EXHIBIT 99.2
EXECUTION COPY
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AGREEMENT AND PLAN OF SPLIT-OFF AND MERGER
Dated as of May 23, 2001
Among
XXXXXXX & XXXXXXX,
SUNRISE ACQUISITION CORP.
And
INVERNESS MEDICAL TECHNOLOGY, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE SPLIT-OFF AND THE MERGER
----------------------------
SECTION 1.01. The Merger.................................................. 3
SECTION 1.02. Closing..................................................... 3
SECTION 1.03. Effective Time.............................................. 3
SECTION 1.04. Effects of the Merger....................................... 4
SECTION 1.05. Certificate of Incorporation and By-laws.................... 4
SECTION 1.06. Directors................................................... 4
SECTION 1.07. Officers.................................................... 4
ARTICLE II
EFFECT OF THE SPLIT-OFF AND THE MERGER
--------------------------------------
ON THE CAPITAL STOCK OF THE
---------------------------
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
--------------------------------------------------
SECTION 2.01. Effect on Capital Stock..................................... 4
SECTION 2.02. Exchange of Certificates.................................... 6
ARTICLE III
RELATED TRANSACTIONS
--------------------
SECTION 3.01. Reorganization Agreements................................... 11
SECTION 3.02. Ancillary Agreements........................................ 11
SECTION 3.03. Restructuring of Assets and Assumption of Liabilities....... 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of the Company............... 12
SECTION 4.02. Representations and Warranties of Parent and Sub............ 42
(i)
PAGE
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
SECTION 5.01. Conduct of Business......................................... 46
SECTION 5.02. No Solicitation............................................. 52
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
SECTION 6.01. Preparation of the Parent Form S-4, the Newco Form S-4,
the Form 8-A and the Parent Proxy Statement;
Stockholders' Meeting..................................... 55
SECTION 6.02. Access to Information; Confidentiality...................... 57
SECTION 6.03. Commercially Reasonable Efforts............................. 57
SECTION 6.04. Sunrise Options; Sunrise Warrants........................... 59
SECTION 6.05. Indemnification, Exculpation and Insurance.................. 61
SECTION 6.06. Fees and Expenses........................................... 63
SECTION 6.07. Public Announcements........................................ 64
SECTION 6.08. Affiliates.................................................. 65
SECTION 6.09. Securities Listings......................................... 65
SECTION 6.10. Tax Treatment............................................... 65
SECTION 6.11. Stockholder Litigation...................................... 66
SECTION 6.12. Employee Matters............................................ 66
SECTION 6.13. Restructuring Agreement..................................... 67
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Split-Off
and the Merger............................................ 67
SECTION 7.02. Conditions to Obligations of Parent and Sub................. 69
SECTION 7.03. Conditions to Obligation of the Company..................... 71
SECTION 7.04. Frustration of Closing Conditions........................... 72
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 8.01. Termination................................................. 72
SECTION 8.02. Effect of Termination....................................... 73
SECTION 8.03. Amendment................................................... 73
SECTION 8.04. Extension; Waiver........................................... 74
(ii)
PAGE
ARTICLE IX
GENERAL PROVISIONS
------------------
SECTION 9.01. Nonsurvival of Representations and Warranties............... 74
SECTION 9.02. Notices..................................................... 74
SECTION 9.03. Definitions................................................. 75
SECTION 9.04. Interpretation.............................................. 77
SECTION 9.05. Counterparts................................................ 78
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries.............. 78
SECTION 9.07. Governing Law............................................... 78
SECTION 9.08. Assignment.................................................. 78
SECTION 9.09. Specific Enforcement........................................ 79
SECTION 9.10. Severability................................................ 79
Appendix Index of Defined Terms
Exhibit A Form of Affiliate Letter
Annex A Form of Restructuring Agreement
Annex B Form of Tax Allocation Agreement
Annex C Form of Post-Closing Covenants Agreement
Annex D Form of License Agreement
Annex E Form of Settlement Agreement and Release of Claims
(iii)
AGREEMENT AND PLAN OF SPLIT-OFF AND
MERGER (this "Agreement") dated as of May
23, 2001, among XXXXXXX & XXXXXXX, a New
Jersey corporation ("Parent"), SUNRISE
ACQUISITION CORP., a Delaware corporation
and a wholly owned subsidiary of Parent
("Sub"), and INVERNESS MEDICAL TECHNOLOGY,
INC., a Delaware corporation (the
"Company").
WHEREAS Parent and Company wish to effect Parent's acquisition of the
Sunrise Business of the Company through a merger of the Company with Sub (the
"Merger") on the terms and conditions set forth herein;
WHEREAS the Board of Directors of the Company has approved an Agreement and
Plan of Restructuring in the form of Annex A attached hereto with such changes
as may be permitted under Section 6.13 (the "Restructuring Agreement"), which
will be entered into prior to the Effective Time (as defined in Section 1.03),
pursuant to which, prior to the Effective Time, (a) all the assets of the
Company primarily related to the Clinical Diagnostics Business, the Nutritional
Supplements Business and the Women's Health Business (each as defined in the
Restructuring Agreement) will be transferred to a wholly owned subsidiary of the
Company ("Newco") or one or more of Newco's subsidiaries and (b) Newco or one or
more of the Subsidiaries will assume the Assumed Liabilities (as defined in the
Restructuring Agreement);
WHEREAS upon the Split-Off (as defined below) it is intended that the
Company will own only the Sunrise Business;
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, the holders of shares of common stock, par
value $.001 per share, of the Company ("Company Common Stock") will receive a
distribution of all the shares of common stock, par value $.001 per share, of
Newco ("Newco Common Stock") in consideration for the redemption of a portion of
their shares of Company Common Stock (the "Split-Off");
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time Sub will merge with and into the Company and
each issued and outstanding share of Company Common Stock, other than Company
Common Stock owned by Parent, Sub or the Company, will be converted into the
right to receive
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(a) shares of common stock, par value $1.00 per share, of Parent ("Parent Common
Stock") and (b) shares of Newco Common Stock;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable this Agreement and the transactions
contemplated hereby, and the sole stockholder of Sub has approved this Agreement
and the transactions contemplated hereby;
WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, certain Company executives have entered into separate consulting and
non-competition agreements with Parent (collectively, the "Non-Competition
Agreements");
WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and the Company will enter into a stock option agreement (the
"Option Agreement"), pursuant to which the Company will grant Parent the option
to purchase shares of Company Common Stock, upon the terms and subject to the
conditions set forth therein;
WHEREAS, for Federal income tax purposes, it is intended (a) by the Company
that the distribution of Newco Common Stock in connection with the transactions
contemplated by this Agreement shall qualify, as to the stockholders of the
Company, as a transaction described in Section 355 of the Internal Revenue Code
of 1986, as amended (the "Code") (it being understood and agreed that such
qualification shall not be a condition to the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements and that
Parent shall have no obligation to cause such distribution to so qualify) and
(b) by the parties that (i) the Merger shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Code, as amended (the "Code") and
(ii) this Agreement constitutes a plan of reorganization; and
WHEREAS Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Split-Off and the Merger.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE SPLIT-OFF AND THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time. Following the Effective Time, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.
SECTION 1.02. CLOSING. The closing of the Split-Off and the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than those
conditions that by their terms are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions), at the offices of Xxxxxxx
Procter LLP, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000, unless another time, date or
place is agreed to in writing by the parties hereto. The date on which the
Closing occurs is referred to in this Agreement as the "Closing Date".
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and, as soon as practicable on or after the Closing Date,
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such other time, if
any, as Parent and the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time").
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SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The Amended and
Restated Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law, except that the first sentence of paragraph 1 thereof shall
be amended to read in its entirety as follows: "The name of the Corporation is
Sunrise Acquisition Corp." Notwithstanding any provisions herein to the
contrary, Parent may cause the Certificate of Incorporation of Sub to be amended
to increase the number of shares of authorized capital stock.
(b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.07. OFFICERS. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE SPLIT-OFF AND THE MERGER
ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.001 per share, of the
Surviving Corporation.
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(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share of
Company Common Stock that is owned by the Company as treasury stock, or by
Parent or Sub, shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 2.02(e), each
issued and outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.01(b)) shall be converted into the right
to receive (x) from the Company, 0.20 (the "Newco Exchange Ratio") of a validly
issued, fully paid and nonassessable shares of Newco Common Stock (the
"Split-Off Consideration") and (y) from Parent, a number of validly issued,
fully paid and nonassessable share of Parent Common Stock equal to the Parent
Exchange Ratio (the "Merger Consideration"). The Split-Off Consideration and the
Merger Consideration are collectively referred to as the "Closing
Consideration". For purposes of this Agreement, "Parent Exchange Ratio" means
the quotient (rounded to the nearest 1/10,000) determined by dividing $35.00 by
the average (rounded to the nearest 1/10,000) of the volume weighted averages
(rounded to the nearest 1/10,000) of the trading prices of Parent Common Stock
on the New York Stock Exchange (the "NYSE"), as reported by Bloomberg Financial
Markets (or such other source to which Parent and the Company may agree), for
each of the 20 consecutive trading days ending with the third trading day
immediately preceding the Effective Time. As of the Effective Time, all such
shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate which immediately prior to the Effective Time represented any
such shares of Company Common Stock (each, a "Certificate") shall cease to have
any rights with respect thereto, except the right to receive the Closing
Consideration, any dividends or other distributions to which such holder is
entitled pursuant to Section 2.02(c) and any cash in lieu of fractional shares
of Parent Common Stock and Newco Common Stock to be issued or paid in
consideration therefor upon surrender of such Certificate in accordance with
Section 2.02(e), without interest. Notwithstanding the foregoing, if between the
date of this Agreement and the Effective Time (i) the outstanding shares of
Parent Common Stock shall have been changed into a different number of shares or
a different class, by reason of the occurrence of any stock dividend,
subdivision, reclassification, recapitalization, split, combination, exchange of
shares or similar transaction or (ii) Parent shall have established the record
date for such
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a change and such record date occurs prior to the Effective Time, the Parent
Exchange Ratio shall be appropriately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination, exchange of
shares or similar transaction.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the
Effective Time (i) the Company shall deposit with EquiServe Trust Company or
such other bank or trust company of similar size as may be designated by the
Company and Parent (the "Exchange Agent"), for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates representing the shares of Newco Common
Stock issuable pursuant to Section 2.01 in exchange for outstanding shares of
Company Common Stock and the Company and Newco shall deposit any dividends or
distributions with respect thereto with a record date after the Effective Time
and an amount of cash representing any cash payments in lieu of any fractional
shares of Newco Common Stock determined in accordance with Section 2.02(e) and
(ii) Parent shall deposit with the Exchange Agent, for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates representing the shares of
Parent Common Stock issuable pursuant to Section 2.01 in exchange for
outstanding shares of Company Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
and an amount of cash representing any cash payments in lieu of any fractional
shares of Parent Common Stock determined in accordance with Section 2.02(e)
(such shares of Newco Common Stock and Parent Common Stock, together with the
amounts of cash described above, are collectively referred to as the "Exchange
Fund"). The Exchange Agent shall be required to keep all cash deposited by the
Company and Newco, on the one hand, and all cash deposited by Parent, on the
other hand, pursuant to this Section 2.02 in separate accounts.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a Certificate whose shares were converted into the right to receive
the Closing Consideration pursuant to Section 2.01(c) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
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surrendering the Certificates in exchange for certificates representing the
Closing Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock and a certificate representing that number of whole shares
of Newco Common Stock that such holder has the right to receive pursuant to the
provisions of this Article II after taking into account all the shares of
Company Common Stock then held by such holder under all such Certificates so
surrendered, cash in lieu of fractional shares of Parent Common Stock and Newco
Common Stock to which such holder is entitled pursuant to Section 2.02(e) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.02(c), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock and a
certificate representing the proper number of shares of Newco Common Stock may
be issued to a person other than the person in whose name the Certificate so
surrendered is registered, if, upon presentation to the Exchange Agent, such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of Parent Common Stock and
Newco Common Stock to a person other than the registered holder of such
Certificate or establish to the reasonable satisfaction of Parent that such tax
has been paid or is not applicable. No interest will be paid or will accrue on
any cash payable to holders of Certificates pursuant to Section 2.02(c) or
2.02(e).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions with respect to Parent Common Stock or Newco Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock and
Newco Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.02(e),
in each case, until the holder of record of such Certificate shall surrender
such Certificate in accordance with this Article II. Following surrender of any
such Certificate, there shall be paid to the record holder of the certificate
representing whole shares of Parent
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Common Stock and the certificate representing whole shares of Newco Common Stock
distributed in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock and a fractional share of Newco Common Stock to which such
holder is entitled pursuant to Section 2.02(e) (such amount to be paid out of
the appropriate accounts in the Exchange Fund) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and to such whole
shares of Newco Common Stock (such amount to be paid out of the appropriate
accounts in the Exchange Fund) and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock and
such whole shares of Newco Common Stock (such amount to be paid by Parent or
Newco, as applicable).
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock and Newco Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to Section 2.02(c) or 2.02(e)) shall be deemed
to have been issued (and paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock previously represented by such Certificates,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of Parent Common Stock or fractional shares of Newco Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution of Parent or Newco, as applicable, shall relate to such
fractional share interests and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent or Newco,
as applicable.
(ii) In lieu of such fractional share interests, each former holder of
Company Common Stock as of the Effective Time shall be entitled to receive from
Parent or
9
the Company, as applicable, an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest in Parent Common Stock and the
fractional share interest in Newco Common Stock to which such former holder
(after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) (x) in the
case of Parent Common Stock, the per share closing price of Parent Common Stock
on the Closing Date, as reported on the NYSE Composite Transactions Tape, and
(y) in the case of Newco Common Stock, the per share closing price of Newco
Common Stock, as reported on a national securities exchange or The Nasdaq
National Market ("Nasdaq"), as the case may be, on the first full trading day
following the Effective Time. Cash payments are being made to holders of Company
Common Stock in lieu of fractional shares of Newco Common Stock and Parent
Common Stock for the purpose of saving Newco and Parent the expense and
inconvenience of issuing and transferring fractional shares. Such cash payments
do not represent separately bargained-for consideration.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for 18 months after the
Effective Time shall be delivered (x) in the case of shares of Newco Common
Stock and cash deposited in the Exchange Fund by the Company or Newco, to Newco
and (y) in the case of shares of Parent Common Stock and cash deposited in the
Exchange Fund by Parent, to Parent, in each case upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter (A) look only to Newco for, and Newco shall remain liable for,
payment of their claim for Split-Off Consideration, any cash in lieu of
fractional shares of Newco Common Stock and any dividends or distributions with
respect to Newco Common Stock and (B) look only to Parent for, and Parent shall
remain liable for, payment of their claim for Merger Consideration, any cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock, in each case in accordance
with this Article II. If any Certificates shall not have been surrendered prior
to two years after the Effective Time (or immediately prior to such earlier date
on which any Closing Consideration would otherwise escheat to or became the
property of any Governmental Entity), any such Closing Consideration in respect
thereof shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation (with respect to any remaining Merger Consideration
and cash related thereto) and the property of Newco (with respect to any
remaining Split-Off Consideration and cash related thereto), free and clear of
all claims or interest of any person previously entitled thereto.
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(g) NO LIABILITY. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock or
Newco Common Stock (or dividends or distributions with respect thereto) or cash
in lieu of fractional shares of Parent Common Stock or Newco Common Stock or
cash from the Exchange Fund, in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent and Newco on a pro rata basis based upon the amount of cash deposited
into the Exchange Fund by Parent, on the one hand, and the Company and Newco, on
the other hand.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent or
the Company, the posting by such person of a bond in such reasonable amount as
Parent or the Company may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Closing
Consideration and any cash in lieu of fractional shares and unpaid dividends and
distributions on shares of Parent Common Stock and Newco Common Stock
deliverable in respect thereof, in each case pursuant to this Agreement.
(j) WITHHOLDING RIGHTS. The Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code,
or under any provision of state, local or foreign tax law. To the extent that
amounts are so withheld and paid over to the appropriate taxing authority, the
Exchange Agent will be treated as though it withheld an appropriate amount of
the type of consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock, sold such consideration for an amount of cash
equal to the fair market value of such consideration at the time of such deemed
sale and paid such cash proceeds to the appropriate taxing authority.
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ARTICLE III
RELATED TRANSACTIONS
SECTION 3.01. REORGANIZATION AGREEMENTS. Prior to the Effective Time, the
Company shall (a) execute and deliver the Restructuring Agreement, the Tax
Allocation Agreement in the form of Annex B attached hereto with such changes as
may be mutually agreed upon by the Company and Parent (the "Tax Allocation
Agreement"), the Post-Closing Covenants Agreement in the form of Annex C
attached hereto with such changes as may be mutually agreed upon by the Company
and Parent (the "Post-Closing Covenants Agreement"), the License Agreement in
the form of Annex D attached hereto with such changes as may be mutually agreed
upon by the Company and Parent (the "License Agreement") and the Settlement
Agreement and Release of Claims in the form of Annex E attached hereto with such
changes as may be mutually agreed upon by the Company and Parent (the
"Settlement Agreement"), (b) cause Newco to execute and deliver the
Restructuring Agreement, the Tax Allocation Agreement, the Post-Closing
Covenants Agreement, the License Agreement and the Settlement Agreement and (c)
cause certain of the Company's subsidiaries (as mutually determined by Parent
and the Company) that are necessary to effect the Restructuring to execute and
deliver the Restructuring Agreement and each such subsidiary that Parent shall
reasonably designate to execute and deliver the Post-Closing Covenants
Agreement. Prior to the Effective Time, Parent shall (x) execute and deliver the
Tax Allocation Agreement, the Post-Closing Covenants Agreement and the
Settlement Agreement and (y) cause LifeScan, Inc. to execute and deliver the
Settlement Agreement.
SECTION 3.02. ANCILLARY AGREEMENTS. Prior to the Effective Time, Parent and
the Company shall, and the Company shall cause Newco (and, if applicable, one or
more of Newco subsidiaries) to, execute and deliver the Ancillary Agreements (as
defined in the Restructuring Agreement, and, together with this Agreement, the
Option Agreement, the Restructuring Agreement, the Tax Allocation Agreement, the
Post-Closing Covenants Agreement and the License Agreement, the "Transaction
Agreements") (other than the Transition Services Agreement). For purposes of
this Agreement, the Transition Services Agreement (as defined in the
Restructuring Agreement) shall not be included in the definitions of "Ancillary
Agreements" and "Transaction
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Agreements". The parties shall use commercially reasonable efforts to cause the
Transition Services Agreement to be executed and delivered prior to the
Effective Time.
SECTION 3.03. RESTRUCTURING OF ASSETS AND ASSUMPTION OF LIABILITIES.
Immediately prior to the Effective Time and pursuant to the terms of the
Restructuring Agreement, the Company and its subsidiaries shall consummate the
Restructuring upon the terms and subject to the conditions set forth in the
Restructuring Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as (i)
disclosed or set forth in the Company SEC Documents filed and publicly available
prior to the date of this Agreement (the "Filed Company SEC Documents") or (ii)
disclosed or set forth on the disclosure schedule (with specific reference to
the particular subsection of this Agreement to which the information set forth
in such disclosure schedule relates; PROVIDED, HOWEVER, that an item included on
the disclosure schedule with respect to any subsection of this Section 4.01
shall be deemed to relate to each other subsection of this Section 4.01 to the
extent such relationship is reasonably apparent) delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company and its
subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite power and
authority to own, lease or otherwise hold and operate its properties and other
assets and to carry on its business as presently conducted. Each of the Company
and its subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties or other assets makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed individually or in the aggregate has not
had and is not reasonably be expected to have a Material Adverse Effect. The
Company has delivered to
13
Parent prior to the execution of this Agreement true and correct copies of its
Amended and Restated Certificate of Incorporation (the "Company Certificate")
and Amended and Restated By-laws (the "Company By-laws"), in each case as
amended through the date hereof. The Company has made available to Parent and
its representatives true and complete copies of the minutes of all meetings of
the stockholders of the Company and each of its subsidiaries, the Board of
Directors of the Company and each of its subsidiaries and the committees of each
of such Board of Directors, in each case held since January 1, 1999.
(b) SUBSIDIARIES. As of the date of this Agreement, Section 4.01(b) of the
Company Disclosure Schedule contains a true and complete list of all the
Company's subsidiaries (whether or not such subsidiaries are engaged in the
Sunrise Business). All the outstanding shares of capital stock or other voting
securities or equity interests of each subsidiary of the Company are owned by
the Company, by another wholly owned subsidiary of the Company or by the Company
and another wholly owned subsidiary of the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"), and are duly authorized, validly
issued, fully paid and nonassessable.
(c) CAPITAL STRUCTURE. The authorized capital stock of the Company consists
of 40,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, par value $.001 per share ("Preferred Stock"). At the close of business
on May 17, 2001, (i) 32,249,698 shares of Company Common Stock were issued and
outstanding, (ii) 743,678 shares of Company Common Stock were held by the
Company in its treasury, (iii) 4,624,969 shares of Company Common Stock were
reserved for issuance pursuant to the Company's 1992 Stock Plan, 1994 Incentive
and Non-Qualified Stock Option Plan, Amended and Restated 1996 Stock Option,
Grant Plan, 2000 Stock Option and Grant Plan, the INOMET, Inc. 1990 Incentive
and Stock Option Plan, the INOMET, Inc. 1991 Incentive and Stock Option, the
Integ Incorporated 1994 Long-Term Incentive and Stock Option Plan and the Integ
Incorporation 1996 Director's Stock Option Plan (such plans, collectively, the
"Company Stock Plans") (of which 4,511,235 shares of Company Common Stock were
subject to outstanding options to purchase shares of Company Common Stock
granted under the Company Stock Plans and 650,000 shares of Company
14
Common Stock were subject to outstanding options to purchase shares of Company
Common Stock granted outside the Company Stock Plans (the "Non-Plan Stock
Options") (collectively, "Stock Options")), (iv) 575,663 shares of Company
Common Stock were reserved for issuance pursuant to the Employee Stock Purchase
Plan (the "Company ESPP"), of which as of the date of this Agreement the Company
expects that approximately 25,000 shares of Company Common Stock will be subject
to outstanding purchase rights under the Company ESPP on June 30, 2001, (v)
warrants to acquire 692,399 shares of Company Common Stock from the Company
pursuant to the warrant agreements set forth on Section 4.01(c) of the Company
Disclosure Schedule (the "Warrants") were outstanding and (vi) no shares of
Preferred Stock were issued and outstanding or were held by the Company as
treasury shares. Except as set forth above in this Section 4.01(c), at the close
of business on May 17, 2001, no shares of capital stock or other voting
securities or equity interest of the Company were issued, reserved for issuance
or outstanding. Except as set forth above in this Section 4.01(c), there are no
outstanding stock appreciation rights, rights to receive shares of Company
Common Stock on a deferred basis or other rights that are linked to the value of
Company Common Stock, granted under the Company Stock Plans, the Warrants, the
Company ESPP or otherwise. Section 4.01(c) of the Company Disclosure Schedule
sets forth a complete and accurate list, as of May 17, 2001, of all outstanding
Warrants, Stock Options or other rights to purchase or receive Company Common
Stock granted under the Company Stock Plans or otherwise, the number of shares
of Company Common Stock subject thereto, the grant dates, expiration dates and
exercise prices thereof and the names of the holders thereof. No stock option
agreement evidencing the grant of Stock Options pursuant to any Company Stock
Plan provides additional or more favorable benefits in any material respect to
the holder of such Stock Options than the benefits provided under the applicable
Company Stock Plans. Attached as an exhibit to Section 4.01(c) of the Company
Disclosure Schedule are true and complete copies of all stock option agreements
pursuant to which Non-Plan Stock Options have been issued. All outstanding
shares of capital stock of the Company are, and all shares that may be issued
pursuant to the Company Stock Plans, the Non-Plan Stock Options, the Warrants or
the Company ESPP will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds,
15
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth above in this Section 4.01(c) or resulting from the issuance of shares of
Company Common Stock pursuant to Stock Options or the Warrants outstanding as of
the date hereof or rights that may have arisen under the Company ESPP, (x) there
are not issued, reserved for issuance or outstanding (A) any shares of capital
stock or other voting securities or equity interests of the Company, (B) any
securities of the Company convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or equity interests of the
Company or (C) any warrants, calls, options or other rights to acquire from the
Company or any of its subsidiaries, or any obligation of the Company or any of
its subsidiaries to issue, any capital stock, voting securities, equity
interests or securities convertible into or exchangeable or exercisable for
capital stock, voting securities or equity interests of the Company and (y)
there are not any outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any such securities or
to issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. None of the Company or any of its subsidiaries is a party to any
voting agreement with respect to the voting of any such securities. There are no
outstanding (1) securities of the Company or any of its subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities or equity interests in any subsidiary of the Company, (2) warrants,
calls, options or other rights to acquire from the Company or any of its
subsidiaries, and no obligation of the Company or any of its subsidiaries to
issue, any capital stock, or other voting securities or equity interests in, or
any securities convertible into or exchangeable or exercisable for any capital
stock, or other voting securities or equity interests in, any subsidiary of the
Company or (3) obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any such outstanding securities of any
subsidiary of the Company or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite power and
authority to enter into each Transaction Agreement to which it is or will be a
party
16
and to consummate the transactions contemplated thereby, subject, in the case of
the consummation of the Merger by the Company, to receipt of the Stockholder
Approval. Each of the Company's subsidiaries has, or prior to the execution and
delivery of the Restructuring Agreement will have, the requisite corporate power
and authority to enter into each Transaction Agreement to which it is or will be
a party and to consummate the transactions contemplated thereby. The execution
and delivery by the Company of each Transaction Agreement to which it is or will
be a party and the consummation by the Company of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part of the Company are
necessary to authorize such Transaction Agreements or to consummate the
transactions contemplated thereby, subject, in the case of the consummation of
the Merger, to receipt of the Stockholder Approval. The execution and delivery
by each of the Company's subsidiaries of the Transaction Agreements to which it
is or will be a party and the consummation by it of the transactions
contemplated thereby have been, or prior to the execution and delivery of the
Restructuring Agreement will be, duly authorized by all necessary action on the
part of such entity and no other proceedings on the part of such entity are or
will be necessary to authorize the Transaction Agreements or to consummate the
transactions contemplated thereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by each of the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms. Each Transaction Agreement (other than this Agreement) to which
the Company or any of its subsidiaries will be a party will, when executed and
delivered by such entity, and, assuming the due authorization, execution and
delivery by Parent, constitute a legal, valid and binding obligation of such
entity, enforceable against such entity in accordance with its terms. The Board
of Directors of the Company, at a meeting duly called and held at which all
directors of the Company were present, duly and unanimously adopted resolutions
(i) approving and declaring advisable this Agreement and each other Transaction
Agreement, the Merger and the other transactions contemplated hereby and
thereby, (ii) declaring that it is in the best interests of the stockholders of
the Company that the Company enter into
17
this Agreement and consummate the Merger and the other transactions contemplated
hereby on the terms and subject to the conditions set forth in this Agreement,
(iii) declaring that it is in the best interest of the stockholders of the
Company that each of the Company and its subsidiaries enter into each other
Transaction Agreement to which it is a party and consummate the transactions
contemplated thereby on the terms and subject to the conditions set forth
therein, (iv) directing that this Agreement be submitted to a vote at a meeting
of the stockholders of the Company and (v) recommending that the stockholders of
the Company adopt this Agreement. The execution and delivery by each of the
Company and its subsidiaries of the Transaction Agreements to which it is or
will be a party do not, and the consummation of the transactions contemplated
thereby and compliance with the provisions thereof will not, conflict with, or
result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien in or upon any of the properties or assets of
the Company or any of its subsidiaries under, (x) the Company Certificate or
Company By-laws or the Certificate of Incorporation or by-laws (or similar
organizational documents) of any of its subsidiaries, (y) any loan or credit
agreement, bond, debenture, note, mortgage, indenture, lease or other contract,
agreement, obligation, commitment, arrangement, understanding, instrument,
permit or license, whether oral or written (excluding any such items between the
Company or any of its subsidiaries, on the one hand, and Parent or any of its
Affiliates, on the other hand) (each, including all amendments thereto, a
"Contract"), to which the Company or any of its subsidiaries is a party or any
of their respective properties or other assets is subject or (z) subject to the
governmental filings and other matters referred to in the following sentence,
any (A) statute, law, ordinance, rule or regulation or (B) order, writ,
injunction, decree, judgment or stipulation, in each case applicable to the
Company or any of its subsidiaries or their respective properties or other
assets, other than, in the case of clauses (y) and (z), any such conflicts,
violations, breaches, defaults, rights, losses or Liens that individually or in
the aggregate have not had and are not reasonably expected to have a Material
Adverse Effect. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing
18
with, any Federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Entity") is required by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the execution and delivery of the other Transaction Agreements
by the Company or any of its subsidiaries or the consummation of the
transactions contemplated hereby or thereby, except for (1) the filing of a
premerger notification and report form by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or any other applicable competition, merger control, antitrust or similar
law or regulation, (2) the filing with the Securities and Exchange Commission
(the "SEC") of (A) a proxy statement relating to the adoption by the
stockholders of the Company of this Agreement (as amended or supplemented from
time to time, the "Proxy Statement"), (B) a registration statement on Form S-4
to be filed with the SEC by Newco in connection with the distribution of Newco
Common Stock in the Split-Off (as amended or supplemented from time to time, the
"Newco Form S-4"), (C) a registration statement on Form 8-A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with the
distribution of Newco Common Stock in the Split-Off (the "Form 8-A") and (D)
such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act, as
may be required in connection with this Agreement, the other Transaction
Agreements and the transactions contemplated hereby or thereby, (3) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (4) such filings with and
approvals of a national securities exchange or Nasdaq to permit the shares of
Newco Common Stock that are to be distributed in the Split-Off to be approved
for listing on such national securities exchange, or approved for quotation on
Nasdaq, as the case may be, in either case subject to official notice of
issuance and (5) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate has not had and are not reasonably
expected to have a Material Adverse Effect.
19
(e) COMPANY SEC DOCUMENTS. The Company has filed all reports, schedules,
forms, statements and other documents (including exhibits and other information
incorporated therein) with the SEC required to be filed by the Company since
January 1, 1999 (together with all voluntary filings made by the Company with
the SEC during such time period, the "Company SEC Documents"). As of their
respective dates, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Company SEC Documents, and
except to the extent that information contained in any Company SEC Document has
been revised, superseded or updated by a later-filed Company SEC Document, none
of the Company SEC Documents contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements set forth in the Company's Form 10-K for
the year ended December 31, 2000, or in the most recent financial statements
included in the Filed Company SEC Documents and except for liabilities or
obligations incurred in connection with this Agreement or any of the other
Transaction Agreements, neither the Company nor any of its subsidiaries has any
liabilities or obligations (other than to Parent or any of its Affiliates) of
any nature (whether accrued, absolute, contingent or otherwise) which,
individually or in the aggregate, have had or are reasonably expected to have a
Material Adverse Effect.
20
(f) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) each of the Newco Form S-4 and the Parent Form S-4 will, at the time it
is filed with the SEC, at any time it is amended or supplemented and at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or (ii) the Proxy Statement will, at the
date the Proxy Statement is first mailed to the Company's stockholders and at
the time of the Stockholders' Meeting, 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, in light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference in such
documents. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder. The Newco Form S-4 will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
thereunder.
(g) INVERNESS MEDICAL LIMITED FINANCIAL STATEMENTS. Section 4.01(g) of the
Company Disclosure Schedule sets forth for Inverness Medical Limited ("IML") (x)
(i) the audited balance sheet as of December 31, 1999 (the "Audited IML Balance
Sheet") and (ii) an audited statement of operations and an audited statement of
cash flows for the year ended December 31, 1999 (together, the "Audited IML
Financial Statements"), together with the report of IML's independent
accountants thereon, and (y) (i) the unaudited balance sheet as of March 31,
2001 (the "Interim IML Balance Sheet") and (ii) an unaudited statement of
operations and an unaudited statement of cash flows for the three months ended,
March 31, 2001 (together, the "Interim IML Financial Statements") and (z) (i)
the unaudited balance sheet as of December 31, 2000 (the "Unaudited IML Balance
Sheet") and (ii) an unaudited statement of operations and an unaudited statement
of cash flows for the year ended December 31, 2000
21
(together, the "Unaudited IML Financial Statements"). There has been no material
change in the financial position of IML since March 31, 2001. Each of the
Audited IML Balance Sheet, the Interim IML Balance Sheet and the Unaudited IML
Balance Sheet (including any related notes and schedules) fairly presents in all
material respects the financial position of IML as of its date, and each of the
statements of operations and statements of cash flows included in the Audited
IML Financial Statements and the Unaudited IML Financial Statements (including
any related notes and schedules) fairly presents in all material respects the
results of operations and cash flows, as the case may be, of IML for the periods
set forth therein (subject in the case of unaudited statements to normal year
end adjustments) (i) in the case of the Audited IML Balance Sheet and the
Audited IML Financial Statements, in accordance with accounting principles
generally accepted in the United Kingdom applied on a consistent basis, and (ii)
in the case of the Unaudited IML Balance Sheet, the Unaudited IML Financial
Statements, the Interim IML Balance Sheet and the Interim IML Financial
Statements, in accordance with GAAP. All of the adjustments necessary to convert
in all material respects the Audited IML Balance Sheet and the Audited IML
Financial Statements into GAAP have been recorded in the appropriate periods on
the books and records of the Company, and after the application of such
adjustments all the financial statements referred to in this Section 4.01(i)
have been prepared on a consistent basis.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except (i) for liabilities
incurred in connection with this Agreement or any of the other Transaction
Agreements, and (ii) the transactions described in the Transaction Agreements,
since March 31, 2001, the Company and its subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past practice,
and there has not been (i) any Material Adverse Change, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's or any of its
subsidiaries' capital stock, other than the payment of dividends by any wholly
owned subsidiary of the Company to its parent (which parent is a Sunrise
Company), (iii) any split, combination or reclassification of any of the
Company's or any of its subsidiaries' capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares
22
of such capital stock, (iv) prior to the date of this Agreement (A) any granting
by the Company or any of its subsidiaries to any current or former director,
officer, employee or consultant of any increase in compensation, bonus or other
benefits, except as was required under employment agreements in effect as of the
date of the most recent audited financial statements included in the Filed
Company SEC Documents and except for increases in cash compensation in the
ordinary course of business consistent with past practice, (B) any granting by
the Company or any of its subsidiaries to any current or former director,
officer, employee or consultant of any increase in severance or termination pay,
except as was required under any employment, severance or termination agreements
in effect as of the date of the most recent audited financial statements
included in the Filed Company SEC Documents, (C) any entry by the Company or any
of its subsidiaries into, or any amendment of, (1) any employment, deferred
compensation, consulting, severance, termination or indemnification agreement,
arrangement or understanding with any current or former director, officer,
employee or consultant or (2) any agreement with any current or former director,
officer, employee or consultant the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Company of a nature contemplated by this Agreement or any of the
other Transaction Agreements (all such agreements under this clause (C),
collectively, "Benefit Agreements"), (D) any amendment to, or modification of,
any Stock Option or Warrant or (E) any adoption of, or amendment to, a Benefit
Plan, (v) any damage, destruction or loss, whether or not covered by insurance,
that individually or in the aggregate has had or are reasonably expected to have
a Material Adverse Effect, (vi) any change in accounting methods, principles or
practices by the Company or its subsidiaries materially affecting the Company's
assets, liabilities or businesses, except insofar as may have been required by a
change in GAAP, or (vii) any material tax election or any settlement or
compromise of any material income tax liability.
(i) LITIGATION. Except as disclosed in the Filed Company SEC Documents,
there is no suit, action or proceeding pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its subsidiaries
or any of their respective properties or assets that individually or in the
aggregate has had or are reasonably expected to have a Material Adverse
23
Effect, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against, or, to the Knowledge of
the Company, investigation by any Governmental Entity involving, the Company or
any of its subsidiaries that individually or in the aggregate has had or are
reasonably expected to have a Material Adverse Effect.
(j) CONTRACTS. Except as disclosed in the Filed Company SEC Documents, none
of the Company or any of its subsidiaries is a party to, and none of its
properties or other assets are subject to, any contract or agreement that are of
a nature required to be filed as an exhibit to a report or filing under the
Securities Act or the Exchange Act and the rules and regulations promulgated
thereunder. None of the Company or any of its subsidiaries is in violation of or
in default under (nor does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a violation of or default
under) any Contract to which the Company or any of its subsidiaries is a party
or by which the Company or any of its Subsidiaries or any of their respective
properties or other assets is bound, except for violations or defaults that
individually or in the aggregate have not had and are not reasonably expected to
have a Material Adverse Effect. None of the Company or any of its subsidiaries
has entered into any Contract with any Affiliate of the Company that is
currently in effect other than agreements that are disclosed in the Filed
Company SEC Documents. Except as set forth in the Post-Closing Covenants
Agreement and except for agreements or covenants which do not affect the Sunrise
Business and would not be binding on Parent or any of its Affiliates (other than
the Company or any of its subsidiaries) as a result of the Merger, none of the
Company or any of its subsidiaries is a party to or otherwise bound by any
agreement or covenant not to compete or by any agreement or covenant restricting
in any respect the development, marketing or distribution of the Company's or
any of its subsidiaries products or services. Other than contracts relating
solely to the Newco Business, none of the Company or any of its subsidiaries is
a party to or is otherwise bound by any continuing contract for the future sale
by the Company or any of its subsidiaries of materials, supplies or equipment
that (i) is not terminable at will by the Company or such subsidiary upon not
more than 30 days' notice without any obligation of the Company or any of its
subsidiaries to pay a termination fee, penalty or
24
similar payment or (ii) imposes any continuing obligation for the sale of
materials, supplies or equipment following termination thereof.
(k) COMPLIANCE WITH LAWS. (i) Each of the Company and its subsidiaries is
in compliance with all statutes, laws, ordinances, rules, regulations,
judgments, orders and decrees of any Governmental Entity applicable to it, its
properties or other assets or its business or operations (collectively, "Legal
Provisions"), except for instances of noncompliance or possible noncompliance
that individually or in the aggregate have not had and are not reasonably
expected to have a Material Adverse Effect. Each of the Company and its
subsidiaries has in effect all material approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights of or with all
Governmental Entities, including all authorizations under the Federal Food,
Drug, and Cosmetic Act of 1938, as amended ("FDCA"), and the regulations of the
Federal Food and Drug Administration (the "FDA") promulgated thereunder, and
under Environmental Laws (collectively, "Permits"), necessary for it to own,
lease or operate its properties and assets and to carry on its business and
operations as presently conducted, except for failures to have in effect such
Permits that individually or in the aggregate have not had and are not
reasonably expected to have a Material Adverse Effect. There has occurred no
default under, or violation of, any such Permit, except individually or in the
aggregate as has not had and are not reasonably expected to have a Material
Adverse Effect. The Merger and the other transactions contemplated by the
Transaction Agreements, in and of themselves, will not cause the revocation or
cancellation of any Permit that individually or in the aggregate are reasonably
expected to have a Material Adverse Effect. No action, demand, requirement or
investigation by any Governmental Entity and no suit, action or proceeding by
any other person, in each case with respect to the Company or any of its
subsidiaries or any of their respective properties or other assets under any
Legal Provision, is pending or, to the Knowledge of the Company, threatened,
other than, in each case, those the outcome of which individually or in the
aggregate has not had and are not reasonably expected to have a Material Adverse
Effect.
(ii) Except for those matters disclosed in the Filed Company SEC Documents
or those matters that individually or in the aggregate have not had and are
25
not reasonably expected to have a Material Adverse Effect: (A) each of the
Company and its subsidiaries is, and has been, in compliance with all applicable
Environmental Laws; (B) during the period of ownership or operation by each of
the Company and its subsidiaries of any of its currently or previously owned,
leased or operated properties, there have been no Releases or threatened
Releases of Hazardous Material in, on, under or affecting such properties or any
surrounding sites; (C) there is no investigation, suit, claim, action or
proceeding pending, or to the Knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries, relating to or arising under
Environmental Laws, and none of the Company or any of its subsidiaries has
received any notice of, or entered into or assumed by contract or operation of
law or otherwise, any obligation, liability, order, settlement, judgment,
injunction or decree relating to or arising under Environmental Laws; and (D) to
the Knowledge of the Company, there are no facts, circumstances or conditions
which could reasonably be expected to form the basis for a suit, investigation,
claim, action or proceeding against or affecting the Company or any of its
subsidiaries relating to or arising under Environmental Laws. The term
"Environmental Laws" means all laws (including the common law), rules,
regulations, codes, ordinances, orders, decrees, judgments, injunctions,
notices, Permits, or binding agreements issued, promulgated or entered into by
any Governmental Entity, relating in any way to the environment, preservation or
reclamation of natural resources, the presence, management, Release or threat of
Release of, or exposure to, Hazardous Materials, or to human health and safety.
The term "Hazardous Material" means (A) petroleum products and byproducts,
asbestos, urea formaldehyde foam insulation, asbestos or asbestos-containing
materials, medical or infectious wastes, polychlorinated biphenyls, radon gas,
chlorofluorocarbons and all other ozone-depleting substances or (B) any
chemical, material, substance, waste, pollutant or contaminant that is
prohibited, limited or regulated by or pursuant to any Environmental Law. The
term "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
migrating into or through the environment or any natural or man-made structure.
26
(l) ABSENCE OF CHANGES IN BENEFIT PLANS; LABOR RELATIONS. Except as
disclosed in the Filed Company SEC Documents, since the date of the most recent
audited financial statements included in the Filed Company SEC Documents, there
has not been any adoption or amendment by the Company or any of its subsidiaries
of any collective bargaining agreement or any employment, bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock appreciation, restricted stock, stock option, phantom stock,
performance, retirement, thrift, savings, stock bonus, paid time off,
perquisite, fringe benefit, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other plan, program, policy,
arrangement or understanding (whether or not legally binding) maintained,
contributed to or required to be maintained or contributed to by the Company,
any of its subsidiaries or any other person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code (each, a "Commonly Controlled Entity"), in each case providing
benefits to any current or former officer, director, employee or consultant of
the Company or any of its subsidiaries (collectively, the "Benefit Plans"), or
any material change in any actuarial or other assumption used to calculate
funding obligations with respect to any Pension Plans, or any change in the
manner in which contributions to any Pension Plans are made or the basis on
which such contributions are determined. Except for any Benefit Agreements under
which the sole obligations of the Company or any of its subsidiaries are (x) to
pay no more than $100,000 under each such Benefit Agreement and $500,000 in the
aggregate under all such Benefit Agreements and (y) to provide other items that
may be purchased for a de minimis monetary value and except as disclosed in the
Filed Company SEC Documents, there exist no currently binding Benefit
Agreements. There are no collective bargaining or other labor union agreements
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound. Since January 1, 1999, none of the
Company or any of its subsidiaries has encountered any labor union organizing
activity or had any actual or threatened employee strikes, work stoppages,
slowdowns or lockouts.
(m) BENEFIT PLAN COMPLIANCE. (i) Section 4.01(m)(i) of the Company
Disclosure Schedule contains a complete and accurate list of each Benefit Plan
that is an "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement
27
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as a "Pension Plan"), an "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) and all other Benefit Plans. The Company has delivered to Parent
true, complete and correct copies of (A) each Benefit Plan and Benefit Agreement
(or, in the case of any unwritten Benefit Plan or Benefit Agreement,
descriptions thereof), (B) the two most recent annual reports on Form 5500
required to be filed with the Internal Revenue Service (the "IRS") with respect
to each Benefit Plan (if any such report was required), (C) the most recent
summary plan description for each Benefit Plan for which such summary plan
description is required and (D) each trust agreement and insurance or group
annuity contract relating to any Benefit Plan. Each Benefit Plan has been
administered in all material respects in accordance with its terms. The Company,
its subsidiaries and all the Benefit Plans are all in compliance in all material
respects with the applicable provisions of ERISA, the Code and all other
applicable laws, including laws of foreign jurisdictions, and the terms of all
collective bargaining agreements.
(ii) All Pension Plans intended to be tax-qualified have received favorable
determination letters from the IRS with respect to "TRA" (as defined in Section
1 of Rev. Proc. 93-39) to the effect that such Pension Plans are qualified and
exempt from United States Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code; no such determination letter has been revoked (or, to
the Knowledge of the Company, has revocation been threatened) nor, to the
Knowledge of the Company, has any event occurred since the date of the most
recent determination letter or application therefor relating to any such Pension
Plan that would adversely affect the qualification of such Pension Plan or
materially increase the costs relating thereto or require security under Section
307 of ERISA. All Benefit Plans maintained or contributed to by the Company or
any of its subsidiaries required to have been approved by any foreign
Governmental Entity have been so approved; no such approval has been revoked
(or, to the Knowledge of the Company, has revocation been threatened) nor, to
the Knowledge of the Company, has any event occurred since the date of the most
recent approval or application therefor relating to any such Benefit Plan that
would materially affect any such approval relating thereto or materially
increase the costs relating thereto or result in the loss of any intended
favorable
28
tax treatment for such Benefit Plan. The Company has delivered to Parent a true
and complete copy of the most recent determination letter received with respect
to each Pension Plan, as well as a true and complete copy of each pending
application for a determination letter, if any. The Company has also provided to
Parent a true and complete list of all Pension Plan amendments as to which a
favorable determination letter has not yet been received.
(iii) Neither the Company nor any Commonly Controlled Entity has (A)
maintained, contributed or been obligated to contribute to any Benefit Plan that
is subject to Title IV of ERISA or (B) any unsatisfied liability under Title IV
of ERISA.
(iv) All material reports, returns and similar documents with respect to
all Benefit Plans required to be filed with any Governmental Entity or
distributed to any Benefit Plan participant have been duly and timely filed or
distributed. None of the Company or any of its subsidiaries has received notice
of, and to the Knowledge of the Company, there are no investigations by any
Governmental Entity with respect to, termination proceedings or other claims
(except claims for benefits payable in the normal operation of the Benefit
Plans), suits or proceedings against or involving any Benefit Plan or asserting
any rights or claims to benefits under any Benefit Plan that could give rise to
any material liability, and, to the Knowledge of the Company, there are not any
facts that could give rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(v) All contributions, premiums and benefit payments under or in connection
with the Benefit Plans that are required to have been made as of the date hereof
in accordance with the terms of the Benefit Plans have been timely made or have
been reflected on the most recent consolidated balance sheet filed or
incorporated by reference into the Filed Company SEC Documents. No Pension Plan
has an "accumulated funding deficiency" (as such term is defined in Section 302
of ERISA or Section 412 of the Code), whether or not waived.
(vi) With respect to each Benefit Plan, (A) there has not occurred any
prohibited transaction in which the Company or any of its subsidiaries or any
employee of the Company or any of its subsidiaries has engaged that could
subject the Company or any of its
29
subsidiaries or any such employee, or, to the Knowledge of the Company, a
trustee, administrator or other fiduciary of any trust created under any Benefit
Plan to any material tax or penalty on prohibited transactions imposed by
Section 4975 of ERISA or the sanctions imposed under Title I of ERISA and (B)
none of the Company, any of its subsidiaries or to the Knowledge of the Company,
any trustee, administrator or other fiduciary of any Benefit Plan or any agent
of any of the foregoing has engaged in any transaction or acted in a manner that
could, or failed to act so as to, subject the Company, any of its subsidiaries
or, to the Knowledge of the Company, any trustee, administrator or other
fiduciary to any material liability for breach of fiduciary duty under ERISA or
any other applicable law. No Benefit Plan or related trust has been terminated,
nor has there been any "reportable event" (as that term is defined in Section
4043 of ERISA) for which the 30-day reporting requirement has not been waived
with respect to any Pension Plan during the last five years, and no notice of a
reportable event will be required to be filed in connection with the
transactions contemplated hereby.
(vii) Section 4.01(m)(vii) of the Company Disclosure Schedule discloses
whether each Benefit Plan that is an employee welfare benefit plan is (A)
unfunded, (B) funded through a "welfare benefit fund", as such term is defined
in Section 419(e) of the Code, or other funding mechanism or (C) insured. Each
such employee welfare benefit plan may be amended or terminated (including with
respect to benefits provided to retirees and other former employees) without
material liability to the Company or any of its subsidiaries at any time after
the Effective Time. The Company and its subsidiaries comply in all material
respects with the applicable requirements of Section 4980B(f) of the Code with
respect to each Benefit Plan that is a group health plan, as such term is
defined in Section 5000(b)(1) of the Code. The Company does not have any
obligations for retiree health or life insurance benefits under any Benefit Plan
or Benefit Agreement that has a present value calculated as of the date of this
Agreement exceeding $100,000 in the aggregate.
(viii) None of the execution and delivery of this Agreement or any of the
other Transaction Agreements, the obtaining of the Stockholder Approval or the
consummation of the Merger or any other transaction contemplated by this
Agreement or any of the other
30
Transaction Agreements (including as a result of any termination of employment
following the Effective Time) will (A) entitle any current or former director,
officer, employee or consultant of the Company or any of its subsidiaries to
severance or termination pay, (B) accelerate the time of payment or vesting or
trigger any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any Benefit Plan or Benefit Agreement or (C)
result in any breach or violation of, or a default under, any Benefit Plan or
Benefit Agreement. Section 4.01(m)(viii) of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, the estimated aggregate amount of all
payments and the fair market value of all non-cash benefits (exclusive of any
benefits or payments related to Stock Options) that may become payable or
provided to employees, officers, directors or consultants of the Company or any
of its subsidiaries under the Benefit Agreements who as a result of such
individuals' employment being terminated immediately following the Effective
Time would individually receive such payments and benefits in a total amount
exceeding $100,000.
(ix) None of the Company nor any of its subsidiaries has any material
liability or obligations, including under or on account of a Benefit Plan,
arising out of the hiring of persons to provide services to the Company or any
of its subsidiaries and treating such persons as consultants or independent
contractors and not as employees of the Company or any of its subsidiaries.
(n) NO EXCESS PARACHUTE PAYMENTS. Other than payments or benefits that may
be made or provided to the persons listed in Section 4.01(n) of the Company
Disclosure Schedule ("Primary Company Individuals"), no amount or other
entitlement or economic benefit that could be received (whether in cash or
property or the vesting of property) as a result of any transaction contemplated
by this Agreement or any of the other Transaction Agreements (including as a
result of termination of employment on or following the Effective Time) by or
for the benefit of any officer, director, employee or consultant of the Company
or any of its Affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any Benefit
Plan, Benefit Agreement or otherwise would be characterized as an "excess
parachute payment" (as such term is defined in
31
Section 280G(b)(1) of the Code). No disqualified individual is entitled to
receive any additional payment from the Company, the Surviving Corporation or
any other person (a "Parachute Gross Up Payment") in the event that the excise
tax required by Section 4999(a) of the Code is imposed on such person. None of
the Board of Directors of the Company or any of its subsidiaries has granted to
any officer, director, employee or consultant of the Company or any of its
subsidiaries any right to receive any Parachute Gross Up Payment. Section
4.01(n) of the Company Disclosure Schedule sets forth the estimated aggregate
amount of "excess parachute payments" that could be paid or provided to the
Primary Company Individuals under all Benefit Plans and Benefit Agreements as a
result of the Merger or the other transactions contemplated by this Agreement
(including as a result of any termination of employment on or following the
Effective Time).
(o) TAXES. (i) Each of the Company and its subsidiaries has timely filed
all material tax returns (as defined below in clause (xiii)) required to be
filed by it. Each of the Company and its subsidiaries has timely paid or caused
to be timely paid all material taxes due and payable with respect to the taxable
periods covered by such tax returns and all other material taxes as are due, and
the most recent financial statements contained in the Filed Company SEC
Documents reflect an adequate reserve (in addition to any reserve for deferred
taxes established to reflect timing differences between book and tax income) for
all material taxes payable by the Company and its subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
(ii) No tax return of the Company or any of its subsidiaries is under audit
or examination by any taxing authority, and no notice of such an audit or
examination has been received by the Company or any of its subsidiaries. There
is no deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any material taxes due and owing by the Company or
any of its subsidiaries. Each deficiency resulting from any completed audit or
examination relating to material taxes by any taxing authority has been timely
paid. No issues relating to material taxes were raised by the relevant taxing
authority in any completed audit or examination that could reasonably be
expected to recur in a later taxable period. The United States Federal income
tax returns of the Company and its subsidiaries have either
32
been examined and settled with the IRS or closed by virtue of the expiration of
the applicable statute of limitations for all years through 1997.
(iii) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any material taxes of the Company or its subsidiaries and no power
of attorney (other than powers of attorney authorizing employees of the Company
to act on behalf of the Company) with respect to any material taxes has been
executed or filed with any taxing authority.
(iv) No Liens for material taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory Liens
for taxes not yet due.
(v) None of the Company or any of its subsidiaries will be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued (for purposes of the financial statements of
the Company included in the Filed Company SEC Documents) in a prior taxable
period but was not recognized for tax purposes in any prior taxable period as a
result of the installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of any other,
domestic or foreign (whether national, Federal, state, provincial, local or
otherwise) tax laws.
(vi) The Company and its subsidiaries have complied with all applicable
statutes, laws, ordinances, rules and regulations relating to the withholding of
taxes (including withholding of taxes pursuant to Sections 1441, 1442, 3121 and
3402 of the Code and similar provisions under any other domestic or foreign
(whether national, federal, state, provincial, local or otherwise) tax laws) and
have, within the time and the manner prescribed by law, withheld from and paid
over to the proper Governmental Entities all amounts required to be so withheld
and paid over under applicable laws in all material respects.
(vii) Other than the distribution of Newco Common Stock in connection with
the transactions contemplated by this Agreement, none of the Company or any of
its subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" (in each
33
case, within the meaning of Section 355(a)(1)(A) of the Code) in a distribution
of stock qualifying for tax-free treatment under Section 355(e) of the Code (A)
in the two years prior to the date of this Agreement or (B) in a distribution
that could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Merger.
(viii) The Company was not, at any time during the period specified in
Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
(ix) None of the Company or any of its subsidiaries has made with respect
to any of the Sunrise Assets (as defined in the Restructuring Agreement), any
consent under Section 341 of the Code.
(x) None of the Sunrise Assets is "tax exempt use property" within the
meaning of Section 168(h) of the Code.
(xi) None of the Sunrise Assets is a lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954.
(xii) None of the Company or any of its subsidiaries has taken any action,
or failed to take any action, or has knowledge of any fact, agreement, plan or
other circumstance that could reasonably prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(xiii) As used in this Agreement, (A) "taxes" shall include (1) all forms
of taxation, whenever created or imposed, and whether domestic or foreign, and
whether imposed by a national, Federal, state, provincial, local or other
Governmental Entity, including all interest, penalties and additions imposed
with respect to such amounts, (2) liability for the payment of any amounts of
the type described in clause (1) as a result of being a member of an affiliated,
consolidated, combined or unitary group and (3) liability for the payment of any
amounts as a result of being party to any tax sharing agreement or as a result
of any express or implied obligation to indemnify any other person with respect
to the payment of any amount described in clause (1) or (2) and (B) "tax
returns" shall mean all domestic or foreign (whether national, Federal, state,
provincial, local or otherwise) returns, declarations, statements, reports,
schedules, forms and information returns relating to taxes and any amended tax
return.
34
(xiv) If all the transactions described in Section 4.1 of the Restructuring
Agreement (excluding (i) the transfer by Inverness Medical Inc. ("IMI") of
certain assets to Newco described in Section 4.1(m) of the Restructuring
Agreement and (ii) any payments or contributions contemplated by Section 4.1(n)
of the Restructuring Agreement) had occurred on December 31, 2000, the aggregate
tax basis for federal income tax purposes that the Company would have had in its
Newco Common Stock immediately after such transactions had occurred (the "Newco
Basis") would have been not less than the amount set forth in Section
4.01(o)(xiv) of the Company Disclosure Schedule. For purposes of computing the
Newco Basis, it has been assumed that the fair market value of the stock of
Can-Am Care Corporation held by IMI at the time of the transaction described in
Section 4.1(g) of the Restructuring Agreement is equal to IMI's basis (for
federal income tax purposes) in such stock. The Company is not currently aware
of any facts or circumstances that would result in the Newco Basis being
materially less than the amount set forth in Section 4.01(o)(xiv) of the Company
Disclosure Schedule immediately after the transactions referred to in the second
preceding sentence if such transactions (excluding (i) the transfer by IMI of
certain assets to Newco described in Section 4.1(m) of the Restructuring
Agreement and (ii) any payments or contributions contemplated by Section 4.1(n)
of the Restructuring Agreement) occurred on the Closing Date instead of December
31, 2000, except for reductions occurring in the ordinary course of business.
(xv) As of December 31, 2000, the aggregate tax basis for federal income
tax purposes that IMI has in the assets that it holds that are used or held for
use primarily in the operation or conduct of the Women's Health Business (as
such term is defined in the Restructuring Agreement) is not less than the amount
set forth in Section 4.01(o)(xv) of the Company Disclosure Schedule.
(xvi) The amount of "net operating loss carryovers" (as defined in Section
172 of the Code) allowable to the Company as a deduction under Section 172 of
the Code as of January 1, 2001, after taking into account any limitations to
which such net operating loss carryovers are subject under Section 382 or any
other
35
provision of the Code is not less than the amount set forth in Section
4.01(o)(xvi) of the Company Disclosure Schedule.
(p) TITLE TO PROPERTIES. (i) Each of the Company and its subsidiaries has
good and marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive covenants and
similar encumbrances that individually or in the aggregate would not materially
interfere with its ability to conduct its business as presently conducted. All
such material assets and properties, other than assets and properties in which
the Company or any of its subsidiaries has a leasehold interest, are free and
clear of all Liens, except for Liens that individually or in the aggregate would
not materially interfere with the ability of the Company or any of its
subsidiaries to conduct their respective businesses as presently conducted.
(ii) Each of the Company and its subsidiaries has complied in all material
respects with the terms of all material leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect in
all material respects. Each of the Company and its subsidiaries enjoys peaceful
and undisturbed possession under all such leases in all material respects.
(iii) At the Effective Time, the properties and assets of the Sunrise
Companies (collectively, the "Sunrise Assets") will compose all the material
assets of the Company and its subsidiaries primarily used or held for use in the
Sunrise Business (including such material assets primarily used or held for use
in the Sunrise Business in connection with research and development activities
and programs). Assuming that (i) the Sunrise Companies (A) continue to employ
all of the employees of the Sunrise Companies set forth on Schedules 1.1(b) and
1.1(c) of the Restructuring Agreement and (B) retain as consultants those
current executives of the Company who have entered into the Non-Competition
Agreements and (ii) the existing agreements, contracts and other relationships
of the Sunrise Companies remain in effect, at the Effective Time there will be
no other assets of the Company or any of its subsidiaries, other than the
Sunrise Assets
36
and assets and services contemplated as of the date of this Agreement to be
provided pursuant to the Restructuring Agreement or the Transition Services
Agreement, that are material to the conduct of the Sunrise Business as currently
conducted. For the avoidance of doubt, the Sunrise Assets shall include all
Intellectual Property Rights (other than trademarks, trademark applications,
registrations and other rights, trade names and trade dress, trade name rights,
service marks, service xxxx rights and service names which shall be allocated as
set forth in the Restructuring Agreement) related to the Diabetes Field (as
defined in the Post-Closing Covenants Agreement).
(q) INTELLECTUAL PROPERTY. (i) Each of the Company and its subsidiaries
owns, or is validly licensed or otherwise has the right to use (without any
obligation to make any material fixed or contingent payments, including royalty
payments) all patents, patent applications, trademarks, trademark applications,
registrations and other rights, trade names and trade dress, trade name rights,
domain names, service marks, service xxxx rights, service names, copyrights,
copyright applications and registrations, technical information including
engineering, production and other designs, drawings, specifications, formulae,
technology, computer and electronic data processing programs and software,
inventions, processes, trade secrets, know-how, confidential information and
other proprietary property, rights and interests and Documentation (as defined
in the License Agreement)(collectively, "Intellectual Property Rights") which
are material to the conduct of the Sunrise Business free and clear of all
material Liens.
(ii) No claims are pending or, to the Knowledge of the Company, threatened
that the Company or any of its subsidiaries is infringing (including with
respect to the manufacture, use or sale by the Company or any of its
subsidiaries of its commercial products) the rights of any person with regard to
any Intellectual Property Right. To the Knowledge of the Company, no person or
persons are infringing the rights of the Company or any of its subsidiaries with
respect to any Intellectual Property Right.
(iii) No claims are pending or, to the Knowledge of the Company, threatened
with regard to the Company's or any of its subsidiaries' ownership of any of its
Intellectual Property Rights.
37
(iv) Section 4.01(q)(iv) of the Company Disclosure Schedule sets forth, as
of the date hereof, a complete and accurate list of all patents, trademarks and
applications therefor owned by or licensed to the Company or any of its
subsidiaries. All patents and patent applications listed in Section 4.01(q)(iv)
of the Company Disclosure Schedule are owned by the Company or its subsidiaries
free and clear of all material Liens. The patent applications listed in Section
4.01(q)(iv) of the Company Disclosure Schedule are pending and have not been
abandoned, and have been and continue to be prosecuted by patent counsel. All
patents, trademarks and applications therefor owned by or licensed to the
Company or any of its subsidiaries have been duly registered and/or filed with
or issued by each appropriate Governmental Entity in the jurisdiction indicated
in Section 4.01(q)(iv) of the Company Disclosure Schedule, all necessary
affidavits of continuing use have been filed, and all necessary maintenance fees
have been timely paid to continue all such rights in effect. None of the patents
listed in Section 4.01(q)(iv) of the Company Disclosure Schedule has expired or
has been declared invalid, in whole or in part, by any Governmental Entity.
There are no ongoing interferences, oppositions, reissues, reexaminations or
other proceedings involving any of the patents or patent applications listed in
Section 4.01(q)(iv) of the Company Disclosure Schedule, including ex parte and
post-grant proceedings, in the United States Patent and Trademark Office or in
any foreign patent office or similar administrative agency. To the Knowledge of
the Company, there are no published patents, patent applications, articles or
other prior art references that are reasonably expected to invalidate any patent
listed in Section 4.01(q)(iv) of the Company Disclosure Schedule. To the
Knowledge of the Company, each of the patents and patent applications listed in
Section 4.01(q)(iv) of the Company Disclosure Schedule properly identifies each
and every inventor of the claims thereof as determined in accordance with the
laws of the jurisdiction in which such patent is issued or such patent
application is pending. Each inventor named on the patents and patent
applications listed in Section 4.01(q)(iv) of the Company Disclosure Schedule
has executed an agreement assigning his, her or its entire right, title and
interest in and to such patent or patent application, and the inventions
embodied and claimed therein, to the Company or any of its subsidiaries. Each
such inventor has executed an agreement with the Company or any of its
subsidiaries obligating such
38
inventor to assign the entire right, title and interest in and to such patent or
patent application, and inventions embodied and claimed therein, to the Company
or any of its subsidiaries, and, to the Knowledge of the Company, no such
inventor has any contractual or other obligation that would preclude any such
assignment or otherwise conflict with the obligations of such inventor to the
Company or any of its subsidiaries under such agreement with the Company or such
subsidiary.
(v) Section 4.01(q)(v) of the Company Disclosure Schedule sets forth a
complete and accurate list of all options, rights, licenses or interests of any
kind relating to Intellectual Property granted to the Company or any of its
subsidiaries, other than software licenses for generally available software, or
granted by the Company or any of its subsidiaries to any other person.
(vi) No material trade secret of the Company or any of its subsidiaries has
been published or disclosed by the Company or any of its subsidiaries or, to the
Knowledge of the Company, by any other person to any person except pursuant to
licenses or contracts requiring such other persons to keep such trade secrets
confidential.
(r) VOTING REQUIREMENTS. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock entitled to vote at the
Stockholders' Meeting or any adjournment or postponement thereof in favor of
adopting this Agreement (the "Stockholder Approval") is the only vote of the
holders of any class or series of the Company's capital stock necessary to adopt
this Agreement and approve the Merger. The affirmative vote of the holders of
the Company Common Stock is not necessary to approve any transaction
contemplated by this Agreement or the other Transaction Agreements (other than
the consummation of the Merger).
(s) STATE TAKEOVER STATUTES. The Board of Directors of the Company has
unanimously approved the terms of this Agreement and the other Transaction
Agreements and the consummation of the Merger, the Restructuring and the other
transactions contemplated hereby or thereby, and such approval represents all
the action necessary to render inapplicable to this Agreement, the other
Transaction Agreements, the Merger, the Restructuring and the other transactions
39
contemplated hereby or thereby, the provisions of Section 203 of the DGCL to the
extent, if any, such Section would otherwise be applicable to this Agreement,
the other Transaction Agreements, the Merger, the Restructuring and the other
transactions contemplated hereby or thereby. To the Knowledge of the Company, no
other state takeover statute or similar statute or regulation applies or
purports to apply to this Agreement, the other Transaction Agreements, the
Merger, the Restructuring or the other transactions contemplated hereby or
thereby.
(t) BROKERS. No broker, investment banker, financial advisor or other
person, other than ABN AMRO Incorporated, UBS Warburg LLC and Xxxxxxxxx
Associates, the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement or
the other Transaction Agreements based upon arrangements made by or on behalf of
the Company. The Company has delivered to Parent true and complete copies of all
agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the persons to
whom such fees are payable.
(u) OPINIONS OF FINANCIAL ADVISORS. The Company has received the opinions
of ABN AMRO Incorporated and UBS Warburg LLC to the effect that, as of the date
thereof, the Closing Consideration is fair from a financial point of view to the
holders of shares of Company Common Stock, signed copies of which opinions will
be delivered to Parent promptly after receipt thereof by the Company.
(v) DEVELOPMENT, DISTRIBUTION, MARKETING, SUPPLY AND MANUFACTURING
AGREEMENTS. Section 4.01(v) of the Company Disclosure Schedule sets forth a
complete and accurate list of all material contracts or agreements (whether or
not in written form), other than contracts or agreements with Parent or any of
its Affiliates, to which the Company or any of its subsidiaries is a party as of
the date hereof or with respect to which the Company or any of its subsidiaries
has any ongoing obligations as of the date hereof, in each case relating to the
research, development, distribution, training, sale, license, marketing and
supply of components for, and manufacturing by third parties of, the Company's
or any of its subsidiaries' products or products licensed by the Company or any
of its
40
subsidiaries. The Company has made available to Parent true and complete copies
of all material contracts or agreements, other than contracts or agreements with
Parent or any of its Affiliates, to which the Company or any of its subsidiaries
is a party relating to the research, development, distribution, training, sale,
license, marketing and supply of components for, and manufacturing by third
parties of, the Company's or any of its subsidiaries' products or products
licensed by the Company or any of its subsidiaries.
(w) REGULATORY COMPLIANCE. (i) As to each product subject to the FDCA and
the FDA regulations promulgated thereunder or similar Legal Provisions in any
foreign jurisdiction (each such product, a "Medical Device") that is
manufactured, tested, distributed and/or marketed by the Company or any of its
subsidiaries, such Medical Device is being manufactured, tested, distributed
and/or marketed by the Company or any of its subsidiaries in compliance with all
applicable requirements under FDCA, the FDA regulations promulgated thereunder,
and such similar Legal Provisions, including those relating to investigational
use, premarket clearance, good manufacturing practices, labeling, advertising,
record keeping, filing of reports and security, except for failures to be in
compliance which, individually or in the aggregate, have not had and are not
reasonably expected to have a Material Adverse Effect. Excluding any notices
given directly to Parent or any of its Affiliates, none of the Company or any of
its subsidiaries has received any notice or other communication from the FDA or
any other Governmental Entity (A) contesting the premarket clearance or approval
of, the uses of or the labeling and promotion of any of the Company's products
or (B) otherwise alleging any violation of any Legal Provision by the Company or
any of its subsidiaries, which, in the case of clause (A) or (B), individually
or in the aggregate, has not had and is not reasonably expected to have a
Material Adverse Effect.
(ii) No Medical Devices have been recalled, withdrawn, suspended or
discontinued by the Company or any of its subsidiaries in the United States or
outside the United States (whether voluntarily or otherwise) by order of the FDA
or any other Governmental Entity. No proceedings in the United States and
outside of the United States of which the Company has Knowledge (whether
completed or pending) seeking the recall, withdrawal, suspension or seizure of
any Medical Devices are pending against the Company or any of its subsidiaries,
nor have any such proceedings been pending at any prior time.
41
(iii) Except for instances that individually or in the aggregate have not
had and are not reasonably expected to have a Material Adverse Effect, (A) none
of the Company, any of its subsidiaries or, to the Knowledge of the Company, any
of their respective officers, employees or agents has made an untrue statement
of a material fact or fraudulent statement to the FDA or any other Governmental
Entity, failed to disclose a material fact required to be disclosed to the FDA
or any other Governmental Entity, or committed an act, made a statement, or
failed to make a statement that, at the time such disclosure was made, could
reasonably be expected to provide a basis for the FDA to invoke its policy
respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities", set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for any
other Governmental Entity to invoke any similar policy; and (B) none of the
Company, any of its subsidiaries or, to the Knowledge of the Company, any of
their respective officers, employees or agents, has been convicted of any crime
or engaged in any conduct for which debarment is mandated by 21 U.S.C. ss.
335a(a) or any similar Legal Provision or authorized by 21 U.S.C. ss. 335a(b) or
any similar Legal Provision.
(iv) Excluding any notices given directly to Parent or any of its
Affiliates, none of the Company or any of its subsidiaries has received any
written notice that the FDA or any other Governmental Entity has commenced, or
threatened to initiate, any action to withdraw its approval or request the
recall of any product of the Company or any of its subsidiaries, or commenced,
or threatened to initiate, any action to enjoin production at any facility of
the Company or any of its subsidiaries which has had or are reasonably expected
to have a Material Adverse Effect.
(x) SOLVENCY OF NEWCO. To the Company's Knowledge, immediately following
the Effective Time, and after giving effect to the Restructuring and the Merger,
(i) the fair value of the assets of each of Newco and its subsidiaries will
exceed its debts and liabilities, contingent or otherwise, (ii) the present fair
saleable value of the assets of each of Newco and its subsidiaries will be
greater than the amount that will be required to pay its then existing debts and
other liabilities, contingent or otherwise, as such debts and other liabilities
become absolute and matured, (iii) each of Newco and its subsidiaries will be
able to pay its then existing debts and other liabilities, contingent or
otherwise, as such
42
debts and liabilities become absolute and matured, and (iv) Newco and its
subsidiaries will not have an unreasonably small amount of capital with which to
conduct the businesses in which they will be engaged.
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Except as
(i) disclosed or set forth in the Parent SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed Parent SEC Documents")
or (ii) disclosed or set forth on the disclosure schedule (with specific
reference to the particular subsection of this Agreement to which the
information set forth in such disclosure schedule relates; PROVIDED, HOWEVER,
that an item included on the disclosure schedule with respect to any subsection
of this Section 4.02 shall be deemed to relate to each other subsection of this
Section 4.02 to the extent such relationship is obvious) delivered by Parent to
the Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), Parent and Sub represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has all requisite corporate
power and authority to carry on its business as now being conducted. Each of
Parent and Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate has not had and is not
reasonably expected to have a Parent Material Adverse Effect. Parent has made
available to the Company complete and correct copies of its Restated Certificate
of Incorporation and By-laws and the Certificate of Incorporation and By-laws of
Sub, in each case as amended to the date hereof.
(b) AUTHORITY; NONCONTRAVENTION. Each of Parent and Sub has the requisite
power and authority to enter into each Transaction Agreement to which it is or
will be a party and to consummate the transactions contemplated thereby. The
execution and delivery of each Transaction Agreement to which it is or will be a
party and the consummation of the transactions contemplated thereby have been
duly authorized
43
by all necessary corporate action on the part of Parent and Sub and no other
corporate proceedings on the part of Parent or Sub are necessary to authorize
any such Transaction Agreement or to consummate the transactions contemplated
thereby. All outstanding shares of Parent Common Stock are, and all shares of
Parent Common Stock which may be issued pursuant to this Agreement shall when
issued be, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. This Agreement has been duly executed and
delivered by Parent and Sub, and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
Parent and Sub, enforceable against Parent and Sub, in accordance with its
terms. Each Transaction Agreement (other than this Agreement) to which Parent
will be a party will, when executed and delivered by Parent, and, assuming the
due authorization, execution and delivery by each of the other parties thereto,
constitute a legal, valid and binding obligation of Parent, enforceable against
such entity in accordance with its terms. The execution and delivery by Parent
of each Transaction Agreement to which it is a party does not, and the
consummation of the Merger and the other transactions contemplated thereby and
compliance with the provisions thereof will not, conflict with, or result in any
violation or breach of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of Parent or Sub under
(i) the Restated Certificate of Incorporation or By-laws of Parent or the
Certificate of Incorporation or By-laws of Sub, (ii) any Contract to which
Parent or Sub is a party or any of their respective properties or other assets
is subject or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any (A) statute, law, ordinance, rule or
regulation or (B) order, writ, injunction, decree, judgment or stipulation, in
each case applicable to Parent or Sub or their respective properties or other
assets, other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, breaches, defaults, rights, losses or Liens that individually or in
the aggregate have not had and are not reasonably expected to have a Parent
Material Adverse Effect. No consent, approval, order or authorization of, action
by or in respect of, or registration, declaration or filings with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement or the other
Transaction Agreements by Parent and Sub or the consummation by Parent and Sub
of the Merger or the other transactions contemplated hereby or thereby, except
for (1) the filing of a premerger
44
notification and report form by Parent under the HSR Act or any other applicable
competition, merger control, antitrust or similar law or regulation, (2) the
filing with the SEC of (A) a registration statement on Form S-4 by Parent in
connection with the distribution of Parent Common Stock in the Merger (as
amended or supplemented from time to time, the "Parent Form S-4") and (B) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (3) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, (4) filings with the NYSE and (5) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made, individually or in the
aggregate, has not had and are not reasonably expected to have a Parent Material
Adverse Effect.
(c) PARENT SEC DOCUMENTS. Parent has filed all reports, schedules, forms,
statements and other documents (including exhibits and other information
incorporated therein) with the SEC required to be filed by Parent since January
1, 1999 (together with all voluntary filings made by Parent with the SEC during
such period, the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and except to the extent that information contained in any Parent SEC
Document has been revised, superseded or updated by a later-filed Parent SEC
Document, none of the Parent SEC Documents contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of Parent
included in the Parent SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of
Parent and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the most recent financial statements
45
included in the Filed Parent SEC Documents and except for liabilities or
obligations incurred in connection with this Agreement or any of the other
Transaction Agreements, neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which, individually or in the aggregate, have had or are
reasonably expected to have a Material Adverse Effect.
(d) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) each of the Parent Form S-4 and the Newco Form S-4 will, at the
time it is filed with the SEC, at any time it is amended or supplemented and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders and
at the time of the Stockholders' Meeting, 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, in light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by Parent or Sub with respect to statements
made or incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference in the Parent
Form S-4. The Parent Form S-4 will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
thereunder.
(e) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(f) TAX MATTERS. Neither Parent, Sub nor any Affiliate of Parent has taken
or agreed to take any action or knows of any fact or circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(g) PARENT SHAREHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby, including the issuance of shares of Parent Common Stock
pursuant to Article II hereof, do not require the approval of the holders of any
shares of capital stock of Parent.
46
(h) BROKERS. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY THE COMPANY.
During the period from the date of this Agreement to the Effective Time, except
(x) as set forth in Section 5.01(a) of the Company Disclosure Schedule, (y) as
specifically permitted or contemplated by any other provision of this Agreement
or the other Transaction Agreements or (z) to the extent Parent shall otherwise
consent in advance in writing, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice (including (x) in respect of research and
development activities and programs and (y) making capital expenditures with
respect to the Sunrise Companies as described in the Company Capital Budget) and
in compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, use all commercially reasonable efforts
to preserve intact their respective current business organizations, keep
available the services of their respective current officers and employees and
preserve the relationships with their respective customers, suppliers,
licensors, licensees, distributors and others having business dealings with them
with the intention that their respective goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company agrees that, except for the transactions specifically
permitted or contemplated by the Transaction Agreements or as set forth in
Section 5.01(a) of the Company Disclosure Schedule, it shall not, and shall not
permit any of its subsidiaries to, without Parent's prior written consent:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property), in respect of, any of its
capital stock, (y) split, combine or reclassify any of its
47
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or (z)
purchase, redeem or otherwise acquire any shares of its capital stock or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or subject
to any Lien any shares of its capital stock, any other voting securities or
equity interests or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity interests or
convertible securities, or any "phantom" stock, "phantom" stock rights, stock
appreciation rights or stock based performance units (other than (x) the
issuance of shares of Company Common Stock upon the exercise of Stock Options,
Warrants or rights under the Company ESPP, in each case, outstanding on the date
hereof and in accordance with their terms on the date hereof and (y) the
issuance of Stock Options (and shares of Company Common Stock thereunder) to any
employee of the Company hired after the date of this Agreement in connection
with such hiring, PROVIDED that such issuance is in the ordinary course of
business consistent with past practice and that such Stock Options have an
exercise price per share at least equal to the market value of the Company
Common Stock on the date of issuance (and with other material terms no more
favorable to such employee than the terms of the Stock Options outstanding on
the date of this Agreement that were issued under similar circumstances));
(iii) amend or propose to amend the Company Certificate or the Company
By-laws or the certificate of incorporation or by-laws (or similar
organizational documents) of any of the Company's subsidiaries;
(iv) directly or indirectly acquire (x) by merging or consolidating with,
or by purchasing assets of, or by any other manner, any person or division,
business or equity interest of any person or (y) any assets that, individually,
have a purchase price in excess of $50,000 or, in the aggregate, have a purchase
price in excess of $250,000, except for purchases of raw materials, components
or supplies in the ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage, sell and leaseback or otherwise
encumber or subject to any Lien
48
or otherwise dispose of any of its properties or other assets or any interests
therein (including securitizations), except sales of inventory and used
equipment in the ordinary course of business consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice not to exceed $250,000 at any time outstanding or (y) make
any loans, advances or capital contributions to, or investments in, any other
person, other than to employees in the ordinary course of business consistent
with past practice;
(vii) except for projects specifically identified in the Company's budget
for 2001 (the "Company Capital Budget"), a true and complete copy of which has
been provided to Parent, make any new capital expenditure or expenditures which,
individually, is in excess of $50,000 or, in the aggregate, are in excess of
$250,000;
(viii) (w) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge, settlement or satisfaction in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities disclosed, reflected or reserved against in the
most recent audited financial statements (or the notes thereto) of the Company
included in the Filed Company SEC Documents or incurred since the date of such
financial statements in the ordinary course of business consistent with past
practice, (x) cancel any indebtedness for borrowed money, (y) waive or assign
any claims or rights of substantial value or (z) waive any benefits of, or agree
to modify in any respect, any confidentiality, standstill or similar agreements
to which the Company or any of the other Sunrise Companies is a party;
(ix) except in the ordinary course of business consistent with past
practice, modify, amend or
49
terminate any material contract or agreement to which the Company or any of its
subsidiaries is a party or waive, release or assign any material rights or
claims thereunder;
(x) enter into any contracts, agreements, binding arrangements or
understandings relating to the supply of components for the research,
development, distribution, manufacturing and assembling by third parties of, and
the training, license and marketing of, products of the Company or any of its
subsidiaries or products licensed by the Company or any of its subsidiaries,
other than pursuant to any such contracts, agreements, arrangements or
understandings currently in place (that have been disclosed in writing to Parent
prior to the date hereof) in accordance with their terms as of the date hereof;
(xi) except as otherwise contemplated by this Agreement or as required to
comply with applicable law, (A) adopt, enter into, terminate or amend in any
material respect any collective bargaining agreement, Benefit Plan or Benefit
Agreement, (B) increase in any manner the compensation, bonus or fringe or other
benefits of, any current or former officer, director, employee or consultant of
the Company or any of its subsidiaries (subject to and except as set forth in
Section 5.01(a)(xi) of the Company Disclosure Schedule, except for normal
increases in cash compensation in the ordinary course of business consistent
with past practice), (C) pay any benefit or amount not required under any
Benefit Plan or Benefit Agreement or any other benefit plan or arrangement of
the Company or any of its subsidiaries as in effect on the date of this
Agreement, (D) increase in any manner the severance or termination pay of any
current or former director, officer, employee or consultant of the Company or
any of its subsidiaries, (E) make any material determinations not in the
ordinary course of business consistent with past practice, under any collective
bargaining agreement, Benefit Plan or Benefit Agreement, (F) grant any awards
under any bonus, incentive, performance or other compensation plan or
arrangement or Benefit Plan (including the grant of stock options, "phantom"
stock, stock appreciation rights, "phantom" stock rights, stock based or stock
related awards, performance units or restricted stock or the removal of existing
restrictions in any Benefit Plans or agreements or awards made thereunder),
except as permitted by Section 5.01(a)(ii) (G) amend or modify any Stock Option
or Warrant, except as specifically
50
provided in Section 6.04 hereof or in the Restructuring Agreement, (H) take any
action to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or Benefit
Plan, (I) take any action to accelerate the vesting or payment of any
compensation or benefit under any Benefit Plan or Benefit Agreement, other than
non-discretionary actions required by the terms of any existing Benefit Plans or
Benefit Agreement as in effect on the date of this Agreement, or (J) change any
actuarial or other assumption used to calculate funding obligations with respect
to any Pension Plan or change the manner in which contributions to any Pension
Plan are made or the basis on which such contributions are determined;
(xii) except as otherwise contemplated by this Agreement, enter into any
Contract of a nature that would be required to be filed as an exhibit to Form
10-K under the Exchange Act, other than contracts for the sale of the Company's
products in the ordinary course of business consistent with past practice;
(xiii) revalue any assets of the Company or any of its subsidiaries or,
except as required by GAAP, make any change in accounting methods, principles or
practices;
(xiv) except in the ordinary course of business consistent with past
practice, extend, accelerate, discount, compromise or settle any account payable
or account receivable;
(xv) sell, transfer or license to any person or otherwise extend, amend or
modify any rights to the Intellectual Property Rights of the Company or any of
its subsidiaries; or
(xvi) authorize any of, or commit or agree to take any of, the foregoing
actions.
(b) OTHER ACTIONS. The Company, Parent and Sub shall not take any action
that would, or that are reasonably expected to, result in (i) any of the
representations and warranties of such party set forth in any Transaction
Agreement that are qualified by materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Split-Off and the Merger
set forth in Article VII not being satisfied.
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(c) ADVICE OF CHANGES; FILINGS. The Company and Parent shall promptly
advise the other party orally and in writing of (i) any breach of its
representations or warranties that would give rise to the failure of a condition
set forth in Section 7.02(a) or 7.03(a), as the case may be, or (ii) the failure
of it (and, in the case of Parent, Sub) to comply with or satisfy in any
material respect any covenant or agreement to be complied with or satisfied by
it under this Agreement at or prior to the Closing Date; PROVIDED, HOWEVER, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement; PROVIDED, FURTHER,
HOWEVER, that the failure to provide such notification shall not give rise to a
failure of a condition set forth in Section 7.02(b) or 7.03(b), if any such
breach or failure described in clauses (i) or (ii) above shall have been cured
on or prior to the Effective Time or no longer exists immediately prior to the
Effective Time. The Company and Parent shall promptly provide the other copies
of all filings made by such party or its subsidiaries with any Governmental
Entity in connection with any Transaction Agreement and the transactions
contemplated thereby, other than the portions of such filings that include
confidential information not directly related to the transactions contemplated
by the Transaction Agreements.
(d) CERTAIN TAX MATTERS. From the date hereof until the Effective Time, (i)
the Company and its subsidiaries (including Newco) will file all material tax
returns and reports ("Post-Signing Returns") required to be filed by such entity
(after taking into account any applicable extensions); (ii) the Company and its
subsidiaries (including Newco) will timely pay all material taxes due and
payable with respect to the taxable periods covered by such Post-Signing Returns
that are so filed; (iii) the Company and its subsidiaries (including Newco) will
make reasonable provision for all taxes payable by the Company and its
subsidiaries (including Newco) for which no Post-Signing Return is due prior to
the Effective Time; (iv) the Company will promptly notify Parent of any action,
suit, proceeding, claim or audit (collectively, "Actions") pending against or
with respect to the Company or any of its subsidiaries (including Newco) in
respect of any material tax and will not settle or compromise any such Action
without Parent's prior written consent, which consent shall not be unreasonably
withheld; and (v) the Company will not make any material tax election without
Parent's prior written consent, which consent shall not be unreasonably
withheld.
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SECTION 5.02. NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of the Company or any of its subsidiaries or any investment
banker, financial advisor, attorney, accountant or other advisor, agent or
representative retained by the Company or any of its subsidiaries (collectively,
"Representatives") to, directly or indirectly through another person (i)
solicit, initiate or encourage, or take any other action designed to, or which
could reasonably be expected to, facilitate, any inquiries or the making of any
proposal that constitutes or could reasonably be expected to lead to a Takeover
Proposal or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information, or otherwise cooperate in any way with,
any Takeover Proposal. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in the preceding sentence by any
Representative of the Company, whether or not such person is purporting to act
on behalf of the Company or otherwise, shall be a breach of this Section 5.02(a)
by the Company. The Company shall immediately cease and cause to be terminated
all existing discussions or negotiations with any person conducted heretofore
with respect to any Takeover Proposal and request the prompt return or
destruction of all confidential information previously furnished.
Notwithstanding the foregoing, at any time prior to obtaining the Stockholder
Approval, in response to a bona fide written Takeover Proposal that the Board of
Directors of the Company determines in good faith (after consultation with
outside counsel and a financial advisor of nationally recognized reputation)
constitutes or is reasonably likely to lead to a Superior Proposal, and which
Takeover Proposal was unsolicited and made after the date hereof and did not
otherwise result from a breach of this Section 5.02(a), the Company may, if its
Board of Directors determines in good faith (after consultation with outside
counsel) that it is required to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law, and subject to
compliance with Section 5.02(c) and after giving Parent written notice of such
determination, (x) furnish information with respect to the Company to the person
making such Takeover Proposal (and its Representatives) pursuant to a customary
confidentiality agreement and (y) participate in discussions or negotiations
with the person making such Takeover Proposal (and its Representatives)
regarding such Takeover Proposal.
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to, or that is reasonably likely to lead to, any direct or
indirect
53
acquisition or purchase, in one transaction or a series of transactions, of
assets or businesses of the Company or its subsidiaries that constitute 20% or
more of the revenues, net income, or the assets of the Company and its
subsidiaries, taken as a whole, or 20% or more of the Company Common Stock, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the Company Common Stock, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution,
joint venture, binding share exchange or similar transaction involving the
Company pursuant to which any person or the shareholders of any person would own
20% or more of the Company or any resulting parent company of the Company, other
than the transactions contemplated by this Agreement or the other Transaction
Agreements.
The term "Superior Proposal" means any bona fide offer made by a third
party that if consummated would result in such person (or its shareholders)
owning, directly or indirectly, all or substantially all the shares of Company
Common Stock then outstanding (or of the surviving entity in a merger or the
direct or indirect parent of the surviving entity in a merger) or all or
substantially all the assets of the Company and its subsidiaries, taken as a
whole, which the Board of Directors of the Company determines in good faith
(after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders from a financial
point of view than the Merger (taking into account all the terms and conditions
of such proposal (including the financial terms thereof and the likelihood of
such proposal being completed) and this Agreement (including any changes to the
financial terms of this Agreement proposed by Parent in response to such offer
or otherwise)).
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i)(A) withdraw (or modify in a manner adverse to Parent), or propose to
withdraw (or modify in a manner adverse to Parent), the approval,
recommendation, or declaration of advisability by such Board of Directors or any
such committee thereof of this Agreement or the Merger, or (B) recommend, adopt
or approve, or propose publicly to recommend, adopt or approve, any Takeover
Proposal (any action described in this clause (i) being referred to as a
"Company Adverse Recommendation Change") or (ii) approve or recommend, or
propose to approve or recommend, or allow the Company to execute or enter into,
any letter of intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership
54
agreement or other similar agreement (each, an "Acquisition Agreement")
constituting or related to, or that is intended to or is reasonably likely to
lead to, any Takeover Proposal (other than a confidentiality agreement referred
to in Section 5.02(a)). Notwithstanding the foregoing, at any time prior to
obtaining the Stockholder Approval, the Board of Directors of the Company may,
in response to a Superior Proposal that was unsolicited and made after the date
hereof and that did not otherwise result from a breach of this Section 5.02, if
such Board of Directors determines in good faith (after consultation with
outside counsel) that it is required to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law (i) make a
Company Adverse Recommendation Change and/or (ii) cause the Company to terminate
this Agreement(and concurrently with or after such termination, if it so
chooses, cause the Company to enter into any Acquisition Agreement with respect
to any Superior Proposal); PROVIDED, HOWEVER, that (i) no Company Adverse
Recommendation Change may be made and (ii) no such termination by the Company
may be made, until after the fourth business day following Parent's receipt of
written notice (a "Notice of Adverse Recommendation") from the Company advising
Parent that the Board of Directors of the Company intends to make a Company
Adverse Recommendation Change and/or terminate this Agreement pursuant to this
Section 5.02(b) and specifying the terms and conditions of such Superior
Proposal (it being understood and agreed that any amendment to the financial
terms or any other material term of such Superior Proposal shall require a new
Notice of Adverse Recommendation and a new four business day period). In
determining whether to make a Company Adverse Recommendation Change or to
terminate this Agreement pursuant to this Section 5.02(b), the Board of
Directors of the Company shall take into account any changes to the financial
terms of this Agreement proposed by Parent in response to a Notice of Adverse
Recommendation or otherwise.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.02, the Company shall promptly advise Parent
orally and in writing of any Takeover Proposal, the material terms and
conditions of any such Takeover Proposal (including any material changes
thereto) and the identity of the person making any such Takeover Proposal. The
Company shall (i) keep Parent fully informed of the status and material details
(including any change to the material terms thereof) of any such Takeover
Proposal and (ii) provide to Parent as soon as practicable after receipt or
delivery thereof with copies of all correspondence and other written material
sent or provided to the Company from any person in connection
55
with any Takeover Proposal or sent or provided by the Company to any person in
connection with any Takeover Proposal, except for such correspondence and
materials previously provided to Parent by the Company.
(d) Nothing contained in this Section 5.02 shall prohibit the Company from
(x) taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or
(y) making any required disclosure to the Company's stockholders if, in the good
faith judgment of the Board of Directors of the Company (after consultation with
outside counsel) failure so to disclose would constitute a violation of
applicable law; PROVIDED, HOWEVER, that in no event shall the Company or its
Board of Directors or any committee thereof take, or agree or resolve to take,
any action prohibited by Section 5.02(b).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF THE PARENT FORM X-0, XXX XXXXX XXXX X-0, THE
FORM 8-A AND THE PARENT PROXY STATEMENT; STOCKHOLDERS' MEETING. (a) As soon as
practicable following the date of this Agreement, the Company and Parent shall
prepare and the Company shall file with the SEC the Proxy Statement, the Newco
Form S-4 and the Form 8-A and Parent shall prepare and file with the SEC the
Parent Form S-4. The Proxy Statement will be included as a prospectus in the
Newco Form S-4 and the Parent Form S-4. Each of the Company and Parent shall use
its commercially reasonable efforts to have the Newco Form S-4 and the Parent
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing. The Company shall use its commercially reasonable efforts to
cause the Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable after the Newco Form S-4 and the Parent Form S-4 are declared
effective under the Securities Act. Each of Parent and the Company shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with, in the case of Parent, the issuance of Parent Common Stock in
the Merger and, in the case of the Company, the issuance of Newco Common Stock
in the Split-Off. The Company shall furnish all information concerning the
Company and the holders of Company Common Stock, and Parent shall furnish all
information concerning Parent, as
56
may be reasonably requested in connection with any such action and the
preparation, filing and distribution of the Proxy Statement, the Newco Form S-4
and the Parent Form S-4. No filing of, or amendment or supplement to, the Parent
S-4 will be made by Parent, and no filing of, or amendment or supplement to, the
Xxxxx X-0 or the Proxy Statement will be made by the Company, in each case
without providing the other party a reasonable opportunity to review and comment
thereon. If at any time prior to the Effective Time any information relating to
the Company or Parent, or any of their respective Affiliates, officers or
directors, should be discovered by the Company or Parent which should be set
forth in an amendment or supplement to any of the Parent Form S-4, the Newco
Form S-4 or the Proxy Statement, so that any such document would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the Company. The
parties shall notify each other promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement, the Newco Form S-4, the Form 8-A or the
Parent Form S-4 or for additional information and shall supply each other with
copies of all correspondence between it or any of its Representatives, on the
one hand, and the SEC or its staff on the other hand, with respect to the Proxy
Statement, the Newco Form S-4, the Parent Form S-4, the Form 8-A, the Merger or
the other transactions contemplated by the Transaction Agreements.
(b) The Company shall, as soon as practicable following the date of this
Agreement (taking into account any delays reasonably required as a result of the
occurrence of any event described in the last sentence of this clause (b)),
establish a record date following the date of this Agreement for, duly call,
give notice of, convene and hold a meeting of its stockholders (the
"Stockholders' Meeting") solely for the purpose of obtaining the Stockholder
Approval. Subject to Section 5.02(b), the Company shall, through its Board of
Directors, recommend to its stockholders approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby (and, if
required, the other Transaction Agreements and the transactions contemplated
thereby) and shall include such recommendation in the Proxy Statement. Without
limiting the generality of the foregoing, the Company's obligations
57
pursuant to the first sentence of this Section 6.01(b) shall not be affected by
(i) the commencement, public proposal, public disclosure or communication to the
Company of any Takeover Proposal or (ii) the withdrawal or modification by the
Board of Directors of the Company or any committee thereof of such Board of
Directors' or such committee's approval or recommendation of the Merger or this
Agreement.
SECTION 6.02. ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall,
and shall cause each of its subsidiaries to, afford to Parent, and to Parent's
officers, employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all its properties, books, contracts,
commitments, personnel and records relating to the Sunrise Business and, during
such period, the Company shall, and shall cause each of its subsidiaries to,
furnish reasonably promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws, (b) a copy of
all of the working papers of the Company, its subsidiaries and its independent
auditors relating to the determination and calculation of the tax basis in the
Newco Assets (subject, in the case of such independent auditors, to the
execution and delivery by Parent of a reasonable and customary release and
indemnity agreement requested by such independent auditors) and (c) all other
information relating to the Sunrise Business as Parent may reasonably request.
Except for disclosures expressly permitted by the terms of the Confidentiality
Agreement dated as of April 18, 2001, between Parent and the Company (as it may
be amended from time to time, the "Confidentiality Agreement"), Parent shall
hold, and shall cause it officers, employees, accountants, counsel, financial
advisors and other representatives and controlled Affiliates to hold, all
information received from the Company, directly or indirectly, in confidence in
accordance with the Confidentiality Agreement. No investigation pursuant to this
Section 6.02 or information provided or received by any party hereto pursuant to
this Agreement will affect any of the representations or warranties of the
parties hereto contained in this Agreement or the conditions hereunder to the
obligations of the parties hereto.
SECTION 6.03. COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to use
its commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all
58
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger, the Restructuring and the other
transactions contemplated by this Agreement and the other Transaction
Agreements, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all acts necessary to cause the conditions to
Closing to be satisfied as promptly as practicable, (ii) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity, (iii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iv) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the other Transaction Agreements, or the
consummation of the transactions contemplated hereby or thereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (v) the execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement and the
other Transaction Agreements. In addition, the Company shall assist Parent with
Parent's evaluation of the transactions to be completed in order to effect the
Restructuring. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (1) take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the other Transaction Agreements, the Merger or
any of the other transactions contemplated hereby or thereby and (2) if any
state takeover statute or similar statute becomes applicable to this Agreement,
the other Transaction Agreements, the Merger or any other transaction
contemplated hereby or thereby, take all action necessary to ensure that the
Merger, the Restructuring and the other transactions contemplated by this
Agreement and the other Transaction Agreements may be consummated as promptly as
practicable on the terms contemplated hereby or thereby and otherwise to
minimize the effect of such statute or regulation on this Agreement, the other
Transaction Agreement, the Merger, the Restructuring and the other transactions
contemplated hereby or thereby. Nothing in this Agreement shall be deemed to
require Parent to agree to, or proffer to, divest or hold separate any assets or
any portion of any business of Parent or its subsidiaries or the Sunrise
Business.
59
(b) Each of Parent and the Company shall, in connection with the efforts
referenced in Section 6.03(a) to obtain all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities necessary to
consummate the transactions contemplated hereby under the HSR Act or any other
applicable competition, merger control, antitrust or similar law or regulation,
use commercially reasonable efforts to (i) cooperate with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, and (ii) keep the other party reasonably informed of communications
received by such party from, or given by such party to, the Antitrust Division
of the Department of Justice, the Federal Trade Commission or any other
Governmental Entity and of material communications received or given in
connection with proceedings by a private party, in each case regarding any of
the transactions contemplated hereby.
SECTION 6.04. SUNRISE OPTIONS; SUNRISE WARRANTS. (a) Prior to the Effective
Time, and in addition to and after giving effect to the conversion of the Stock
Options into Sunrise Options and Newco Options (each as defined in the
Restructuring Agreement) and the amendment of each such option as and to the
extent set forth in the Restructuring Agreement, the Board of Directors of the
Company (or, if appropriate, any committee of the Board of Directors of the
Company administering the Company Stock Plans) shall adopt such resolutions or
take such other actions as may be required to effect the following:
(i) adjust the terms of all outstanding Sunrise Options granted under the
Company Stock Plans, whether or not exercisable, as necessary to provide that,
at the Effective Time, each Sunrise Option outstanding immediately prior to the
Effective Time shall be amended and converted into an option to acquire, on the
same terms and conditions as were applicable under the Sunrise Option, the
number of shares of Parent Common Stock (rounded down to the nearest whole
share) determined by multiplying the number of shares of Company Common Stock
subject to such Sunrise Option by the Parent Exchange Ratio, at a price per
share of Parent Common Stock equal to (A) the aggregate exercise price for the
shares of Company Common Stock otherwise purchasable pursuant to such Sunrise
Option divided by (B) the aggregate number of shares of Parent Common Stock
deemed purchasable pursuant to such Sunrise Option (each, as so adjusted, an
"Adjusted Option"); PROVIDED that such exercise price shall be rounded up to the
nearest whole cent; and
60
(ii) make such other changes to the Company Stock Plans with respect to the
Sunrise Options and to the agreements evidencing the grants with respect to
Sunrise Options that are Non-Plan Stock Options (the "Non-Plan Stock Option
Agreements") as Parent and the Company may agree are appropriate to give effect
to the Split-Off and the Merger.
(b) The adjustments provided herein with respect to any Sunrise Options
held by Sunrise Employees that are "incentive stock options" as defined in
Section 422 of the Code shall be and are intended to be effected in a manner
which is consistent with Section 424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the need of
any further corporate action, Parent shall assume the Company Stock Plans and
the obligations of the Company under all Sunrise Options, with the result that
all obligations of the Company (including under the applicable Non-Plan Stock
Option Agreements) with respect to Sunrise Options outstanding at the Effective
Time, shall be obligations of Parent following the Effective Time.
(d) As soon as practicable but in any event within five business days
following the Effective Time, Parent shall prepare and file with the SEC a
registration statement on Form S-8 (or another appropriate form) registering a
number of shares of Parent Common Stock equal to the number of shares of Parent
Common Stock subject to the Adjusted Options. Such registration statement shall
be kept effective (and the current status of the prospectus or prospectuses
required thereby shall be maintained) at least for so long as any Adjusted
Options or any unsettled awards granted under the Company Stock Plans after the
Effective Time, may remain outstanding.
(e) As soon as practicable after the Effective Time, Parent shall deliver
to the holders of Sunrise Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Stock Plans and the
agreements evidencing the grants of such Sunrise Options and that such Sunrise
Options and agreements have been assumed by Parent and shall continue in effect
on the same terms and conditions (subject to the adjustments required by this
Section 6.04 after giving effect to the Merger).
(f) Except as otherwise contemplated by this Section 6.04 and by Section
6.7 of the Restructuring Agreement, and except to the extent required under the
respective terms of the Sunrise Options, all restrictions or
61
limitations on transfer and vesting with respect to Sunrise Options awarded
under the Company Stock Plans or any other plan, program or arrangement of the
Company or any of its Subsidiaries, to the extent that such restrictions or
limitations shall not have already lapsed, shall remain in full force and effect
with respect to such Sunrise Options after giving effect to the Merger and the
assumption by Parent as set forth above.
(g) At the Effective Time and after giving effect to the conversion of
warrants pursuant to Section 7.1 of the Restructuring Agreement, each Sunrise
Warrant outstanding immediately prior to the Effective Time shall be amended and
converted into a warrant to acquire, on the same terms and conditions as were
applicable under the Sunrise Warrant, the number of shares of Parent Common
Stock (rounded down to the nearest whole share) determined by multiplying the
number of shares of Company Common Stock subject to such Sunrise Warrant by the
Parent Exchange Ratio, at a price per share of Parent Common Stock equal to (A)
the aggregate exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Sunrise Warrant divided by (B) the aggregate number
of shares of Parent Common Stock deemed purchasable pursuant to such Sunrise
Warrant (each, as so amended, the "Adjusted Warrants"), PROVIDED that such
exercise price shall be rounded up to the nearest whole cent. The Company shall
use its commercially reasonable efforts to cause each Warrant to be amended
prior to the Effective Time so as to comply with this Section.
SECTION 6.05. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a) Parent agrees
that all of the Company's obligations with respect to rights to indemnification,
advancement of expenses and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of the Company as provided in the Company
Certificate, the Company By-laws or any indemnification agreement between such
directors or officers and the Company (in each case, as in effect on the date
hereof) shall be assumed by the Surviving Corporation in the Merger, without
further action, as of the Effective Time and shall survive the Merger and shall
continue in full force and effect in accordance with their terms for not less
than six years, and Parent shall cause the Surviving Corporation to fulfill such
indemnification obligations. Without limiting the obligations of Parent and the
Surviving Corporation pursuant to the foregoing sentence, Parent will cause the
Surviving Corporation to reimburse each current director of the Company for such
person's reasonable expenses (including legal fees and expenses) incurred in
62
connection with the investigation and defense of any claim arising out of or
related to the transactions contemplated hereby or by the Transaction Agreements
to the extent (i) such fees and expenses are not paid pursuant to the Company's
insurance coverage or statutory indemnification obligations within 30 days after
the receipt by the Surviving Corporation of an invoice therefor and (ii) it is
permitted by Delaware law for a party to reimburse another for such expenses (as
opposed to the more limiting provisions of Section 145 of the DGCL applicable to
the indemnification of directors by a corporation). If such insurance coverage
or statutory indemnification is paid to such person after reimbursement is made
pursuant to this paragraph 6.05(a), the director receiving such reimbursement
shall promptly repay the Company therefor to the extent payment therefor has
been made to the director under such insurance coverage or statutory
indemnification.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, Parent shall cause proper provision
to be made so that the successors and assigns of the Surviving Corporation shall
expressly assume the obligations set forth in this Section 6.05. In the event
the Surviving Corporation transfers any material portion of its assets, in a
single transaction or in a series of transactions, Parent will either guarantee
the indemnification and reimbursement obligations referred to in Section 6.05(a)
or take such other action to insure the ability of the Surviving Corporation,
legal and financial, to satisfy such indemnification obligations will not be
diminished in any material respect.
(c) For six years after the Effective Time, Parent shall maintain in effect
the Company's current officers' and directors' liability insurance in respect of
acts or omissions occurring at or prior to the Effective Time, covering each
person currently covered by the Company's officers' and directors' liability
insurance policy (a true and complete copy of which has been heretofore
delivered to Parent), on terms with respect to such coverage and amount no less
favorable than those of such policy in effect on the date hereof; PROVIDED,
HOWEVER, that the limit of coverage of such insurance shall be increased to $20
million; provided, FURTHER, HOWEVER, that Parent may substitute therefor
policies of Parent containing terms with respect to coverage and amount no less
favorable
63
in any material respect to such directors and officers; PROVIDED, FURTHER,
HOWEVER, that in satisfying its obligation under this Section 6.05(c) Parent
shall not be obligated to pay annual premiums in excess of $250,000, it being
understood and agreed that Parent shall nevertheless be obligated to provide
such coverage as may be obtained for such amount. Prior to the Effective Time,
the Company shall have the right to purchase an extended reporting period
endorsement under the Company's existing directors' and officers' liability
insurance coverage for the Company's directors and officers, and/or under one or
more other policies which provide such coverage, that in the aggregate provide
such directors and officers with coverage for six years following the Effective
Time of not more than $20 million in coverage and has other terms not materially
less favorable on the whole to the insured persons than the directors' and
officers' liability insurance coverage presently maintained by the Company;
PROVIDED, however, that the aggregate premiums for such coverage do not exceed
$500,000. The Company agrees that its purchase of the extended reporting period
endorsement described in the immediately preceding sentence shall be deemed to
satisfy Parent's obligations pursuant to this Section 6.05(c).
(d) The provisions of this Section 6.05 (d) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 6.06. FEES AND EXPENSES. (a) Except as provided in paragraph (b) of
this Section 6.06, all fees and expenses incurred in connection with this
Agreement, the Merger and the other transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
(b) In the event that (i) this Agreement is terminated by Parent pursuant
to Section 8.01(e), (ii) this Agreement is terminated by the Company pursuant to
Section 8.01(f) or (iii) (A) a Takeover Proposal shall have been made to the
Company or shall have been made directly to the stockholders of the Company
generally or shall have otherwise become publicly known or any person shall have
publicly announced an intention (whether or not conditional) to make a Takeover
Proposal, (B) thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 8.01(b)(i) without a vote at the Stockholders'
Meeting having been taken or Section 8.01(b)(iii) and
64
(C) within 12 months after such termination, the Company enters into an
Acquisition Agreement with respect to, or consummates, transactions contemplated
by any Takeover Proposal (for purposes of this clause (iii)(C), the term
"Takeover Proposal" shall have the meaning assigned to such term in Section
5.02(a) except that references to 20% therein shall be deemed to be references
to 35%), then the Company shall pay Parent a fee equal to $28,000,000 (the
"Termination Fee") by wire transfer of same-day funds (x) in the case of a
payment required by clause (i) or clause (ii) above, on the date of termination
of this Agreement and (y) in the case of a payment required by clause (iii)
above, on the date of the first to occur of such events referred to in clause
(iii)(C).
(c) The Company acknowledges and agrees that the agreements contained in
Section 6.06(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if to obtain payment of the Termination Fee, Parent
commences a suit that results in a judgment against the Company for the
Termination Fee, the Company shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the Termination Fee from the date such payment
was required to be made until the date of payment at the prime rate of Citibank,
N.A. in effect on the date such payment was required to be made.
SECTION 6.07. PUBLIC ANNOUNCEMENTS. Parent and the Company will consult
with each other before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement and the other Transaction
Agreements, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system. The parties agree that the initial press release to be issued
with respect to the transactions contemplated by this Agreement shall be in the
form heretofore agreed to by the parties.
SECTION 6.08. AFFILIATES. As soon as practicable after the date hereof, the
Company shall deliver to Parent a letter identifying all persons who are at the
time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of
65
Rule 145 under the Securities Act. The Company shall use its commercially
reasonable efforts to cause each such person to deliver to Parent prior to the
Closing Date a written agreement substantially in the form attached as Exhibit A
hereto.
SECTION 6.09. SECURITIES LISTINGS. (a) To the extent Parent does not issue
treasury shares in the Merger that are already listed, Parent shall use its
commercially reasonable efforts to cause the shares of Parent Common Stock to be
issued in the Merger or upon exercise of the Sunrise Options or Sunrise Warrants
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
(b) The Company shall use its commercially reasonable efforts to cause the
shares of Newco Common Stock to be distributed in the Split-Off to be approved
for listing on a national securities exchange, or approved for quotation on
Nasdaq, in each case subject to official notice of issuance, prior to the
Closing Date.
SECTION 6.10. TAX TREATMENT. (a) Each of Parent and the Company shall use
commercially reasonable efforts to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code, and Parent will
not take any action that would breach the representations made by Parent in the
Parent Representation Letter (as defined below). The Company shall use its
commercially reasonable efforts to obtain the opinion of counsel referred to in
Section 7.03(c). Parent shall provide Xxxxxxx Procter LLP, counsel to the
Company, with a duly executed letter in the form of the letter set forth in
Section 6.10 of the Company Disclosure Schedule (the "Parent Representation
Letter") (i) executed and dated on the date on which the Form S-4 is filed with
the SEC and (ii) executed and dated on the Closing Date.
(b) Parent shall, and shall cause the Surviving Corporation to, report the
Split-Off for federal income tax purposes in a manner consistent with its
treatment for such purposes as integrated with the Merger and as a redemption of
a number of shares of Company Common Stock equal in value to the value of the
Newco Common Stock distributed in the Split-Off.
SECTION 6.11. STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and/or its directors relating to the
66
transactions contemplated by the Transaction Agreements; PROVIDED, HOWEVER, that
no such settlement shall be agreed to without Parent's prior written consent,
which consent shall not be unreasonably withheld or delayed.
SECTION 6.12. EMPLOYEE MATTERS. (a) For a period ending not earlier than
December 31, 2002, the Sunrise Employees (other than those employees located in
Ireland) shall be provided pension and welfare benefits that are substantially
comparable in the aggregate to the pension and welfare benefits provided to such
employees immediately prior to the Effective Time. Except as provided above, (i)
for a period ending not earlier than December 31, 2002, the Sunrise Employees
shall be provided base salary or hourly wage rates that are at least equal to
those being received by them immediately prior to the Effective Time and (ii)
for a period ending not earlier than December 31, 2001, the Sunrise Employees
shall be provided other employee benefits that are substantially comparable in
the aggregate to the employee benefits provided to the Sunrise Employees
immediately prior to the Effective Time; PROVIDED, that neither Parent nor the
Surviving Corporation shall have any obligation to issue, or adopt any plans or
arrangements providing for the issuance of, shares of capital stock, warrants,
options, stock appreciation rights or other rights in respect of any shares of
capital stock of any entity or any securities convertible or exchangeable into
such shares pursuant to any such plans or arrangements; PROVIDED, FURTHER, that
no plans or arrangements of the Company or any of its subsidiaries providing for
such issuance shall be taken into account in determining whether employee
benefits are substantially comparable in the aggregate.
(b) With respect to Sunrise Employees employed in the United States or
covered by the Company's Benefit Plans that are subject to ERISA, Parent shall
recognize the service of each Sunrise Employee at the Effective Time with his or
her service through the Effective Time as if such service had been performed
with Parent (i) for purposes of eligibility and vesting (but not benefit
accrual) under Parent's defined benefit pension plan and (ii) for purposes of
eligibility for vacation under Parent's vacation program (in the case of each of
clauses (i) and (ii), solely to the extent that Parent makes such plan or
program available to employees of the Surviving Corporation but not for purposes
of any other employee benefit plan of Parent). With respect to Sunrise Employees
employed outside the United States, Parent shall comply with all applicable
local laws in respect of any requirement to credit service of such Sunrise
Employees prior to the Effective Time for employee benefit plan purposes.
67
(c) The Company shall take all actions necessary to cause the Company ESPP
to terminate immediately prior to the Effective Time, and in accordance with the
terms of the Company ESPP refund to each participant thereunder the accumulated
contributions through the Effective Time.
SECTION 6.13. RESTRUCTURING AGREEMENT. The Company shall not, prior to the
Effective Time, amend, waive or fail to enforce any provision of the
Restructuring Agreement without the prior written consent of Parent.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE SPLIT-OFF
AND THE MERGER. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Stockholder Approval shall have been
obtained.
(b) ANTITRUST. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) NO RESTRAINTS. No temporary restraining order, preliminary or permanent
injunction or other judgment or order issued by any court of competent
jurisdiction or other statute, law, rule, regulation, legal restraint or
prohibition (collectively, "Restraints") shall be in effect preventing the
consummation of the Merger; PROVIDED, HOWEVER, that each of the parties shall
have used its commercially reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(d) SECURITIES LISTING. (i) The shares of Parent Company Stock issuable to
the Company's stockholders as contemplated by this Agreement shall have been
approved for listing on the NYSE, subject only to official notice of issuance.
(ii) The shares of Newco Common Stock issuable to the Company's
stockholders as contemplated by this Agreement shall have been approved for
listing on a national securities exchange, or approved for quotation on Nasdaq,
in either case subject only to official notice of issuance.
68
(e) FORM S-4. Each of the Parent Form S-4 and the Newco Form S-4 shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(f) PRE-MERGER TRANSACTIONS. The transactions contemplated by Article III,
including the Restructuring and the execution and delivery of the Transaction
Agreements not executed on the date hereof, shall have been consummated in
accordance with the terms of this Agreement and the Restructuring Agreement
(including the satisfaction of all conditions to the Restructuring set forth in
the Restructuring Agreement) in all material respects.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) The representations and warranties
of the Company contained in Sections 4.01(c), 4.01(h)(iv), 4.01(j) (but only
with respect to the last two sentences thereof), 4.01(m)(viii) (but only with
respect to the last sentence thereof), 4.01(n) (but only with respect to the
last sentence thereof), 4.01(o)(xiv), 4.01(p)(iii), 4.01(q) (but only with
respect to clauses (i) and (iv) (other than, in the case of clause (iv), the
fourth, fifth, sixth and seventh sentences thereof)) and 4.01(w)(ii) to the
extent that they are qualified as to materiality shall be true and correct, and
such representations and warranties of the Company to the extent that they are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date as though made
on the Closing Date, except to the extent such representations and warranties
expressly relate to a specified date, in which case as of such specified date
and (ii) all other representations and warranties of the Company contained in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made on the Closing Date, except to the extent
such representations and warranties expressly relate to a specified date, in
which case as of such specified date, and except further, in the case of this
clause (ii), to the extent that the facts or matters as to which such
representations and warranties are not so true and correct as of such dates
(without giving effect to any qualifications or limitations as to materiality or
Material Adverse Effect set forth therein), individually or in the aggregate,
have not had and are not reasonably expected to have a Material Adverse Effect.
Parent shall have received
69
a certificate signed on behalf of the Company by the chief executive officer and
the vice president of finance and treasurer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the vice president of finance and treasurer of the Company to such
effect.
(c) NO LITIGATION. There shall not be pending any suit, action or
proceeding by any Governmental Entity relating to any of the transactions
contemplated by the Transaction Agreements (i) challenging the acquisition by
Parent or Sub of any shares of Company Common Stock, seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or the other Transaction Agreements, or seeking
to place limitations on the ownership of shares of Company Common Stock (or
shares of common stock of the Surviving Corporation) by Parent or Sub or seeking
to obtain from the Company, Parent or Sub any damages that are material in
relation to the Sunrise Business, (ii) seeking to prohibit or materially limit
the ownership or operation by any Sunrise Company, Parent or any of Parent's
subsidiaries of any portion of the Sunrise Business or of the business or assets
of Parent or any of Parent's subsidiaries, or to compel any Sunrise Company or
Parent or any of Parent's subsidiaries to divest or hold separate any portion of
the Sunrise Business or of the business or assets of Parent or any of Parent's
subsidiaries as a result of the transactions contemplated by the Transaction
Agreements or (iii) seeking to prohibit Parent or any of Parent's subsidiaries
from effectively controlling in any material respect any portion of the Sunrise
Business.
(d) ORDERS. No order, ruling, judgment or other similar legal restraint
(collectively, "Orders") that is reasonably expected to result, directly or
indirectly, in any of the effects referred to in clauses (i) through (iii) of
paragraph (c) of this Section 7.02 shall be in effect.
(e) CONSENTS. Parent shall have received evidence, in form and substance
reasonably satisfactory to it, that (i) the Company shall have obtained all
consents, waivers and approvals referred to on Section 7.02(e) of the Company
Disclosure Schedule and (ii) all consents, approvals, authorizations,
qualifications and orders of Governmental Entities required in connection with
this
70
Agreement, the other Transaction Agreements and the transactions contemplated
hereby or thereby under any applicable competition, merger control, antitrust or
similar law or regulation of Switzerland or any country that is part of the
European Union shall have been obtained, except in the case of this clause (ii)
for those the failure of which to be obtained are not reasonably expected to (A)
restrain or prohibit the consummation of the Merger or the other transactions
contemplated by the Transaction Agreements or (B) prohibit or limit in any
material respect the ownership or operation or effective control by Parent of
any portion of the Sunrise Business.
(f) OTHER AGREEMENTS. The Non-competition Agreements and the other
Transaction Agreements shall be in full force and effect and none of the parties
thereto (other than Parent) shall have breached or threatened to breach any of
its material covenants thereunder.
(g) FINANCING. The Company shall have received at least $50,000,000 of
proceeds from financings on terms and conditions no less favorable to the
Company than those set forth in the commitment letter dated May 18, 2001.
SECTION 7.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Sub contained in the Transaction Agreements that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Parent and Sub contained in the Transaction Agreements that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties expressly relate to a
specified date, in which case as of such specified date. The Company shall have
received a certificate signed on behalf of Parent by an executive officer of
Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
71
(c) TAX OPINION. The Company shall have received from Xxxxxxx Procter LLP,
counsel to the Company, on the date on which the Form S-4 is filed with the SEC
and on the Closing Date, an opinion, in form and substance reasonably
satisfactory to the Company, in each case dated as of such date and to the
effect that (i) the Merger will be treated for United States Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and (ii) Parent and the Company will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinions,
such counsel shall be entitled to rely upon representations reasonably requested
by such counsel and made by the Company and upon the Parent Representation
Letter.
SECTION 7.04. FRUSTRATION OF CLOSING CONDITIONS. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use commercially reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.03.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the Stockholder
Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or before
January 31, 2002; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.01(b)(i) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to be consummated on or before
such date;
(ii) if any Restraint having any of the effects set forth in
Section 7.01(c) shall be in effect and shall have become final and
nonappealable;
72
(iii) if the Stockholder Approval shall not have been obtained at
the Stockholders' Meeting duly convened therefor or at any adjournment
or postponement thereof;
(c) by Parent (i) if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 7.02(a) or 7.02(b),
and (B) is incapable of being cured by the Company within 30 calendar days
following receipt of written notice of such breach or failure to perform
from Parent; or (ii) if any Order having the effects referred to in clauses
(i) through (iv) of Section 7.02(c) shall be in effect and shall have
become final and nonappealable;
(d) by the Company, if Parent shall have breached or failed to perform
any of its representations, warranties, covenants or agreements set forth
in this Agreement, which breach or failure to perform (i) would give rise
to the failure of a condition set forth in Section 7.03(a) or 7.03(b), and
(ii) is incapable of being cured by Parent within 30 calendar days
following receipt of written notice of such breach or failure to perform
from the Company;
(e) by Parent, in the event that a Company Adverse Recommendation
Change shall have occurred; or
(f) by the Company in accordance with Section 5.02(b).
SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 4.01(t), the penultimate sentence of Section 6.02, Section
6.06, this Section 8.02 and Article IX, which provisions shall survive such
termination, and except to the extent that such termination results from the
wilful and material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto at any time before or after the Stockholder Approval with, if necessary,
the approval of their respective Boards of Directors; PROVIDED, HOWEVER,
73
that after any such approval, there shall be made no amendment that by law
requires further approval by the stockholders of the Company or the approval of
the stockholders of Parent without such approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. Notwithstanding the foregoing, at any time prior to the
Stockholder Approval, the Company may, in its sole discretion, unilaterally
change the Newco Exchange Ratio with, if necessary, approval of its Board of
Directors.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 8.03, waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or sent by
74
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Sub, to:
Xxxxxxx & Xxxxxxx
Xxx Xxxxxxx & Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telecopy No.: (000)000-0000
Attention: Office of General Counsel
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, III, Esq.
if to the Company, to:
Inverness Medical Technology, Inc.
00 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telecopy No.: (000)000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxx Procter LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, P.C.
75
SECTION 9.03. DEFINITIONS. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Knowledge" of any person that is not an individual means, with respect
to any matter in question, the knowledge of such person's executive officers and
other employees having primary responsibility for such matter;
(c) "Material Adverse Change" or "Material Adverse Effect" means any
change, effect, event, occurrence or state of facts (or any development or
developments which, individually or in the aggregate, are reasonably expected to
result in any change or effect) that is materially adverse to the business,
properties, assets, liabilities (contingent or otherwise), financial condition
or results of operations of the Sunrise Business, other than any change, effect,
event, occurrence, state of facts or development (i) relating to the economy in
general, (ii) relating to the industries in which the Company operates in
general, (iii) resulting from changes in foreign currency rates, (iv) resulting
from the effects of the pendency of the transactions contemplated hereby on
current or prospective customers or suppliers, (v) resulting from any action
required to be taken by the Company or any other party pursuant to the
Transaction Agreements in order to effect the Restructuring and the other
transactions contemplated thereby and (vi) resulting from any unjustified
action, including the cancellation or extension of any orders for products,
taken by Parent or any of its Affiliates in respect of the business relationship
between Parent or such Affiliate, on the one hand, and the Company and its
subsidiaries, on the other hand;
(d) "Parent Material Adverse Effect" means any change, effect, event,
occurrence or state of facts (or any development or developments which,
individually or in the aggregate, could reasonably be expected to result in any
change or effect) that is materially adverse to the business, properties,
assets, liabilities (contingent or otherwise, financial condition, results of
operations or prospects of Parent or that could reasonably be expected to impair
the ability of Parent to consummate the transactions
76
contemplated by, or satisfy its obligations under, the Transaction Agreements,
other than any change, effect, event, occurrence, state of facts or development
(i) relating to the economy in general, (ii) relating to the industries in which
the Company operates in general, (iii) resulting from changes in foreign
currency rates and (iv) resulting from the effects of the pendency of the
transactions contemplated hereby on current or prospective customers or
suppliers;
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(f) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting rights or voting partnership interests of which
is sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04. INTERPRETATION. (a) As used in Section 4.01 (other than
clauses (c), (d), (e), (l), (m) and (o) thereof), and Section 7.02(a), unless
the context otherwise requires, (i) any reference to the Company and its
subsidiaries shall be to the Company and the subsidiaries of the Company if and
only to the extent that they are engaged in, or own, lease or otherwise control
properties or other assets used in, any part of the Sunrise Business, (ii) any
reference to the properties or other assets of the Company and its subsidiaries,
including Intellectual Property Rights, shall be to the properties and other
assets that are included in the Sunrise Assets, (iii) any reference to the
businesses or products of the Company and its subsidiaries shall be to the
businesses or products of such subsidiaries if and only to the extent that they
are part of the Sunrise Business and (iv) any reference to the directors,
officers, employees and consultants of the Company and its subsidiaries shall be
to the directors, officers, employees and consultants who will be Sunrise
Employees (as defined in the Restructuring Agreement). In addition, (A) any
reference to the "Sunrise Business" means all the businesses and operations of
the Company and its subsidiaries other than the Clinical Diagnostics Business,
the Nutritional Supplement Business and the Women's Health Business, (B) any
reference to the "Sunrise Companies" means the Company and its subsidiaries,
other than Newco and its subsidiaries (determined after giving effect to the
Restructuring) and
77
(C) any reference to Newco and its subsidiaries means Newco and its subsidiaries
(determined after giving effect to the Restructuring).
(b) When a reference is made in this Agreement to an Article, a Section, an
Exhibit, an Annex or a Schedule, such reference shall be to an Article of, a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.
SECTION 9.05. 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.
SECTION 9.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the other Transaction Agreements and the Confidentiality Agreement
(a) constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, the other Transaction Agreements and the
Confidentiality Agreement and (b) except for the provisions of Article II and
Section 6.05, are not intended to confer upon any person other than the parties
any rights or remedies.
78
SECTION 9.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 9.09. SPECIFIC ENFORCEMENT. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware in any state court in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
of any state court located in the State of Delaware in the event any dispute
arises out of this Agreement or the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or the transactions
contemplated by this Agreement in any court other than a Federal court located
in the State of Delaware or a state court located in the State of Delaware.
SECTION 9.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such
79
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
XXXXXXX & XXXXXXX,
by /s/ Xxxx X. Xxxx
-------------------------------------
Name: Xxxx X. Xxxx
Title: Treasurer
SUNRISE ACQUISITION CORP.,
by /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
INVERNESS MEDICAL TECHNOLOGY, INC.,
by /s/ Xxx Xxxxxxxxx
-------------------------------------
Name: Xxx Xxxxxxxxx
Title: Chief Executive Officer
APPENDIX
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
TERM
Acquisition Agreement..................................... Section 5.02(b)
Actions................................................... Section 5.01(d)
Adjusted Options.......................................... Section 6.049a)(i)
Adjusted Warrants......................................... Section 6.04(g)
Affiliate................................................. Section 9.03(a)
Agreement................................................. Preamble
Audited IML Balance Sheet................................. Section 4.01(g)
Adjusted IML Financial Statements ........................ Section 4.01(g)
Average Closing Price..................................... Section 2.01(c)
Benefit Agreements........................................ Section 4.01(h)
Benefit Plans............................................. Section 4.01(l)
Certificate............................................... Section 2.01(c)
Certificate of Merger..................................... Section 1.03
Closing................................................... Section 1.02
Closing Consideration..................................... Section 2.01(c)
Closing Date.............................................. Section 1.02
Code...................................................... Recitals
Commonly Controlled Entity................................ Section 4.01(l)
Company................................................... Preamble
Company Adverse Recommendation Change..................... Section 5.02(b)
Company By-laws........................................... Section 4.01(a)
Company Capital Budget.................................... Section 5.01
Company Certificate....................................... Section 4.01(a)
Company Common Stock...................................... Recitals
Company Disclosure Schedule............................... Section 4.01
Company ESPP.............................................. Section 4.01(c)
Company SEC Documents..................................... Section 4.01(e)
Company Stock Plans....................................... Section 4.01(c)
Confidentiality Agreement................................. Section 6.02
Contracts................................................. Section 4.01(d)
DGCL...................................................... Section 1.01
Effective Time............................................ Section 1.03
Environmental Laws........................................ Section 4.01(k)
ERISA..................................................... Section 4.01(m)
Exchange Act.............................................. Section 4.01(d)
Exchange Agent............................................ Section 2.02(a)
Exchange Fund............................................. Section 2.02(a)
FDA....................................................... Section 4.01(k)
FDCA...................................................... Section 4.01(k)
Filed Company SEC Documents............................... Section 4.01(e)
Form 8-A.................................................. Section 4.01(d)
GAAP...................................................... Section 4.01(e)
Governmental Entity....................................... Section 4.01(d)
Hazardous Material........................................ Section 4.01(j)
HSR Act................................................... Section 4.01(d)
ANNEX I
TO THE MERGER AGREEMENT
TERM
[NYCorp;1257005.17:4615A:05/22/01-8:49p]
IMI....................................................... Section 4.01(o)(xiv)
IML....................................................... Section 4.01(g)
Intellectual Property Rights.............................. Section 4.01(q)
Interim IML Balance Sheet................................. Section 4.01(g)
Interim IML Financial Statements.......................... Section 4.01(g)
IRS....................................................... Section 4.01(l)
Knowledge................................................. Section 9.03(b)
Legal Provisions.......................................... Section 4.01(k)
Liens..................................................... Section 4.01(b)
Material Adverse Change................................... Section 9.03(c)
Material Adverse Effect................................... Section 9.03(c)
Medical Device............................................ Section 4.01(w)
Merger.................................................... Recitals
Merger Consideration...................................... Section 2.01(c)
Nasdaq.................................................... Section 2.02(e)(ii)
Newco..................................................... Recitals
Newco Assets.............................................. Section 4.01(o)(xiv)
Newco Basis............................................... Section 4.01(o)(xiv)
Newco Common Stock........................................ Recitals
Newco Exchange Ratio...................................... Section 2.01(c)
Newco Form S-4............................................ Section 4.01(d)
Non-Competition Agreements................................ Preamble
Non-Plan Stock Option Agreements.......................... Section 6.04(a)(ii)
Non-Plan Stock Options.................................... Section 4.01(c)
Notice of Adverse Recommendation.......................... Section 5.02(b)
NYSE...................................................... Section 2.02(c)
Officers.................................................. Section 6.10(c)
Officer's Opinion......................................... Section 6.10(c)
Order..................................................... Section 7.02
Parachute Gross Up Payment................................ Section 4.01(n)
Parent.................................................... Recitals
Parent Common Stock....................................... Preamble
Parent Disclosure Schedule................................ Section 4.02
Parent Form S-4........................................... Section 4.02(b)
Parent Material Adverse Effect............................ Section 9.03(d)
Parent Representation Letter.............................. Section 6.10
Parent SEC Documents...................................... Section 4.02(c)
Pension Plan.............................................. Section 4.01(m)
Permits................................................... Section 4.01(k)
person.................................................... Section 9.03(e)
Post-Closing Covenants Agreement.......................... Section 3.01
Post-Signing Returns...................................... Section 5.01(d)
Preferred Stock........................................... Section 4.01(c)
Primary Company Individuals............................... Section 4.01(n)
Principal Stockholders.................................... Recitals
Proxy Statement........................................... Section 4.01(d)
Release................................................... Section 4.01(k)
TERM
Representatives........................................... Section 5.02(a)
Restraints................................................ Section 7.01(c)
Restructuring Agreement................................... Recitals
Retained.................................................. Section 4.01(t)
SEC....................................................... Section 4.01(d)
Securities Act............................................ Section 4.01(e)
Settlement Agreement...................................... Section 3.01
Split-Off................................................. Recitals
Split-Off Consideration................................... Section 2.01(c)
Split-Off Opinion......................................... Section 6.10(c)
Stockholder Agreement..................................... Recitals
Stockholder Approval...................................... Section 4.01(r)
Stockholders' Meeting..................................... Section 6.01(b)
Stock Options............................................. Section 4.01(c)
Sub....................................................... Preamble
subsidiary................................................ Section 9.03(f)
Sunrise Assets............................................ Section 4.01(p)(iii)
Sunrise Business.......................................... Section 9.04
Sunrise Companies......................................... Section 9.04
Sunrise Employee.......................................... Section 9.04
Sunrise Liabilities....................................... Recitals
Superior Proposal......................................... Section 5.02(a)
Surviving Corporation..................................... Section 1.01
Takeover Proposal......................................... Section 5.02(a)
Tax Allocation Agreement.................................. Section 3.01
taxes..................................................... Section 4.01(o)
Termination Fee........................................... Section 6.06
Transaction Agreements.................................... Section 3.02
Transition Services Agreement............................. Section 3.02
Warrants.................................................. Section 4.01(c)
