EXHIBIT B
AMENDED AND RESTATED
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
By and Among
ENCORE MEDICAL CORPORATION
and the
PURCHASERS NAMED ON ANNEX I HERETO
As of May 3, 2001
TABLE OF ANNEXES AND EXHIBITS
ANNEX
-----
I INVESTORS, SERIES A PREFERRED STOCK AND PURCHASE PRICE
EXHIBITS
--------
A Certificate of Designation
B Form of Investors' Rights Agreement
C Form of Lock-Up Agreement
D Opinion of Counsel to the Company
-i-
AMENDED AND RESTATED SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
AMENDED AND RESTATED SERIES A PREFERRED STOCK PURCHASE AGREEMENT,
originally dated as of April 20, 2001, as amended and restated as of May 3, 2001
(the "Agreement"), is by and among Encore Medical Corporation, a Delaware
corporation (the "Company"), and the purchasers named on Annex I hereto. The
parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Accounting terms used in this Agreement and not
otherwise defined herein shall have the meanings provided by GAAP. Certain
capitalized terms are used in this Agreement as specifically defined in this
Section 1.1 as follows:
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Company (or
other specified Person) and shall include (a) any Person who is an officer,
director or beneficial holder of at least 10% of the outstanding capital stock
of the Company (or other specified Person), (b) any Person of which the Company
(or other specified Person) or any officer or director of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of the outstanding equity securities or constitute at least a 10%
participant, and (c) in the case of a specified Person who is an individual,
Members of the Immediate Family of such Person; provided, however, that the
Investors shall not be Affiliates of the Company for purposes of this Agreement.
"Agreement" is defined in the Preamble.
"Balance Sheet Date" is defined in Section 3.6.
"By-laws" means all written rules, regulations, procedures and by-laws
and all other similar documents, relating to the management, governance or
internal regulation of a Person other than an individual, each as from time to
time amended or modified.
"Certificate of Designation" is defined in Section 2.1.
"Charter" means the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement or articles or other
charter of any Person other than an individual, each as from time to time
amended or modified.
"Closing" is defined in Section 2.3.
"Closing Date" is defined in Section 2.3.
"Code" means the federal Internal Revenue Code of 1986 or any
successor statute, and the rules and regulations thereunder, as from time to
time amended and in effect.
-1-
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act, the Exchange Act or
both.
"Common Stock" means the common stock, $0.001 par value, of the
Company.
"Company" is defined in the Preamble.
"Contractual Obligation" means, with respect to any Person, any
contracts, agreements, deeds, mortgages, leases, licenses, other instruments,
commitments, undertakings, arrangements or understandings, written or oral, or
other documents, including any document or instrument evidencing indebtedness,
to which any such Person is a party or otherwise subject to or bound by or to
which any asset of any such Person is subject.
"Employee Benefit Plan" means each and all "employee benefit plans" as
defined in section 3(3) of ERISA, maintained or contributed to by the Company,
any of its Affiliates or any of their respective predecessors, or in which the
Company, any of its Affiliates or any of their respective predecessors
participates or participated and which provides benefits to employees of the
Company or their spouses or covered dependents or with respect to which the
Company has or may have a material liability, including, (i) any such plans that
are "employee welfare plans" as defined in section 3(1) of ERISA and (ii) any
such plans that are "employee pension benefit plans" as defined in section 3(2)
of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor statute and the rules and regulations thereunder, and in the case
of any referenced section of any such statute, rule or regulation, any successor
section thereof, collectively and as from time to time amended and in effect.
"ERISA Group", with respect to any entity, means any Person which is a
member of the same "controlled group" or under "common control", within the
meaning of section 414(b) or (c) of the Code or section 4001(b)(1) of ERISA,
with such entity.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as from time to time amended and in effect.
"Financial Statements" is defined in Section 3.6.
"GAAP" means United States generally accepted accounting principles,
as in effect from time to time, consistently applied.
"Investor Securities" is defined in Section 2.1.
"Investors" means the holders of Investor Securities immediately
following the the Closing, the original holders of which are listed on Annex I
hereto.
"Investors' Rights Agreement" is defined in Section 2.4(d)(i).
"Legal Requirement" means any federal, state, local or foreign law,
statute, standard, ordinance, code, order, rule, regulation, resolution,
promulgation or any final order, judgment or
-2-
decree of any court, arbitrator, tribunal or governmental authority, or any
license, franchise, permit or similar right granted under any of the foregoing.
"Lock-up Agreements" is defined in Section 2.4(d)(iii).
"Material Adverse Effect" means a material adverse effect upon the
business, assets, financial condition, income or prospects of the Company.
"Members of the Immediate Family," as applied to any individual, means
each parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust created for the benefit of one or more
of such persons and each custodian of a property of one or more such persons.
"Pension Plan" means each pension plan (as defined in section 3(2) of
ERISA) established or maintained, or to which contributions are or were made by
the Company or any of its Subsidiaries or former Subsidiaries, or any Person
which is a member of the same ERISA Group with any of the foregoing.
"Person" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization and any
governmental department or agency or political subdivision.
"Proxy Statement" is defined in Section 5.1(b).
"Related Agreements" means the Investors' Rights Agreement and the
Lock-up Agreements.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be from time to time amended and in effect.
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $0.001 per share, of the Company.
"Subsidiary" means any Person of which the Company now or hereafter
shall at the time (a) own directly or indirectly through a Subsidiary at least
50% of the outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally or (b) constitute a general partner.
"Welfare Plan" means each welfare plan (as defined in section 3(l) of
ERISA) established or maintained, or to which any contributions are or were
made, by the Company or any of its Subsidiaries or any Person which is a member
of the same ERISA Group with any of the foregoing.
-3-
ARTICLE II
SALE AND PURCHASE OF SECURITIES
2.1 INVESTOR SECURITIES. The Series A Preferred Stock being purchased
by the Investors hereunder, together with any securities issued with respect
thereto, upon exercise, conversion or transfer thereof or in exchange therefor,
including the Common Stock issuable upon conversion of the Series A Preferred
Stock, are collectively referred to as "Investor Securities"; provided, however,
that once any such securities have been sold in a public offering registered
under the Securities Act or sold pursuant to Rule 144 under the Securities Act
they shall cease to be Investor Securities for all purposes of this Agreement.
The powers, preferences and rights of the Series A Preferred Stock are set forth
in the Company's Certificate of Designation, Preferences and Limitations,
attached hereto as Exhibit A (the "Certificate of Designation").
2.2 Agreement to Sell and Purchase. Subject to the terms and
conditions hereof and in reliance on the Investors' representations, warranties
and agreements contained or referred to herein, the Company agrees to issue and
sell to the Investors and, subject to the terms and conditions hereof and in
reliance on the representations, warranties and agreements of the Company
contained or referred to herein, the Investors severally agree to purchase at
the Closing, the number of shares of Series A Preferred Stock specified in Annex
I for each Investor at the purchase price of $102.00 per share, payable by wire
transfer or certified check.
2.3 CLOSING. The closing of the purchase and sale of the Series A
Preferred Stock (the "Closing") shall take place in New York, New York at the
offices of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, on a date no later than
one week after the Company's 2001 annual stockholders meeting (the "Closing
Date") or at such other place and time as the Company and the Investors may
otherwise agree. At the Closing, the Company will deliver to the Investors
certificates evidencing the number of shares of Series A Preferred Stock set
forth on Annex I, to be purchased at the Closing against payment of the purchase
price as set forth on Annex I.
2.4 CONDITIONS TO CLOSING FOR THE INVESTORS. The Investors' several
obligations to purchase the Series A Preferred Stock pursuant to this Agreement
on the Closing Date are subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company herein shall have been true and correct in
all material respects when made and shall be true and correct on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date, except for representations and warranties that are made as of a
specific date which shall only be required to be true and correct as of such
date.
(b) PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing shall have been performed or complied with in all
material respects and the Company shall not be in default in the performance of
or compliance with any provisions of this Agreement.
-4-
(c) COMPLIANCE CERTIFICATES. The Company shall have delivered to
the Investors a certificate of the chief executive officer or chief financial
officer of the Company, dated the date of the Closing, certifying to the matters
stated in Sections 2.4(a) and (b).
(d) RELATED AGREEMENTS. The Company and the other parties thereto
shall have duly authorized, executed and delivered to the Investors the
following agreements:
(i) Investors' Rights Agreement, in the form of Exhibit B,
among the Company and the Investors (as from time to time in effect, the
"Investors' Rights Agreement").
(ii) The Lock-up Agreements, in the form of Exhibit C, among
the Company, the Investors and the directors and executive officers of the
Company, in their individual capacity (as from time to time in effect, the
"Lock-up Agreements").
(e) SECRETARY'S CERTIFICATE. The Company shall have delivered to
the Investors copies of each of the following:
(i) the Charter of the Company as of the Closing (which shall
include the Certificate of Designation), certified by the Secretary of State of
Delaware as of a date not more than five (5) days prior to the Closing;
(ii) the By-laws of the Company; and
(iii) resolutions of the Board of Directors of the Company,
the form and substance of which are reasonably satisfactory to each of the
Investors, authorizing the execution, delivery and performance of this Agreement
and the Related Agreements to which the Company is a party, and the transactions
contemplated hereby and thereby, including the terms and filing of the
Certificate of Designation and the issuance and sale of the Series A Preferred
Stock.
(f) LEGAL OPINION. On the Closing Date, the Investors shall have
received from Xxxxxxx Xxxxxx L.L.P., counsel to the Company, their opinion
substantially in the form of Exhibit D.
(g) KEY EXECUTIVE INSURANCE. The Company will have in full force
and effect as the owner thereof on the Closing date key executive life insurance
policies with a financially sound and reputable insurer in the amount of
$3,000,000 covering the life of Xxxxxxx X. Xxxxxxxx, the proceeds of which shall
be payable to the Company. Such policies shall not be cancelable without at
least thirty (30) days' written notice from the insurer to the Investors.
(h) KEY EMPLOYMENT AGREEMENTS. The Company will have in full force
and effect on the Closing Date employment agreements with the following
individuals Xxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx, Xxxx Xxxxxx, August Xxxxx and
Xxxxx X. Xxxxxxxxx, each on terms and conditions reasonably acceptable to the
Investors, and all preexisting employment agreements with such persons shall be
of no further force and effect.
(i) SEVERANCE AGREEMENTS. All severance agreements between the
Company and its employees shall have been terminated, except for the agreement
between the Company and Xxxxx Xxxxxx, which shall remain in effect.
-5-
(j) ELECTION OF DIRECTORS. As of the Closing, the Board of
Directors of the Company shall consist of ten (10) directors, including two
persons selected by the Investors (who shall initially be Xxxxx X. Xxxxxx and
Xxxxxx Xxxxxx), and one of the persons selected by the Investors shall have been
appointed to the Compensation Committee of the Board of Directors.
(k) NASDAQ LISTING. As of the Closing, the shares of Common Stock
into which the Series A Preferred Stock to be issued on the Closing Date are
convertible shall have been listed on the Nasdaq National Market, subject only
to official notice of issuance.
(l) STOCKHOLDER APPROVAL. As of the Closing, the stockholders of
the Company shall have approved the issuance and sale of the Series A Preferred
Stock pursuant to this Agreement at the Annual Meeting in accordance with the
rules of the Nasdaq National Market.
(m) CREDIT AGREEMENT AMENDMENT. The Company's credit agreement
with Xxxxx Fargo Bank Texas, N.A. (the "Bank") shall have been amended in a
manner satisfactory to Xxxxx Partners III, L.P. relating to the Bank's
acquisition approval rights.
(n) CONSENTS. All consents and approvals to the transactions
contemplated by this Agreement required to be obtained by the Company from any
third party shall have been obtained by the Company.
(o) LEGALITY. All authorizations, approvals or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Investor Securities pursuant to this
Agreement shall have been duly obtained and shall be in full force and effect.
(p) GENERAL. All instruments and legal and corporate proceedings
in connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Investors, and the
Investors shall have received copies of all documents, including records of
corporate proceedings and officers' certificates, which they may have reasonably
requested in connection therewith.
2.5 CONDITIONS TO CLOSING FOR THE COMPANY. The Company's obligation to
issue and sell the Series A Preferred Stock pursuant to this Agreement on the
Closing Date is subject to the satisfaction, on or prior to the Closing Date, of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Investors herein shall have been true and correct in
all respects when made and shall be true and correct on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date.
(b) LEGALITY. All authorizations, approvals or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Investor Securities pursuant to this
Agreement shall have been duly obtained and shall be in full force and effect.
-6-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of the Investors as follows:
3.1 ORGANIZATION. The Company is a duly organized and validly
existing corporation in good standing under the laws of Delaware. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which it does business, except where the failure to be
so qualified would not have a Material Adverse Effect.
3.2 CORPORATE POWER. The Company has all necessary corporate power
and authority to enter into and perform this Agreement and the Related
Agreements to which it is a party, to issue and sell the Investor Securities
hereunder, to own all the properties owned by it and to carry on the businesses
now conducted or presently proposed to be conducted by it. The Company has taken
all corporate action necessary to authorize this Agreement, the Related
Agreements to which it is a party and the issuance of the Investor Securities to
be issued and sold hereunder.
3.3 SUBSIDIARIES. Except as listed in Schedule 3.3, the Company has
no Subsidiaries. Each of the Subsidiaries is a duly organized and validly
existing corporation under the laws of its jurisdiction of organization, which
jurisdiction is listed in Schedule 3.3. Each Subsidiary has all necessary
corporate power and authority to own all the properties owned by it and to carry
on the businesses now conducted or presently proposed to be conducted by it.
Each Subsidiary is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which it does business, except where
the failure to be so qualified would not have a Material Adverse Effect. The
Company owns all of the issued and outstanding capital stock of each of its
Subsidiaries and there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of its capital stock.
3.4 CAPITALIZATION. The authorized capital stock of the Company
immediately prior to the Closing is set forth in Schedule 3.4. Schedule 3.4
contains a true and correct list of all outstanding capital stock, warrants and
options as of the date hereof, including the owner thereof, and, with respect to
the warrants and options, the exercise price and the dates of issuance and
termination. All of the outstanding shares of capital stock of the Company,
including the Series A Preferred Stock to be issued pursuant to this Agreement,
will be, upon consummation of the transactions contemplated by this Agreement,
validly issued, fully paid, nonassessable and subject to no lien or restriction
on transfer, except restrictions on transfer imposed by the Related Agreements
and applicable securities laws or as otherwise set forth in Schedule 3.4. The
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
have been duly and validly reserved and, upon issuance in accordance with the
conversion provisions of the Series A Preferred Stock will be validly issued,
fully paid, nonassessable and subject to no lien or restriction on transfer,
except restrictions on transfer imposed by the Related Agreements and applicable
securities laws or as otherwise set forth in Schedule 3.4. All of the
outstanding shares of capital stock and warrants have been offered and sold in
compliance with applicable federal and state securities laws. Other than as set
forth in Schedule 3.4, the Company has no outstanding (i) rights (either
preemptive or otherwise) or options to subscribe for or purchase, or any
warrants or other agreements providing for or requiring the issuance of, any
capital stock or
-7-
any securities convertible into or exchangeable for its capital stock, (ii)
obligation to repurchase or otherwise acquire or retire any of its capital
stock, any securities convertible into or exchangeable for its capital stock or
any rights, options or warrants with respect thereto, (iii) rights that require
it to register the offering of any of its securities under the Securities Act or
(iv) any restrictions on voting any of its securities.
3.5 AUTHORIZATION. All shareholder approval and corporate action on
the part of the Company necessary for the due authorization, execution and
delivery of this Agreement, the Certificate of Designation and the Related
Agreements to which the Company is a party and the consummation of the
transactions contemplated herein and therein, and for the due authorization and
issuance of (i) the shares of Series A Preferred Stock, and (ii) the Common
Stock issuable upon conversion of the Series A Preferred Stock has been or will
be taken prior to the Closing Date. This Agreement and the Related Agreements to
which the Company is a party are legal, valid and binding agreements of the
Company, enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and the Related Agreements to which
the Company is a party and the issuance and sale of the Investor Securities will
not result in any violation of or be in conflict with, or result in a breach of
or constitute a default under, any term or provision of any Legal Requirement to
which the Company or any of its Subsidiaries is subject, or the Company's or any
Subsidiary's Charter or By-Laws, or any Contractual Obligation to which the
Company or any of its Subsidiaries is a party or by which it is bound.
3.6 FINANCIAL STATEMENTS. The Investors have been furnished with
complete and correct copies of the following financial statements of the Company
(the "Financial Statements"): (a) the audited consolidated balance sheet of the
Company as of December 31, 1999 and the respective related consolidated
statements of income, retained earnings and cash flows for the twelve-month
period then ended, (b) the audited consolidated balance sheet of the Company as
of December 31, 2000 together with the related consolidated statements of
operations, retained earnings and cash flows for the twelve-month period then
ended, and (c) the unaudited consolidated balance sheet of the Company as of
February 23, 2001 (the "Balance Sheet Date") together with the related
consolidated statements of operations, cash flows and stockholders' equity for
the two-month period then ended. The Financial Statements have been prepared in
accordance with GAAP consistently applied and fairly and accurately present the
financial condition of the Company and its Subsidiaries at the date thereof and
the results of its operations for the period covered thereby. All the books,
records and accounts of the Company and its Subsidiaries are in all material
respects accurate and complete, are in all material respects in accordance with
good business practice and all laws, regulations and rules applicable to the
Company and its Subsidiaries and the conduct of their business and accurately
present and reflect in all material respects all of the transactions described
therein.
3.7 OUTSTANDING DEBT: ABSENCE OF LIABILITIES. Neither the Company nor
any of its Subsidiaries (i) has any outstanding indebtedness for borrowed money
except as reflected in the Financial Statements or Schedule 3.7 and (ii) except
as reflected, is a guarantor or otherwise contingently liable on such
indebtedness of any other Person. Except as set forth in Schedule 3.7, neither
the Company nor any of its Subsidiaries has any material liabilities or
obligations, contingent or otherwise, which are not reflected or provided for in
the Financial Statements.
3.8 CHANGES IN CONDITION. Since the Balance Sheet Date, there have
occurred no event or events that, individually or in the aggregate, have caused
or will cause a Material
-8-
Adverse Effect. Except as set forth in Schedule 3.8, neither the Company nor any
of its Subsidiaries has (a) declared any dividend or other distribution on any
shares of its capital stock, (b) made any payment (other than compensation to
its directors, officers and employees at rates in effect prior to the Balance
Sheet Date or for bonuses accrued in accordance with normal practice prior to
the Balance Sheet Date) to any of its Affiliates, (c) increased the
compensation, including bonuses, payable or to be payable to any of its
directors, officers, employees or Affiliates, by more than 10%, or (d) entered
into any Contractual Obligation, or entered into or performed any other
transaction, not in the ordinary and usual course of business and consistent
with past practice, other than as specifically contemplated by this Agreement.
3.9 CONTRACTUAL OBLIGATIONS. Schedule 3.9 contains, together with a
reference to the paragraph pursuant to which each item is being disclosed, a
correct and complete list of all Contractual Obligations of a material nature of
the Company and its Subsidiaries of the types described below:
(a) All collective bargaining agreements, all employment, bonus
or consulting agreements, all pension, profit sharing, deferred compensation,
stock option, stock purchase, retirement, welfare or incentive plans or
agreements, and all plans, agreements or practices that constitute "fringe
benefits" to any of the employees of the Company or its Subsidiaries.
(b) All Contractual Obligations under which the Company or any
Subsidiary is restricted from carrying on any business, venture or other
activities anywhere in the world.
(c) All Contractual Obligations to sell or lease (as lessor) any
of the properties or assets of the Company or any Subsidiary, except in the
ordinary course of business, or to purchase or lease (as lessee) any real
property.
(d) All Contractual Obligations pursuant to which the Company or
any Subsidiary guarantees any liability of any Person, or pursuant to which any
Person guarantees any liability of the Company or any Subsidiary.
(e) All Contractual Obligations pursuant to which the Company or
any Subsidiary provides goods or services involving payments to the Company or
any Subsidiary of more than $100,000 annually, which Contractual Obligation is
not terminable by the Company or any Subsidiary without penalty upon notice of
thirty (30) days or less.
(f) All Contractual Obligations with any Affiliate of the Company
or any Subsidiary (other than the Related Agreements).
(g) All Contractual Obligations providing for the disposition of
the business, assets or shares of the Company or any Subsidiary or the merger or
consolidation or sale or purchase of all or substantially all of the assets or
business of any Person, and any letters of intent relating to the foregoing.
(h) All Contractual Obligations of the Company or any Subsidiary
relating to the borrowing of money or to the mortgaging or pledging of, or
otherwise placing a lien on, any asset of the Company or any Subsidiary (except
liens imposed by operation of law in favor of landlords, suppliers, mechanics or
others who provide services to the Company or any Subsidiary).
-9-
All of the Contractual Obligations of the Company and its
Subsidiaries are enforceable against the Company and its Subsidiaries, as the
case may be, and, to the Company's knowledge, the other parties thereto in
accordance with their terms, except for Contractual Obligations the failure of
which to be so enforceable does not and will not result in a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is in default under nor,
to the Company's knowledge, are there any liabilities arising from any breach or
default by any Person prior to the date of this Agreement of, any provision of
any such Contractual Obligation. Upon request by counsel for the Investors, the
Company will, prior to each Closing, furnish to counsel for the Investors true
and correct copies of all Contractual Obligations listed in Schedule 3.9.
3.10 INSURANCE. The Company has insurance policies in full force and
effect, written by reputable insurers licensed to write insurance in the states
in which the Company and its Subsidiaries conduct business, which insurance
contracts provide for coverages which are usual and customary in its business as
to amount and scope. Schedule 3.10 contains a correct and complete list and
description of all insurance policies owned by the Company or any of its
Subsidiaries, correct and complete copies of which have previously been made
available to the Investors. Neither the Company nor any of its Subsidiaries is
in default under any of its insurance policies, nor has the Company or any of
its Subsidiaries received any notice of cancellation or intent to cancel or
increase premiums with respect to present insurance policies. Schedule 3.10 also
contains a list of all pending claims with any insurance company and any
instances of a denial of coverage of the Company or any of its Subsidiaries by
any insurance company.
3.11 TRANSACTIONS WITH AFFILIATES. Other than as set forth in
Schedule 3.11, no Affiliate of the Company or any Subsidiary is a customer or
supplier of, or is party to any Contractual Obligation with, the Company or any
Subsidiary.
3.12 CONFORMITY WITH LEGAL REQUIREMENTS. The operations of the
Company and its Subsidiaries as now conducted are not in violation of, nor is
the Company or any Subsidiary in default under, any Legal Requirements presently
in effect or the Company's or any Subsidiary's Charter or By-Laws, except for
such violations and defaults as do not and will not, in the aggregate, have a
Material Adverse Effect. The Company and its Subsidiaries have all franchises,
licenses, permits or other authority presently necessary for the conduct of
their businesses as now conducted.
3.13 BENEFIT PLANS. Schedule 3.13 sets forth a complete list of all
Employee Benefit Plans and all Welfare Plans applicable to the employees of the
Company and its Subsidiaries. Each Employee Benefit Plan and Welfare Plan has
been administered in substantial compliance with its terms and all applicable
laws, including the Code and ERISA. Except as set forth in Schedule 3.13,
neither Company nor any Subsidiary has any obligation under any Welfare Plan to
provide for the continuation of benefits (other than disability payments and
medical benefits incurred for illness arising in the course of employment) for
more than one year after retirement or other termination of employment. No
"reportable events" within the meaning of section 4043 of ERISA have occurred
with respect to any Employee Benefit Plan. No Pension Plan is a "multiemployer
plan" as defined in ERISA. The present value of benefits liabilities as
described in Title IV of ERISA of Employee Benefit Plans does not exceed the
current value of such Employee Benefit Plans assets allocable to such benefits
liabilities by more than $100,000.
-10-
3.14 EMPLOYEES. None of the employees of the Company or any
Subsidiary is presently represented by a labor union, and no petition has been
filed or proceedings instituted by any employee or group of employees with any
labor relations board seeking recognition of a bargaining representative. Except
as set forth in Schedule 3.14, no controversies or disputes are pending between
the Company or any Subsidiary and any of its employees, except for such
controversies and disputes as do not and will not, in the aggregate, have a
Material Adverse Effect. To the Company's knowledge, no employee of the Company
or any Subsidiary is in violation of any term of any Contractual Obligation with
a former employer relating to the right of any such employee to be employed by
the Company or such Subsidiary because of the nature of the Company's or such
Subsidiary's business or the use of any trade secrets or proprietary
information. Except as set forth in Schedule 3.14, each employee of the Company
and its Subsidiaries is an "employee at will" and may be terminated by the
Company or such Subsidiary without payment of any amounts other than accrued
wages.
3.15 TAXES. The Company and each of its Subsidiaries has filed all
federal, state and local tax and information returns which are required to be
filed by it and such returns are true and correct in all material respects. The
Company and each of its Subsidiaries have paid all taxes, interest and
penalties, if any, reflected in such tax returns or otherwise due and payable by
it. The Company has no knowledge of any material additional assessments or any
basis therefor. The charges, accruals and reserves on the balance sheet of the
Company as of the Balance Sheet Date in respect of taxes or other governmental
charges are adequate in amount for the payment of all liabilities for such taxes
or other governmental charges. The Company and its Subsidiaries have withheld or
collected from each payment made to its employees the amount of all taxes
required to be withheld or collected therefrom and has paid over such amounts to
the appropriate taxing authorities. Any deficiencies proposed as a result of any
governmental audits of such tax returns have been paid or settled or are being
contested in good faith, and there are no present disputes as to taxes payable
by the Company or any of its Subsidiaries.
3.16 LITIGATION. No litigation or proceeding before, or investigation
by, any foreign, federal, state or municipal board or other governmental or
administrative agency or any arbitrator is pending or, to the Company's
knowledge, threatened (nor to the Company's knowledge, does any basis exist
therefor) against the Company or any of its Subsidiaries or, to the Company's
knowledge, any officer of the Company or any Subsidiary, which individually or
in the aggregate could result in any material liability or which may otherwise
result in a Material Adverse Effect, or which seeks rescission of, seeks to
enjoin the consummation of, or which questions the validity of, this Agreement
or any other Related Agreement or any of the transactions contemplated hereby or
thereby.
3.17 PATENTS AND TRADEMARKS. The Company owns or has sufficient
rights to use all patents, patent applications, trademarks, service marks,
copyrights, trade secrets and other proprietary information necessary for its
business as now conducted or proposed to be conducted by it. A complete list of
all of the Company's patents, patent applications, trademarks, and registered
copyrights is included in Schedule 3.17. To the Company's knowledge without any
independent investigation for the purpose hereof, the conduct of the business of
the Company and its Subsidiaries does not conflict with or infringe upon the
patents, trademarks, copyrights or other intellectual property rights of any
other Person. The Company is not aware that any of its patents, trademarks,
copyrights or other intellectual property rights are not valid and enforceable.
-11-
3.18 CONSENTS. No consent, approval, qualification, order or
authorization of, or filing with any governmental authority is required in
connection with the Company's valid execution, delivery or performance of the
Related Agreements to which it is a party, or the offer, issue or sale of the
Investor Securities by the Company, the conversion of the Series A Preferred
Stock, or the issuance of Common Stock upon conversion of the Series A Preferred
Stock, or the consummation of any other transaction pursuant to this Agreement
on the part of the Company, except the filing of the Certificate of Designation
and filings under applicable federal securities or blue sky laws.
3.19 FILINGS, BROKER'S FEES. The Company is not obligated to pay any
broker's fee, finder's fee, investment banker's fee or other similar transaction
fee in connection with the transactions contemplated hereby.
3.20 MINUTE BOOKS. The minute books of the Company, which shall have
been provided to counsel for the Investors prior to the Closing if requested,
contain a complete record of actions taken at all meetings of directors and
stockholders since April 19, 1995 and reflect all such actions accurately in all
material respects.
3.21 REAL PROPERTY HOLDING CORPORATION. The Company is not a "United
States real property holding corporation" as defined in section 897(c)(2) of the
Code and Treasury Regulation section 1.897-2(b).
3.22 DISCLOSURE. The Company's Annual Report on Form 10-K for the
year ended December 31, 2000 does not contain any untrue statement of a material
fact, nor omits to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. Neither this Agreement, nor any agreement,
certificate, statement or document furnished in writing by or on behalf of the
Company to the Investors in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company has
furnished the Investors with an accurate and complete copy of its Annual Report
on Form 10-K for the 2000 fiscal year and all other reports or documents
required to be filed by the Company pursuant to the Exchange Act and the rules
and regulations of the Commission thereunder, since the filing of the most
recent annual report to stockholders. The Company has made all filings with the
Commission that it has been legally required to make.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
4.1 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors severally represents and warrants to the Company that:
(a) He or it has full power and authority to enter into this
Agreement and the Related Agreements, and that this Agreement and the Related
Agreements, when executed and delivered, will constitute the valid and binding
legal obligation of such Investor.
-12-
(b) He or it is an "accredited investor" for purposes of
Regulation D under the Securities Act and that he or it has sufficient knowledge
and experience in evaluating and investing in companies similar to the Company
in terms of the Company's stage of development so as to be able to evaluate the
risks and merits of his or its investment in the Company and is able financially
to bear the risks thereof. If such Investor is other than an individual, then
such Investor represents that it was not organized for the purpose of acquiring
the Series A Preferred Stock or, if such Investor was formed for the purpose of
acquiring the Series A Preferred Stock, then all of its members are "accredited
investors" for purposes of Regulation D under the Securities Act.
(c) He or it is acquiring the Investor Securities at the
applicable closing, subject to the terms hereof and related contemporaneous
agreements, for investment for his or its own account and not with a view to, or
for resale in connection with, any distribution thereof, and that such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same; provided, however, that the disposition of the Investors'
property shall at all times remain in the Investors' control. By executing this
Agreement, each Investor further represents and warrants that such Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Investor Securities.
(d) He or it has had an opportunity to discuss the terms and
conditions of the offering of the Series A Preferred Stock and the Company,
business, management and financial affairs with the Company's management and has
received (or had made available to it) any financial and business documents
requested by him or it.
(e) He or it understands that the shares of Series A Preferred
Stock to be purchased hereunder have not been registered under the Securities
Act and must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration.
(f) He or it has no contract, arrangement or understanding with
any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.2 LEGEND. Each certificate representing shares of Investor
Securities shall bear a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
the securities laws of any state, and may not be sold, or
otherwise transferred, in the absence of such registration or
unless the Corporation has been furnished with an opinion of
counsel satisfactory to the Corporation that such registration is
not required."
-13-
ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTORS
5.1 ANNUAL STOCKHOLDER MEETING.
(a) As soon as practicable, the Company shall take all action
necessary in accordance with the Delaware general corporation law and its
Charter and By-laws to call, give notice of and convene a meeting of the
Company's stockholders to consider and vote upon the approval of the
transactions contemplated by this Agreement as required by the rules of the
Nasdaq National Market and for such other purposes as may be necessary or
desirable.
(b) The Company shall, as promptly as practicable, prepare and
file with the Commission a proxy statement (the "Proxy Statement") with respect
to the approval of the transactions contemplated by this Agreement. The Company
shall use its best efforts to cause the Proxy Statement to be mailed to the
stockholders of the Company at the earliest practicable date and shall use its
best efforts to hold the Annual Meeting as soon as practicable after the date
hereof.
5.2 EXPENSES. The Company will bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the Related
Agreements, and the Company hereby agrees to pay the reasonable fees, expenses
and disbursements of the Investors, including those of Reboul, MacMurray,
Xxxxxx, Xxxxxxx & Kristol, counsel for the Xxxxx parties, and Xxxxxx Xxxxxx &
Xxxxxxx, counsel for Ivy Orthopedic Partners LLC (up to a maximum of $6,000),
with respect to services rendered in connection with the transactions
contemplated by this Agreement, up to an aggregate maximum of $250,000.
5.3 USE OF PROCEEDS. Without the consent of Investors holding greater
than fifty percent (50%) of the voting power of all of the Investor Securities,
the Company will not use the proceeds from the sale of the Series A Preferred
Stock hereunder for any purpose other than (i) acquisitions in related or
contiguous business segments, (ii) working capital and general corporate
purposes related to acquisitions in related or contiguous business segments and
(iii) payment of all reasonable fees and expenses incurred by the Company and
the Investors in connection with the transactions contemplated by this
Agreement.
5.4 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings.
-14-
ARTICLE VI
MISCELLANEOUS
6.1 INDEMNIFICATION.
(a) All representations, warranties, covenants or agreements made
herein or in any Related Agreement or in any closing certificate or other
certificate or written report delivered to the Investors pursuant to an express
requirement hereof shall be deemed to have been material and relied on by the
Investors, notwithstanding any investigation made by the Investors or on the
Investors' behalf, and shall survive the execution and delivery to the Investors
hereof and of the Investor Securities. All representations, warranties,
covenants or agreements made herein or in any Related Agreement or in any
closing certificate or other certificate or written report delivered to the
Company pursuant to an express requirement hereof shall be deemed to have been
material and relied on by the Company, notwithstanding any investigation made by
the Company or on the Company's behalf, and shall survive the execution and
delivery to the Company hereof.
(b) The Company shall indemnify and hold any Investors harmless
from and against any and all actions, causes of action, suits, litigation,
losses, liabilities, damages and expenses (including, but not limited to,
reasonable legal fees and court costs), whether or not resulting from judgments
or arbitration awards, that shall be suffered or incurred by any Investor, as
the case may be, resulting from or arising out of any breach of any of the
representations, warranties, covenants or agreements of the Company made in this
Agreement or in any Related Agreement to which the Company is a party or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by the Company hereunder or thereunder.
(c) The Investors shall severally indemnify and hold the Company
harmless from and against any and all actions, causes of action, suits,
litigation, losses, liabilities, damages and expenses (including, but not
limited to, reasonable legal fees and court costs), whether or not resulting
from judgments or arbitration awards, that shall be suffered or incurred by the
Company, resulting from or arising out of any breach of any of the
representations, warranties, covenants or agreements of the Investors made in
this Agreement or in any Related Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by the Investors
hereunder or thereunder.
(d) The indemnified party will notify the indemnifying party in
writing within ten days after the receipt by any indemnified party of any notice
of legal process of any suit brought against or claim made against such
indemnified party as to any matters covered by this Section 6.1. The
indemnifying party shall be entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding covered by this Section 6.1,
or, if it so elects, to assume at its expense by counsel satisfactory to the
indemnified parties the defense of any such claim, action, suit or proceeding,
and if the indemnifying party elects to assume such defense, the indemnified
party shall be entitled to participate in the defense of any such claim, action,
suit or proceeding at its expense.
6.2 SURVIVAL. The obligations of the Company to the Investors, and
the Investors to the Company, as the case may be, under this Agreement shall
survive the redemption, repurchase or transfer of any or all of the Investor
Securities.
-15-
6.3 TERMINATION. This Agreement may be terminated, whether before or
after approval by the stockholders of the Company:
(a) by mutual action of the board of directors of the Company and
the Investors; or
(b) by either the Company or the Investors, if (i) the conditions
to its obligations under Sections 2.4 and 2.5, as applicable, shall not have
been complied with or performed in any material respect and such noncompliance
or nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) by the other party on or before July 31, 2001 or
such later date as agreed to by the Company and Xxxxx Partners III, or (ii) the
Closing shall not have occurred prior to the close of business on July 31, 2001
or such later date as agreed to by the Company and Xxxxx Partners III; unless in
the case of either (i) or (ii), such event has been caused by the breach of this
Agreement by the party seeking such termination.
6.4 NOTICES. Any notice or other communication in connection with
this Agreement or the Investor Securities shall be deemed to be delivered if in
writing addressed as provided below and if either (a) actually delivered at said
address, (b) in the case of a letter, seven business days shall have elapsed
after the same shall have been deposited in the United States mails, postage
prepaid and registered or certified, return receipt requested or (c) transmitted
to any address outside of the United States, by telecopy and confirmed by
overnight or two-day courier:
If to the Company, to it at 0000 Xxxxxx Xxxx., Xxxxxx, XX 00000,
attention: Xxxxx Xxxxxxxxx, telecopy: (000) 000-0000, telephone: (000) 000-0000,
with a copy to Xxxxxxx Xxxxxx L.L.P., 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
XX 00000-0000, attention: Xxxxxxxx X. Xxxx, Esq., telecopy (000) 000-0000,
telephone (000) 000-0000 or at such other address as the Company shall have
specified by notice to the Investors.
If to the Investors, to the Investors' respective addresses set forth
on Annex I, or at such other address as the Investors shall have specified by
notice to the Company, with a copy to Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, XX 00000, attention: Xxxxxxx X. Xxxxx,
Esq., telecopy: (000) 000-0000, telephone: (000) 000-0000 and Xxxxxx Xxxxxx &
Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, attention: Xxxxx Xxxxxxx,
Esq., telecopy (000) 000-0000, telephone (000) 000-0000.
If to any other holder of record of any Investor Security, to it at
its address set forth in the stock register of the Company.
6.5 PRESS RELEASES. The Company and all of the Investors shall agree
on a form of press release related to this Agreement following the Closing Date
and the Company may thereafter issue such press release from time to time
without consulting the Investors named in such press release (if any); provided
that the Company shall not issue such press release in the event that (i) any
material modifications are made to the form of press release or (ii) the
information provided regarding any Investor is modified in any manner.
6.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the written consent of (i) the
-16-
Company and (ii) the Investors or, following the Closing, those Investors
holding at the relevant time greater than fifty percent (50%) of the voting
power of all Investor Securities. Any amendment or waiver effected in accordance
with this Section 6.6 shall be binding upon each holder of any Investor
Securities and the Company and each of its Subsidiaries.
6.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of the Investors or, following the Closing, the Investors
holding at the relevant time the greater of fifty percent (50%) of the voting
power of all Investor Securities. The Investors may assign or transfer their
rights under this Agreement to the extent permitted herein and by the other
agreements between the respective parties and the Company. Whether or not any
express assignment has been made in this Agreement, provisions of this Agreement
that are for the Investors' benefit as the holder of any Investor Securities are
also for the benefit of, and enforceable by, all subsequent holders of Investor
Securities.
6.8 GENERAL. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. This
Agreement, the Related Agreements and the other items referred to herein or
therein constitute the entire understanding of the parties hereto with respect
to the subject matter hereof and thereof and supersede all present and prior
agreements, whether written or oral. This Agreement is intended to take effect
as a sealed instrument and may be executed in any number of counterparts which
together shall constitute one instrument and shall be governed by and construed
in accordance with the laws (other than the conflict of laws rules) of the State
of Delaware, and shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
6.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
[Signature pages follow]
-17-
The undersigned have executed this Agreement as of the date first above written.
ENCORE MEDICAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman of the Board,
Chief Executive Officer
and President
XXXXX PARTNERS III, L.P.
By: Claudius, L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Member
XXXXX PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Member
XXXXX EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc., its General
Partner
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
IVY ORTHOPEDIC PARTNERS, LLC
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
-------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
Title: Manager
-18-
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
XXXXXXX X. XXXXXXXX
/s/ Xxxxx Xxxxxx
-------------------------------------
XXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
-------------------------------------
XXXXXX XXXXXX
KANTER FAMILY FOUNDATION
By: /s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx, President
CHICAGO INVESTMENTS, INC.
By: /s/ Xxxxx Xxxxxxxxxxxx
---------------------------------
Xxxxx Xxxxxxxxxxxx, President
/s/ Xxxxxxx Xxxxxx
-------------------------------------
XXXXXXX XXXXXX
NORTHLEA PARTNERS, LTD.
By: /s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx, General Partner
/s/ Xxxx Xxxxxxx
-------------------------------------
XXXX XXXXXXX
/s/ Xxxxx Xxxxxxx
-------------------------------------
XXXXX XXXXXXX
-19-
ANNEX I TO SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
INVESTORS
---------
NAME AND ADDRESS SHARES PURCHASE PRICE
---------------- ------ --------------
Xxxxx Partners III, L.P. 105,201 $10,730,492
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Partners International III, L.P. 9,522 $ 971,294
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Employees Fund III, L.P. 435 $ 44,314
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ivy Orthopedic Partners, LLC 9,804 $ 1,000,000
Four Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxx Xxxxxx 00000
Xxxxxxx X. Xxxxxxxx 1,961 $ 200,000
0000 Xxxxxxxx Xx. Xxxx.
Xxxxxxxx, XX 00000
Xxxxxxx Xxxxxx 200 $ 20,400
00000 Xxxxxxxxx Xx. Xx.
Xxxxxxxx, XX 00000
Kanter Family Foundation 1,000 $ 102,000
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Chicago Investments, Inc. 1,500 $ 153,000
C/o Xxxxx Xxxxx Enterprises, Inc.
N. 0000 Xxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Northlea Partners, Ltd. 980 $ 100,000
0000 XX 00xx
Xxxx Xxxxx, XX 00000
Xxxxxx Xxxxxx 500 $ 51,000
00 Xxxxx Xxxxxx #0000
Xxxxxxx, Xxxxx 00000
Xxxxx Xxxxxx 500 $ 51,000
0000 Xxxxxxxx Xxx Xxxxx
Xx. Xxxxxxxxxx, XX 00000
Xxxx and Xxxxx Xxxxxxx 750 $ 76,500
0 Xxxxx Xxxx #0000
Xxxxxxx Xxxxx, XX 00000
Total 132,353 $13,500,000
-20-
