge or any of their respective
Affiliates or any successor thereto, or that could, after the Effective Date,
limit or restrict New Synergetics or any of its Affiliates (including the
MergerSub) or any successor thereto, from engaging or competing in any line of
business or in any geographic area.
(xi) SEC and Nasdaq Compliance. Valley Forge shall comply
in all material respects with SEC filing and disclosure requirements and shall
comply with all rules, regulations and administrative guidelines promulgated by
the Nasdaq SmallCap Market.
(xii) Non-Solicitation. After the date hereof and prior to
the Effective Date, MergerSub and Valley Forge agree (i) that they shall not,
and shall direct and use their best efforts to cause their respective directors,
officers, partners, employees, advisors, accountants and attorneys not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving Valley Forge, or any
purchase of all or any significant portion of the assets or any equity
securities of Valley Forge (any such proposal or offer being hereinafter
referred to as a "Valley Forge Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to a Valley Forge Acquisition
Proposal, or otherwise facilitate any effort to attempt to make or implement a
Valley Forge Acquisition Proposal; (ii) that they will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties other than Synergetics conducted heretofore with respect to any of
the foregoing and will take the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this Section
6(a)(xii); and (iii) that they will notify Synergetics immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, them.
(xiii) Remedies. The MergerSub and Valley Forge agree that
Synergetics will be entitled to specifically enforce its rights under Section
6(a)(xii) to recover damages by reason of any breach of the provisions therein
and to exercise all other rights existing in its favor. The MergerSub and Valley
Forge further agree and acknowledge that money damages may not be an adequate
remedy for the breach of such provision and that Synergetics may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief in order to enforce or prevent any
violations of this covenant.
44
(xiv) Codman Agreement. With regard to the Agreement dated
as of October 1, 2004 by and between Valley Forge and Codman & Xxxxxxxxx, Inc.
("Codman"), as amended by the amendment dated as of March 1, 2005 (collectively,
the "Codman Agreement"), Valley Forge shall to the extent it may do so under the
terms of the Codman Agreement: (i) provide Codman written notice under Article
One - "Exclusivity End Date" subparagraph (c)(ii) to shorten the "Exclusivity
End Date" to a date no later than the Closing of the Merger; (ii) sell to Codman
only the amount of product it is obligated to sell to Codman under the Codman
Agreement (the "Obligated Amount"), and shall not agree to sell to Codman
products in excess of the Obligated Amount without the prior written consent of
Synergetics, which consent shall not be unreasonably withheld or delayed; (iii)
not modify the Codman Agreement, without the prior written consent of
Synergetics, which consent shall not be unreasonably withheld or delayed; (iv)
not enter into any distribution or marketing agreement for its products without
the prior written consent of Synergetics, which consent shall not be
unreasonably withheld or delayed; and (v) work with Synergetics on a marketing
plan and implementation schedule, which will place New Synergetics (or Valley
Forge in the event the Reincorporation does not occur for any reason) in a
position to market and sell the Valley Forge products (including the New
Product, as that term is defined in the Codman Agreement) upon the Closing of
the Merger.
(b) Covenants of Synergetics. During the period from the date of
this Agreement and continuing until the Effective Date, Synergetics agrees that
(except as expressly contemplated or permitted by this Agreement, as disclosed
in the Synergetics Disclosure Binder or as required by a governmental entity of
competent jurisdiction or to the extent that Valley Forge and the MergerSub
shall otherwise consent in writing):
(i) Ordinary Course. Synergetics shall carry on its
businesses in the Ordinary Course of Business in all material respects, and
shall use reasonable best efforts to preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with customers, suppliers and others having business dealings with them;
provided, however, that no action by Synergetics with respect to matters
specifically permitted by any other provision of this Agreement shall be deemed
a breach of this Section 6(b)(i) unless such action would constitute a breach of
one or more of such other provisions. Other than in connection with this
Agreement, Synergetics shall not, and shall not permit any of its Affiliates to,
(A) enter into or terminate any "material contract" as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC or agreement or make any change in
any material lease or contract, other than in the Ordinary Course of Business;
(B) enter into any new line of business; (C) incur or commit to any capital
expenditure or any obligations or liabilities in connection therewith, (D) enter
into any contract, agreement or other arrangement for the sale of products or
inventories or for the furnishing of services by Synergetics or any of its
Affiliates which contract, agreement or other arrangement involves amounts or
expenditures in excess of $50,000 or which may give rise to commitments which
may extend beyond twelve (12) months from the date of such contract, agreement
or arrangement.
(ii) Dividends; Changes in Share Capital. Synergetics
shall not and shall not propose to, declare or pay any dividends or
45
distributions on or make other distributions in respect of any of its capital
stock.
(iii) Issuance of Securities. Synergetics shall not, and
shall not permit any of its Affiliates to issue, deliver or sell, or authorize
or propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any voting debt or any securities convertible into or exercisable
for, or any rights, warrants, calls or options to acquire, any such shares of
Synergetics, or enter into any commitment, arrangement, undertaking or agreement
with respect to any of the foregoing, other than (i) the issuance of Synergetics
Shares upon the exercise of any Synergetics stock options under plans disclosed
in the Synergetics Disclosure Binder in accordance with their present terms in
the Ordinary Course of Business consistent with past practice and (ii) Options
granted after the date hereof to acquire up to 10,000 Synergetics Shares
pursuant to the Option Plan in connection with the hiring of a new Chief
Financial Officer of Synergetics.
(iv) Governing Documents. Except to the extent required to
comply with its obligations hereunder or with applicable law, Synergetics shall
not amend or propose to so amend its certificate of incorporation or bylaws.
(v) No Acquisitions. Other than the acquisition detailed
in this Agreement, Synergetics shall not, and shall not permit any of its
Affiliates to, acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business (including by acquisition of
assets) or any corporation, partnership, association or other business
organization or division, provided, however, that nothing in this Section
(6)(b)(v) shall prohibit (x) internal reorganizations or consolidations
involving existing Affiliates or (y) the creation of new Affiliates organized to
conduct or continue activities otherwise permitted by this Agreement.
(vi) No Dispositions. Other than (i) internal
reorganization or consolidations as detailed above, (ii) as may be required by
or in conformance with law or regulation in order to permit or facilitate the
consummation of the transactions contemplated hereby or the transactions
disclosed in the Synergetics Disclosure Binder, Synergetics shall not, and shall
not permit any of its Affiliates to, sell, lease or otherwise dispose of, or
agree to sell, lease or otherwise dispose of, any of its assets (excluding
inventory in the Ordinary Course of Business).
(vii) Investments; Indebtedness. Synergetics shall not, and
shall not permit any of its Affiliates to, other than in connection with actions
permitted by this Agreement (i) make any loans, advances or capital
contributions to, or investments in, any other Person, other than (x) by
Synergetics pursuant to any contract or other legal obligation existing at the
date of this Agreement or (y) in the Ordinary Course of Business consistent with
past practice in an aggregate amount not in excess of $50,000 in the aggregate
(provided that none of such transactions referred to in this clause (y) presents
a material risk of making it more difficult to obtain any approval or
authorization required in connection with the Merger under and applicable
regulatory laws) or (ii) create, incur, assume or suffer to exist any
indebtedness, issuances of debt securities, guarantees, loans or advances not in
46
existence as of the date of this Agreement, except pursuant to the credit
facilities, indentures and other arrangements in existence on the date of this
Agreement or in the Ordinary Course of Business consistent with past practice.
(viii) Compensation. Other than as contemplated by this
Agreement or disclosed in the Section 4(x) of the Synergetics Disclosure Binder,
Synergetics shall not increase the amount of compensation of any director,
executive officer or employee, make any increase in or commitment to increase
any employee benefits, issue any additional Synergetics stock options, adopt or
make any commitment to adopt any additional employee benefit plan or make any
contribution, other than regularly scheduled contributions, to any Synergetics
benefit plan and, in the case of any of the foregoing, except, in any case, in
the Ordinary Course of Business consistent with past practice or as required by
an existing agreement.
(ix) Accounting Methods. Except as disclosed in the
Synergetics Disclosure Binder, or as required by a governmental entity,
Synergetics shall not change its methods of accounting in effect as of the date
of this Agreement.
(x) Certain Agreements. Synergetics shall not, and shall
not permit any of its Affiliates to, enter into any agreements or arrangements
that limit or otherwise restrict Synergetics or any of their respective
Affiliates or any successor thereto, or that could, after the Effective Date,
limit or restrict New Synergetics or any of its Affiliates (including the
MergerSub) or any successor thereto, from engaging or competing in any line of
business or in any geographic area.
(xi) Non-Solicitation. After the date hereof and prior to
the Effective Date, Synergetics agrees (i) that it shall not, and shall direct
and use its best efforts to cause its directors, officers, partners, employees,
advisors, accountants and attorneys not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer with respect to a merger, acquisition, consolidation or
similar transaction involving Synergetics, or any purchase of all or any
significant portion of the assets or any equity securities of Synergetics (any
such proposal or offer being hereinafter referred to as a "Synergetics
Acquisition Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to a Synergetics Acquisition Proposal, or otherwise facilitate any
effort to attempt to make or implement a Synergetics Acquisition Proposal; (ii)
that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties other than Valley Forge
conducted heretofore with respect to any of the foregoing and will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 6(b)(xi); and (iii) that they will notify
Valley Forge immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, them.
(xii) Remedies. Synergetics agrees that Valley Forge will
be entitled to specifically enforce its rights under Section 6(b)(xi) to recover
damages by reason of any breach of the provisions therein and to exercise all
47
other rights existing in its favor. Synergetics further agrees and acknowledges
that money damages may not be an adequate remedy for the breach of such
provision and that Valley Forge may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance or injunctive
relief in order to enforce or prevent any violations of this covenant.
(c) Control of the other Party's Business. Nothing contained in
this Agreement shall give Valley Forge, Synergetics or the MergerSub, directly
or indirectly, the right to control or direct either Party's operations prior to
the Effective Date.
7. Additional Agreements.
---------------------
(a) Preparation of Proxy Statement; S-4 Registration Statement;
Valley Forge Shareholders Meeting and Registration Expenses.
(i) As promptly as reasonably practicable following the
date of this Agreement, Valley Forge and Synergetics shall prepare and file with
the SEC mutually acceptable proxy materials which shall constitute the Proxy
Statement/Prospectus (such proxy statement/prospectus, and any amendments or
supplements thereto, the "Proxy Statement/Prospectus") and Valley Forge shall
prepare and file a registration statement on Form S-4 with respect to the
issuance of the Synergetics Merger Consideration pursuant to this Agreement (the
"Form S-4"). The Proxy Statement/Prospectus will be included in and will
constitute a part of the Form S-4 as Valley Forge's prospectus. The Form S-4 and
the Proxy Statement/Prospectus shall comply as to form in all material respects
with the applicable provisions of the Securities Act and the Exchange Act and
the rules and regulations thereunder. Valley Forge and Synergetics shall use
reasonable best efforts to have the Form S-4 declared effective by the SEC as
promptly as practicable after the date hereof and to keep the Form S-4 effective
as long as is necessary to consummate the Merger and the transactions
contemplated thereby. Valley Forge shall, as promptly as practicable after
receipt thereof, provide Synergetics copies of any written comments and advise
Synergetics of any oral comments, with respect to the Proxy Statement/Prospectus
received from the SEC and shall provide Synergetics with a reasonable
opportunity to review and comment on any and all correspondence between Valley
Forge or any of its representatives, on the one hand, and the SEC, or its staff
or any other governmental officials, on the other hand, with respect to the Form
S-4, the Proxy Statement/Prospectus or the Merger and will provide Synergetics
with copies of any such correspondence. Notwithstanding any other provision
herein to the contrary, no amendment or supplement (including by incorporation
by reference) to the Proxy Statement/Prospectus or the Form S-4 shall be made
without the approval of both Parties, which approval shall not be unreasonably
withheld or delayed; provided, that with respect to documents filed by a Party
which are incorporated by reference in the Form S-4 or Proxy
Statement/Prospectus, this right of approval shall apply only with respect to
information relating to the other Party or its business, financial condition or
results of operations. Valley Forge will use reasonable best efforts to cause
the Proxy Statements/Prospectus to be mailed to the Valley Forge stockholders,
and Synergetics will use reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to the Synergetics' stockholders, in each
case, as soon as reasonably practicable after the Form S-4 is declared effective
48
under the Securities Act. Each Party will advise the other party, promptly after
it receives notice thereof, of the time when the Form S-4 has become effective,
the issuance of any stop order, the suspension of the qualification of the
Valley Forge Shares issuable in connection with the Merger for offering or sale
in any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4.
(ii) Valley Forge and Synergetics shall take all lawful
action to call, give notice of, convene and hold a meeting of their respective
stockholders on a date as soon as reasonably practicable for the purpose of
obtaining the Requisite Valley Forge Stockholder Approval, and the Requisite
Synergetics Stockholder Approval with respect to the adoption of this Agreement
and, with respect to Valley Forge, the Reincorporation. The Parties hereby agree
to cause their respective Boards of Directors to recommend that their respective
stockholders approve the Merger and, in the case of Valley Forge, the
Reincorporation. The Parties further agree not to withdraw such recommendations
unless such withdrawal is based primarily on a breach by the other Party of any
representation, warranty or covenant contained in this Agreement.
(b) Reasonable Best Efforts. Subject to the terms and conditions
of this Agreement, each Party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under this Agreement and applicable laws and
regulations to consummate the Merger and the other transactions contemplated by
this Agreement as soon as practicable after the date hereof, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents,
clearances, waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from any third
party and/or any governmental entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement and (ii) taking all
reasonable steps as may be necessary to obtain all such material consents,
clearances, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals.
(c) Fees and Expenses. Except as otherwise provided herein,
whether or not the Merger is consummated, all expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the Party incurring such Expenses. Expenses incurred by either party in
connection with the filing, printing and mailing of the Proxy
Statement/Prospectus, shall be paid 50% by Valley Forge and 50% by Synergetics.
As used in this Agreement, "Expenses" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a Party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Proxy Statement/Prospectus, the
Form S-4 and the solicitation of stockholder approvals and all other matters
related to the transactions contemplated hereby.
49
(d) Directors' and Officers' Indemnification and Insurance. From
and after the Effective Date, the Surviving Corporation and/or Valley Forge
agrees that it will (i) indemnify and hold harmless, against any costs or
expenses (including attorney's fees), judgments, fines, losses, claims damages
or liabilities incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative, and
provide advancement of expenses to, all past and present directors, officers and
employees of Valley Forge (in all of their capacities) (a) to the same extent,
respectively, such persons are indemnified or have the right to advancement of
expenses as of the date of this Agreement by Valley Forge pursuant to the Valley
Forge certificate of incorporation, bylaws and indemnification agreements, if
any, in existence on the date hereof with any directors, officers and employees
of Valley Forge and its Affiliates and (b) without limitation to clause (a), to
the fullest extent permitted by law, in each case, for acts or omissions at or
prior to the Effective Date (including for acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby; excepting therefrom, however, acts of willful
misconduct or gross negligence), (ii) include and cause to be maintained in
effect in the Surviving Corporation's (or any successor's) certificate of
incorporation and bylaws for a period of three (3) years after the Effective
Date, the current provisions regarding elimination of liability of directors,
indemnification of officers, directors and employees and advancement of expenses
relative to same and (iii) cause to be maintained for a period of three (3)
years after the Effective Date the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Valley Forge
or the Surviving Corporation (provided that Synergetics (or any successor) may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Date (including for acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby; excepting therefrom, however, acts of
willful misconduct or gross negligence). The obligations of under this Section
shall not be terminated or modified in such a manner as to adversely affect any
indemnitee to whom this Section applies without the consent of such affected
indemnitee.
(e) Public Announcements. Valley Forge and Synergetics shall use
reasonable best efforts to develop a joint communications plan and each Party
shall use reasonable best efforts (i) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (ii) unless
otherwise required by applicable law or by obligations pursuant to any listing
agreement with or rules of any securities exchange, to consult with each other
before issuing any press release or, to the extent practical, otherwise making
any public statement with respect to this Agreement or the transactions
contemplated hereby. In addition to the foregoing, except to the extent
disclosed in or consistent with the Proxy Statement/Prospectus in accordance
with the provisions of this Agreement, neither Valley Forge or Synergetics shall
issue any press release or otherwise make any public statement or disclosure
concerning the other Party or the other Party's business, financial condition or
results of operations without the consent of the other Party, which consent
shall not be unreasonably withheld or delayed.
50
(f) Assignment of Xxxxx Trademark. Prior to or contemporaneous
with the Closing, Valley Forge will exercise its option in accordance with that
certain Option Agreement, dated October 22, 2004, by and between Xxxxxxx Xxxxx
and Valley Forge attached hereto and made a part hereof as Exhibit "E",
whereupon Xxxxxxx Xxxxx shall, prior or contemporaneous with the Closing, assign
and transfer all of his interest in and to the "Xxxxx" trademarks/tradenames
currently used by Valley Forge to Valley Forge or the MergerSub as well as
rights to use the name "Xxxxx" in connection with future medical instruments and
products.
(g) Supermajority Director Voting Requirements. Until the 12-month
anniversary of the Closing Date, the following transactions with respect to
Valley Forge and any and all Subsidiaries and Affiliates will require the
affirmative vote of five (5) members of the New Synergetics Board of Directors:
(i) the issuance, authorization, or obligation to issue or authorize, any
capital stock or instruments convertible or exercisable into capital stock,
other than capital stock or instruments convertible or exercisable into capital
stock which have been granted to employees in connection with the New
Synergetics Stock Option Plan (a copy of the New Synergetics Stock Option Plan
is attached hereto as Exhibit "J"); (ii) authorization or approval of any
dividend (cash, stock or otherwise) or redemption rights, liquidation
preferences, conversion rights, or voting rights with respect to any capital
stock; (iii) amendments to the Certificate of Incorporation; (iv) redemption or
repurchase any capital stock or instruments convertible or exercisable or
exchangeable into capital stock; (v) effecting any merger, consolidation, change
of control, or reorganization; (vi) adoption, amendment, restatement or
modification of any employee stock plan or the terms of any benefit plans or the
compensation of any executive officers; (vii) entering into any transaction or
agreement with any New Synergetics shareholder or any such shareholder's
Subsidiary or Affiliates; (viii) entering into any line of business other than
the design, manufacture and sale of medical devices and instruments as those
terms are defined by the FDA; (ix) effecting any acquisition of any business or
material assets of any business; (x) incurring any material indebtedness in an
amount more than $500,000 in excess of the indebtedness of the New Synergetics
existing on the Effective Date; and (xi) changing any representation on any
audit or compensation committee of the Board of Directors; provided, however,
upon the death, disability or resignation of Xxxxxx Xxxx which creates a vacancy
on either committee or in the event of his inability or unwillingness to serve
on any such committee, Xxxxx X. Xxxxx and the independent director nominated by
Valley Forge and approved and elected in accordance with Section 2(d)(iv) hereof
shall appoint an independent representative to serve on such committee for the
remaining term; further provided that upon the death, disability or resignation
of either Xxxxx Xxxxxxxxx or Xxxxxxx Xxxxxxx, which creates a vacancy on either
committee, or in the event either is unable or unwilling to serve on any such
committee, Xxxxx X. Xxxxxxxx and Xxxx X. Xxxxx, Xx. shall appoint an independent
representative to serve on such committee for the remaining term.
(h) Section 16 Matters. Valley Forge shall take all steps
reasonably necessary to cause the issuance of Valley Forge Shares or other
equity securities (including stock options and other derivative securities) of
Valley Forge in connection with the Merger to each director or officer of
Synergetics functioning as a director or officer of Valley Forge following the
Merger to be exempt pursuant to Rule 16b-3 under the Exchange Act.
51
(i) Nasdaq Listing. Valley Forge shall file such notifications or
applications and take such other actions as may be required by the rules of The
Nasdaq Stock Market, Inc. and any national securities exchange upon which the
Valley Forge Shares are listed with respect to the Valley Forge Shares issuable
pursuant to the transactions contemplated by this Agreement.
(j) Affiliate Letters. Within 30 days following the date of this
Agreement, Synergetics shall deliver to Valley Forge a letter identifying all
known persons who may be deemed to be an affiliate of Synergetics under Rule 145
of the Securities Act. Synergetics shall use its reasonable best efforts to
obtain a written agreement from each Person who may be so deemed as soon as
practicable and, in any event, on or prior to the Effective Date, substantially
in the form of Exhibit "F" hereto.
(k) Access to Information. Subject to the applicable law,
Synergetics shall afford to Valley Forge and its accountants, counsel, financial
advisors and other representatives and Valley Forge shall afford to Synergetics
and its accountants, counsel, financial advisors and other representatives full
access during normal business hours with reasonable notice throughout the period
prior to the Effective Date to all of their respective properties, books,
contracts, commitments and records (including those of any Subsidiary) and,
during such period, shall furnish promptly to one another such information
concerning their respective businesses, properties and personnel as Valley Forge
or Synergetics, as the case may be, shall reasonably request. Any investigation
pursuant to this Section 7(k) shall be conducted in a manner which will not
interfere unreasonably with the conduct of the business of the other party. No
information or knowledge obtained in any investigation pursuant to this Section
7(k) or otherwise shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger. The Parties hereto acknowledge that Valley
Forge and Synergetics have previously executed a Confidentiality Agreement,
dated as of July 11, 2003, which shall continue in full force and effect in
accordance with its terms, except as expressly modified by this Agreement.
8. Conditions Precedent.
--------------------
(a) Conditions Precedent to Each Party's Obligation to Effect the
Merger. The respective obligations of Valley Forge, the MergerSub and
Synergetics to effect the Merger are subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(i) Stockholder Approval. (A) Synergetics shall have
obtained the Requisite Synergetics Stockholder Approval in connection with the
adoption of this Agreement by the stockholders of Synergetics; and (B) Valley
Forge shall have obtained the Requisite Valley Forge Stockholder Approval in
connection with the adoption of this Agreement by the stockholders of Valley
Forge.
(ii) No Injunctions or Restraints, Illegality. No laws
shall have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order, judgment, decision, opinion
52
or decree issued by a court or other governmental entity of competent
jurisdiction in the United States shall be in effect, having the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
(iii) Effectiveness of the Form S-4. The Form S-4 shall
have been declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
(iv) Governmental and Regulatory Approvals. All consents,
clearances, approvals and actions of, filings with and notices to any
governmental entity required of Valley Forge, the MergerSub or Synergetics in
connection with the execution and delivery of this Agreement and the
consummation of the Merger, the issuance of the Valley Forge Shares and the
other transactions contemplated hereby shall have been made or obtained (as the
case may be), except for those the failure of which to be made or obtained,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Valley Forge or the MergerSub, taken together after
giving effect to the Merger.
(b) Additional Conditions Precedent to the Obligations of Valley
Forge and the MergerSub. The obligations of Valley Forge and the MergerSub to
effect the Merger are subject to the satisfaction of, or waiver by Valley Forge,
on or prior to the Closing Date of the following conditions:
(i) Representations and Warranties. Each of the
representations and warranties of Synergetics set forth in this Agreement shall
be true and correct, except where the failure to be so true and correct,
individually or in the aggregate, would not have a Material Adverse Effect on
Synergetics (it being agreed that any materiality qualifications in particular
representations and warranties shall be disregarded in determining whether any
such inaccuracies would have a Material Adverse Effect for purposes of this
Section 8(b)(i)), in each case, as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (except to the extent
in either case that such representations and warranties speak as of another
date), and Valley Forge shall have received a certificate of the chief executive
officer of Synergetics to such effect.
(ii) Performance of Obligations of Synergetics.
Synergetics shall have materially performed or complied with all agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date and Valley Forge shall have received a certificate of the chief
executive officer of Synergetics to such effect.
(iii) Employee Benefit Plans. Synergetics shall have
delivered evidence reasonably satisfactory to Valley Forge and MergerSub that
all employee benefit plans of Synergetics, including, without limitation, its
401(k) plan, has been maintained in compliance in all material respects with all
applicable laws.
(iv) Title Policy. The Declaration of Restrictions set
forth in the title insurance policy issued in connection with Synergetics'
53
Missouri Property shall not interfere in any material way with Synergetics' use
or proposed use or occupation of such property.
(v) Tax Benefits Related to Industrial Revenue Bonds. The
consummation of the Merger shall not adversely affect in any material respect
any of the tax benefits available to Synergetics immediately prior to the
Closing with respect to the industrial revenue bonds issued in connection with
the building and development of the Missouri Property.
(vi) Litigation. Valley Forge shall have determined, in
its reasonable discretion, that the litigation matters set forth in Section 4(u)
of the Synergetics Disclosure Binder would not reasonably be expected to have a
Material Adverse Effect on Synergetics or, subsequent to the Closing, New
Synergetics.
(vii) No Material Change. Synergetics shall not have
suffered from the date of this Agreement any change that would reasonably be
expected to have a Material Adverse Effect on Synergetics, and Valley Forge
shall have received a certificate of the chief executive officer of Synergetics
to such effect.
(c) Additional Conditions Precedent to the Obligations of
Synergetics. The obligations of Synergetics to effect the Merger are subject to
the satisfaction of, or waiver by Synergetics, on or prior to the Closing Date
of the following conditions:
(i) Representations and Warranties. Each of the
representations and warranties of Valley Forge and the MergerSub set forth in
this Agreement shall be true and correct, except where the failure to be so true
and correct, individually or in the aggregate, would not have a Material Adverse
Effect on Valley Forge or the MergerSub (it being agreed that any materiality
qualifications in particular representations and warranties shall be disregarded
in determining whether any such inaccuracies would have a Material Adverse
Effect for purposes of this Section 8(c)(i)), in each case, as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent in either case that such representations and
warranties speak as of another date), and Synergetics shall have received a
certificate of the chief executive officer of Valley Forge to such effect.
(ii) Performance of Obligations of Valley Forge and the
MergerSub. Valley Forge and the MergerSub shall have materially performed or
complied with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date and Synergetics shall have
received a certificate of the chief executive officer of Valley Forge to such
effect.
(iii) Employee Benefit Plans. Valley Forge shall have
delivered evidence reasonably satisfactory to Synergetics that all employee
benefit plans of Valley Forge, including, without limitation, its 401(k) plan,
has been maintained in compliance in all material respects with all applicable
laws.
54
(iv) Assignment of "Xxxxx Trademark". Valley Forge shall
have delivered evidence reasonably satisfactory to Synergetics that the "Xxxxx"
trademark has been properly assigned and transferred to Valley Forge.
(v) Final Order. Valley Forge shall have delivered to
Synergetics a final non-appealable order from the Superior Court, County of
Maricopa, State of Arizona, approving that certain Settlement and Release
Agreement entered into in connection with the matter Xxxxxx v. Valley Forge
Scientific, et. al., Court Action No. CV2002-100791.
(vi) No Material Change. Valley Forge shall not have
suffered from the date of this Agreement any change that would reasonably be
expected to have a Material Adverse Effect on Valley Forge, and Synergetics
shall have received a certificate of the chief executive officer of Valley Forge
to such effect.
(vii) Tax Opinion. Synergetics shall have received a
written opinion from counsel of its choice, in form and substance reasonably
satisfactory to it, to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code and such opinion
shall not have been withdrawn. The Parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinion.
(viii) New Directors. The slate of directors of New
Synergetics as described in Section 2(d)(iv) hereof shall have been properly
elected by the stockholders of Valley Forge and the Board shall have established
and elected the following independent members to the following committees: (i)
the New Synergetics Audit Committee shall consist of Xxxxxxx X. Xxxxxxx, Xxxxxx
Xxxx and Xxxxx Xxxxxxxxx; (ii) the New Synergetics Compensation Committee shall
consist of Xxxxxxx X. Xxxxxxx, Xxxxxx Xxxx and Xxxxx Xxxxxxxxx; and (iii) the
New Synergetics Nominating Committee shall consist of Xxxxxxx X. Xxxxxxx, Xxxxxx
Xxxx and Xxxxx Xxxxxxxxx.
(ix) Listing of Additional Shares. Valley Forge shall, if
required by the Rules of The Nasdaq Stock Market, file with The Nasdaq Stock
Market a Notification Form for Listing Additional Shares with respect to Valley
Forge Shares issuable in connection with the Merger.
9. Items to be Delivered at Closing.
--------------------------------
(a) Items to be Delivered by Synergetics. As a condition to the
Merger, Synergetics shall have delivered at or prior to the Closing Date:
(i) a bring-down certificate, certifying that the
Synergetics Disclosure Binder and all written statement (including all
Synergetics Financial Statements), exhibit, certificate, schedule or other
document delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be true and correct in all material respects at and as
of the Closing Date, as if made at the Closing and as of the Closing Date;
55
(ii) Synergetics shall have delivered to Valley Forge and
the MergerSub a certificate to the effect that each of the conditions specified
above in Section 8(a)(i), (ii) and (iv) are satisfied in all respects;
(iii) Synergetics shall have delivered to Valley Forge and
the MergerSub a certificate to the effect that each of the conditions specified
above in Section 8(b)(i), (ii) and (iii) is satisfied in all respects;
(iv) Synergetics shall have delivered to Valley Forge and
the MergerSub a duly executed original copy of the Certificate of Merger
(v) Synergetics shall have performed and complied with
all of their respective covenants hereunder in all material respects through the
Closing;
(vi) Synergetics shall have procured and delivered to
Valley Forge all of necessary third party consents, authorizations, and
approvals required pursuant to this Agreement;
(vii) Synergetics and/or certain of the Synergetics
shareholders, as the case may be, shall have entered into (A) the Shareholders'
Agreement; (B) those certain Employment Agreements with Xxxxx X. Xxxxx, Xxxxx X.
Xxxxxxxx and Xxxx X. Xxxxx, Xx. in form and substance set forth in Exhibit "G"
and the same shall be in full force and effect; and (C) the Synergetics Voting
Agreement;
(viii) the MergerSub and Valley Forge shall have received
from counsel to Synergetics, an opinion dated the Closing Date, addressed to the
MergerSub and Valley Forge in form and substance satisfactory to the MergerSub,
Valley Forge and counsel in accordance Exhibit "H"; and
(ix) a Subordination, Non-Disturbance and Attornment
Agreement, in a form reasonably acceptable to Valley Forge, from the holders of
any and all mortgages on the Missouri Property.
(b) Items to be Delivered by Valley Forge and/or the MergerSub.
Valley Forge and/or the MergerSub shall deliver at or prior to the Closing on
the date hereof:
(i) a bring-down certificate, certifying that the Valley
Forge Disclosure Binder and all written statement (including all Valley Forge
Financial Statements), exhibit, certificate, schedule or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be true and correct in all material respects at and as of the
Closing Date, as if made at the Closing and as of the Closing Date;
(ii) Valley Forge shall have delivered to Synergetics a
certificate to the effect that each of the conditions specified above in Section
8(a)(i), (ii), (iii) and (iv) are satisfied in all respects;
56
(iii) Valley Forge shall have delivered to Synergetics a
certificate to the effect that each of the conditions specified above in Section
8(c)(i), (ii) and (iii) is satisfied in all respects;
(iv) Valley Forge shall have delivered to Synergetics a
duly executed original copy of the Certificate of Merger;
(v) Valley Forge shall have performed and complied with
all of their respective covenants hereunder in all material respects through the
Closing;
(vi) Valley Forge shall have procured and delivered to
Synergetics all of necessary third party consents, authorizations, and approvals
required pursuant to this Agreement;
(vii) Valley Forge, the MergerSub and the principal
stockholders of Valley Forge, as the case may be, shall have entered into (A)
the Shareholders' Agreement; (B) those certain Employment Agreements with Xxxxx
X. Xxxxx, Xxxxx X. Xxxxxxxx and Xxxx X. Xxxxx, Xx. in form and substance set
forth in Exhibit "G"; and (C) the Valley Forge Voting Agreement;
(viii) Synergetics shall have received from counsel to the
MergerSub and Valley Forge, an opinion dated the Closing Date, addressed to
Synergetics in form and substance satisfactory to Synergetics and counsel in
accordance with Exhibit "I"; and
(ix) an estoppel certificate executed by Xxxxxxx Xxxxx in
connection with the assumption of the "Xxxxx" trademark in a form reasonably
acceptable to Synergetics.
10. Break-up Fee.
------------
(a) Fee Payable to Valley Forge. In the event this Agreement is
terminated by Valley Forge (i) pursuant to Section 11(c)(i) or (iii), or (ii) in
the event the Synergetics Board of Directors withdraws its recommendation to
Synergetics shareholders to approve the Merger (unless such withdrawal is based
primarily on a breach by Valley Forge or MergerSub of any representation,
warranty or covenant contained in this Agreement), Synergetics shall pay, as
liquidated damages and not as a penalty, a break-up fee in the amount of One
Million Dollars ($1,000,000).
(b) Fee Payable to Synergetics. In the event this Agreement is
terminated by Synergetics (i) pursuant to Section 11(d)(i) or (iii), or (ii) in
the event the Valley Forge Board of Directors withdraws its recommendations to
Valley Forge shareholders to approve the Merger (unless such withdrawal is based
primarily on a breach by Synergetics of any representation, warranty or covenant
contained in this Agreement), Valley Forge shall pay, as liquidated damages and
not as a penalty, a break-up fee in the amount of One Million Dollars
($1,000,000).
57
(c) Exclusive Remedy. In the event one of the Parties hereto
terminates this Agreement for reasons set forth in Section 10(a) or 10(b) above,
the rights and remedies set forth in this Section 10 shall be the sole and
exclusive rights and remedies of the other Party hereto with respect to the
matters referred to in this Section 10.
11. Termination. This Agreement may be terminated at any time
prior to the Closing Date as follows:
(a) by the written agreement of MergerSub, Valley Forge and
Synergetics;
(b) by either MergerSub and Valley Forge or Synergetics by written
notice to the other Parties if the transactions contemplated hereby shall not
have been consummated pursuant hereto by 5:00 p.m. CST on September 30, 2005,
unless such date shall be extended by mutual written consent of MergerSub,
Valley Forge and Synergetics, provided that no party may give such notice if its
breach of this Agreement has precluded the consummation of the transactions
contemplated by this Agreement;
(c) by MergerSub and Valley Forge by written notice to Synergetics
if (i) the representations and warranties of Synergetics shall not have been
true and correct in all respects (in the case of a representation or warranty
containing a materiality qualification) or in all material respects (in the case
of a representation or warranty without a materiality qualification) as of the
date when made, or (ii) any of the conditions set forth in Section 8(a), 8(b) or
9(a) shall not have been, or if it becomes apparent that any of such conditions
will not be fulfilled by 5:00 p.m. CST on September 30, 2005, unless such
failure shall be due to the failure of MergerSub or Valley Forge to perform or
comply with any of the covenants, agreements, or conditions hereof to be
performed or complied with by it prior to the Closing, or (iii) Synergetics
fails to perform or comply with any material covenant or agreement contained
herein and such failure is not cured within thirty (30) days of such written
notice; or
(d) by Synergetics by written notice to the other parties if (i)
the representations and warranties of Merger Sub or Valley Forge shall not have
been true and correct in all respects (in the case of a representation or
warranty containing a materiality qualification) or in all material respects (in
the case of a representation or warranty without a materiality qualification) as
of the date when made, or (ii) any of the conditions set forth in Section 8(a),
8(c) or 9(b) shall not have been, or if it becomes apparent that any of such
conditions will not be, fulfilled by 5:00 p.m. CST on September 30, 2005, unless
such failure shall be due to the failure of Synergetics to perform or comply
with any of the covenants, agreements or conditions to be performed or complied
with by them prior to the Closing, or (iii) Valley Forge or MergerSub fails to
perform or comply with any material covenant or Agreement contained herein and
such failure is not cured within thirty (30) days of such notice.
(e) In the event of the termination of this Agreement pursuant to
Section 11, this Agreement shall become void, without any liability to any party
in respect hereof or of the transaction contemplated hereby on the part of any
party hereto, or any of its directors, officers, employees agents, consultants,
representatives, advisers, shareholders or Affiliates except as specified in
Section 10 and except for any liability resulting from such party's breach of
this Agreement.
58
12. Miscellaneous.
-------------
(a) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement, together with the Exhibits
and the Valley Forge Disclosure Binder and Synergetics Disclosure Binder, to be
delivered pursuant hereto, constitute the entire agreement between the Parties
and supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral.
(c) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its or his rights, interests, or obligations hereunder without the prior
written approval of the other Parties; provided, however, that the MergerSub may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which case the MergerSub nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first business day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth business
day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
59
If to Synergetics:
Xxxxx X. Xxxxxxxx
CEO
Synergetics, Inc.
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xx. Xxxxxxx, Xxxxxxxx 00000
636.939.5100 (p)
000.000.0000 (f)
With a copy to:
Xxxxxx Xxxxx, Esquire
Xxxxxx & Guest LLP
000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
314.576.2800 (p)
314.469.7806 (f)
And
Xxxxx X. Xxxxxxxx, Esquire
Xxxxxxxxx Xxxxxxxx LLP
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
314.621.5070 (p)
314.612.2229 (f)
If to the MergerSub, or Valley Forge:
Xxxxx X. Xxxxx
President and CEO
Valley Forge Scientific Corp.
000 Xxxxx Xxxx Xxxx - Xxxxx 000
X.X. Xxx 0000
Xxxx, XX 00000-0000
000-000-0000 (p)
610-666-7565 (f)
60
With a copy to:
Xxxxxxx X. Xxxxxxxxx, Esquire
Xxxxxxxxx, Xxxxxxxx & Xxxxxx
00 Xxxxxx Xxxx, Xxxxx X-000
Xxxxxxxxx, XX 00000
000-000-0000 (o)
000-000-0000 (f)
And
Xxxxxxx X. Xxxxxx, Esquire
Fox Rothschild LLP
000 Xxxxx Xxxxx, Xxxxxxxx #0
Xxxxxxxxxxxxx, Xxx Xxxxxx 00000
609.895.6749 (p)
609.896.1469 (f)
Any Party may change or supplement the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered to such
Party by giving the other Parties notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by, construed
and interpreted in accordance with the domestic laws of the State of Delaware
and the Federal law of the United States of America, where applicable, without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Delaware.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
the Parties. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
61
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(k) Incorporation of Exhibits and Schedules. The Exhibits, Valley
Forge Disclosure Binder and Synergetics Disclosure Binder identified in this
Agreement are incorporated herein by reference and made a part hereof.
(l) Arbitration. All claims, demands, disputes, controversies,
differences or misunderstandings between or among the Parties hereto shall be
settled by arbitration in Chicago, Illinois in accordance with the American
Arbitration Association Rules for Commercial Arbitration then applying. Any
dispute involving $1,000,000 or more shall be decided by three independent and
impartial arbitrators, one of whom shall be appointed by the Synergetics, one of
whom shall be appointed by the Valley Forge and one of whom shall be appointed
jointly by the two other arbitrators. Any determination rendered in such
proceeding shall be binding and conclusive upon the Parties hereto and judgment
thereon may be entered in any court having jurisdiction thereof. The Parties
hereto agree that arbitration shall be the sole and exclusive remedy of the
Parties with respect to any such matter for which arbitration is required
hereunder. The prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and all other expenses incurred in connection with
any arbitration or legal proceeding, in addition to any other relief to which
such party or parties may be entitled. Attorneys' fees shall include, without
limitation, paralegal fees, investigative fees, administrative costs, sales and
use taxes and all other charges billed by the attorney to the prevailing party.
The terms of this section shall survive the Closing.
(m) Future Assurances. At any time and from time to time from and
after Closing, upon the request of any Party, the MergerSub, Valley Forge and
Synergetics, as appropriate, will do, execute, acknowledge and deliver, or cause
to be delivered, all such further acts, deeds, bills of sale, assignments,
conveyances, powers of attorney and other documents as may reasonably be
required to carry out the provisions of this Agreement.
[Signature page follows]
62
IN WITNESS WHEREOF, the Parties hereto have executed, or caused their
duly authorized officers to execute, this Agreement on the date first above
written.
VALLEY FORGE SCIENTIFIC CORP.
By: /s/ XXXXX X. XXXXX
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
SYNERGETICS ACQUISITION CORPORATION
By: /s/ XXXXX X. XXXXX
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
SYNERGETICS, INC.
By: /s/ XXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
[Signature Page to Agreement and Plan of Merger]
63
