Exhibit 10.11
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN MEDICAL SYSTEMS, INC.
LEIO ACQUISITION CORP.
THERMATRX, INC.
THERMATRX INVESTMENT HOLDINGS LLC
BSD MEDICAL CORPORATION
AND
THERMATRX INVESTMENT HOLDINGS LLC,
AS STOCKHOLDERS' REPRESENTATIVE
DATED AS OF JUNE 15, 2004
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
June15, 2004, is by and among American Medical Systems, Inc., a Delaware
corporation ("Parent"); Leio Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Subsidiary"); TherMatrx, Inc., a
Delaware corporation (the "Company"); TherMatrx Investment Holdings LLC, a
Delaware limited liability company ("TherMatrx LLC"), and BSD Medical
Corporation, a Delaware corporation ("BSD") (each individually, a "Principal
Stockholder," and collectively, the "Principal Stockholders"); and TherMatrx
Investment Holdings LLC, as the Stockholders' Representative (as defined below)
with respect to Article 10.
WHEREAS, the Board of Directors of each of the Company, Parent and
Merger Subsidiary have (i) determined that the Merger (as defined below) is fair
and in the best interests of their respective stockholders and (ii) approved the
Merger of Merger Subsidiary with and into the Company, with the Company
surviving, and payment of the Merger Consideration in accordance with the terms
and conditions of this Agreement.
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Merger Subsidiary
hereby agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. At the Effective Time (as defined below) and upon the terms
and subject to the conditions of this Agreement and in accordance with
the Delaware General Corporation Law (the "DGCL"), Merger Subsidiary
shall be merged with and into the Company, and following the merger,
the Company shall continue as the surviving corporation (the "Surviving
Corporation"), the separate corporate existence of Merger Subsidiary
shall cease and the Surviving Corporation shall continue to be governed
by the laws of the State of Delaware (the "Merger"), and the Surviving
Corporation will be a wholly-owned subsidiary of Parent.
1.2 Effective Time. Subject to the terms and conditions set forth in this
Agreement, on the Closing Date (as defined below) the Company and
Merger Subsidiary will file, or cause to be filed, with the Secretary
of State of the State of Delaware a Certificate of Merger, in the form
as required by, and executed and acknowledged in accordance with, the
applicable provisions of the DGCL, and substantially in the form
attached hereto as Exhibit A (the "Certificate of Merger"). The Merger
shall become effective at 3:00 p.m., Central Time, on the date the
Certificate of Merger is filed or, if agreed to by the Parent and the
Company, such later date or time set forth in the Certificate of Merger
(the "Effective Time").
1.3 Closing of the Merger. Unless this Agreement shall have been terminated
and the transactions contemplated herein abandoned pursuant to Article
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7 hereof, the closing of the Merger (the "Closing") will take place on
a date (the "Closing Date") to be specified by Parent and the Company
which shall be no later than the second business day after satisfaction
or waiver of the last condition set forth in Articles 5 and 6 to be
satisfied or waived (other than delivery of items to be delivered at
the Closing and other than those conditions that by their nature are to
be satisfied at the Closing, it being understood that the occurrence of
the Closing shall remain subject to the delivery of such items and the
satisfaction or waiver of such conditions at the Closing), at 10:00
a.m., local time, at the offices of Xxxxxxxxxxx, Xxxxx & Xxxxxxxx LLP,
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000,
unless another time, date, place or manner (e.g., by telecopy exchange
of signature pages with originals to follow by overnight delivery) is
agreed to in writing by the parties hereto. In no event shall the
Closing occur later than August 15, 2004 (the "Termination Date").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
the DGCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time all the properties, rights, privileges,
powers and franchises of the Company and Merger Subsidiary shall vest
in the Surviving Corporation and all debts, liabilities and duties of
the Company and Merger Subsidiary shall become the debts, liabilities
and duties of the Surviving Corporation.
1.5 Certificate of Incorporation of the Surviving Corporation. The form of
Second Amended and Restated Certificate of Incorporation of the
Surviving Corporation, as amended, attached hereto as Exhibit B, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter further amended in accordance with Applicable Law.
1.6 Bylaws of the Surviving Corporation. The Bylaws of Merger Subsidiary,
as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter amended in
accordance with Applicable Law, except that the name of the Surviving
Corporation shall be TherMatrx, Inc.
1.7 Directors and Officers of the Surviving Corporation. The directors and
officers of Merger Subsidiary immediately prior to the Effective Time
shall be the directors and officers respectively, of the Surviving
Corporation until their respective successors shall be duly elected and
qualified.
1.8 Initial Merger Consideration. Subject to Section 1.13 (Dissenting
Shares), Parent shall pay for all of the Company Common Stock and
Company Preferred Stock issued and outstanding immediately prior to the
Effective Time the consideration set forth in this Section 1.8.
(a) At Closing, Parent shall pay, by wire transfer in immediately
available funds, Forty Million Dollars ($40,000,000) (the "Initial
Payment") plus or minus, as the case may be, the Purchase Price
Adjustment (as defined in section 1.8(b)) (as so adjusted, the
"Estimated Initial Merger Consideration"), which shall be paid by
Parent to the Persons and in the amounts as follows: (i) Four
Million Dollars ($4,000,000) (the "Escrow Funds") to U.S. Bank
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National Association (the "Escrow Agent") to be held in escrow
pursuant to the Escrow Agreement to secure any indemnification
obligation of the Stockholders under Section 8.2 and to refund to
Parent any negative Purchase Price Adjustment due Parent after
final determination of the Closing Balance Sheet in accordance
with Section 1.10; and (ii) the balance of the Estimated Initial
Merger Consideration to the Payment Agent for distribution to the
Stockholders who are not otherwise Dissenting Stockholders (as
defined in Section 1.13) in accordance with the terms of the
Payment Agreement (such balance payable to the Stockholders is
sometimes referred to herein as the "Net Initial Merger
Consideration"). The Escrow Funds shall not be distributed to the
Stockholders until six (6) months after the Effective Time and
shall only be distributed in accordance with the terms and
conditions of the Escrow Agreement. In the event that Parent shall
have perfected, prior to the expiration of such 6 month period, a
claim for indemnification pursuant to Section 8.4, the
Stockholders' Representative and the Parent shall endeavor in good
faith to determine a reasonable estimate of the maximum amount of
such claim and shall instruct the Escrow Agent to deliver any
excess amount of Escrow Funds to the Payment Agent for
distribution to the Stockholders in accordance with the Escrow
Agreement.
(b) The Initial Payment shall be adjusted (the "Purchase Price
Adjustment") as follows: (a) increased or decreased on a
dollar-for-dollar basis, by the amount that the Net Equity (as
defined below), as reflected in the Estimated Closing Balance
Sheet (as defined in Section 1.8(c)) is greater or less than Seven
Million ($7,000,000) (the "Net Equity Threshold"); and (b)
decreased by the amount of consideration that would have been
payable to Dissenting Stockholders (as defined below) if they had
not perfected their rights as Dissenting Stockholders. For
purposes of clarity, the Purchase Price Adjustment shall increase
the amount of Initial Merger Consideration to the extent the Net
Equity is greater than the Net Equity Threshold and shall decrease
the amount of Initial Merger Consideration to the extent the Net
Equity is less than the Net Equity Threshold. For purposes hereof,
the term "Net Equity" shall mean the Company's total assets less
total liabilities as reflected on the Estimated Closing Balance
Sheet, prepared in accordance with Section 1.10, and shall include
Transaction Expenses and Severance Accruals.
(c) Not less than three business days prior to the Closing, the
Company shall prepare and deliver to Parent (i) a good faith
estimate of the Estimated Initial Merger Consideration, setting
forth, in reasonable detail, a calculation of: (A) the estimated
Net Equity; (B) the estimated Transaction Expenses and Severance
Accruals; and (C) the estimated consideration that would have been
payable to Dissenting Stockholders if they had not perfected their
rights as Dissenting Stockholders; (ii) an estimated consolidated
balance sheet for the Company as of the Closing Date (the
"Estimated Closing Balance Sheet"), with the items described in
subclauses (c)(i) and (ii) above prepared in accordance with GAAP
as applicable to interim financial statements (and thus may not
contain all notes and may not contain prior period comparative
data which are required for compliance with GAAP) on a basis
consistent with the accounting methods, practices and procedures
used to prepare the Latest Financial Statements (as defined in
Section 2.6), except as described in Section 2.6 of the Disclosure
Schedule; and (iii) a certificate of a duly authorized officer of
the Company certifying the foregoing.
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1.9 Contingent Merger Consideration. As additional consideration for the
Merger and subject to the conditions set forth in this Section 1.9,
Section 1.13 (Dissenting Shares) and Section 8.6 (Right of Off-Set),
Parent shall make additional payments as set forth in this Section 1.9
(the "Contingent Merger Consideration") to the Payment Agent for
distribution to those Stockholders who are not otherwise Dissenting
Stockholders an amount equal to (A) the product of the Net Product
Revenues for the period beginning on July 5, 2004 and ending on
December 31, 2005 (the "Contingent Period") multiplied by four (4),
less (B) Forty Million Dollars ($40,000,000); provided however, that
the aggregate Merger Consideration shall not exceed Two Hundred Fifty
Million Dollars ($250,000,000).
(a) Parent shall deliver quarterly to the Stockholders'
Representative, no later than forty-five (45) days following the
last day of each fiscal quarter of Parent during the Contingent
Period, a statement with reasonable detail reflecting Parent's
calculation of (i) Net Product Revenues for the preceding fiscal
quarter, without adjustment for any Uncollected Invoices, (ii) the
adjustment for Uncollected Invoices related to sales of the
Product during the fiscal quarter preceding the fiscal quarter for
which Net Product Revenues are being calculated, if such quarter
is within the Contingent Period, and (iii) the Contingent Merger
Consideration payable for such quarter, which shall be based on
Net Product Revenues for the preceding fiscal quarter, less
Uncollected Invoices related to sales of the Product during the
fiscal quarter preceding the fiscal quarter for which Net Product
Revenues are being calculated, if such quarter is within the
Contingent Period; provided, however, that there shall be no
deduction for Uncollected Invoices with respect to the first
quarter of the Contingent Period. (the "Quarterly Contingent
Calculation"). For the avoidance of doubt, any Uncollected
Invoices for which a prior adjustment was made but subsequently
collected will be added to Net Product Revenues for the quarter in
which such previously Uncollected Invoices are collected. No later
than July 15, 2006, Parent shall deliver to the Stockholders'
Representative a statement showing Parent's final reconciliation
of Net Product Revenues for the Contingent Period, including the
adjustment for Uncollected Invoices that remain uncollected as of
June 30, 2006 and that are related to sales of the Product made
any time during the Contingent Period (the "Final Contingent
Calculation"). All statements delivered by Parent pursuant to this
Section 1.9(a) shall be certified by Parent's Chief Financial
Officer and shall be accompanied by schedules and work papers
providing reasonable support for the calculations contained in
such statements. The Stockholders' Representative may distribute
these statements to any Stockholder requesting these statements,
any Person who is assisting the Stockholders' Representative in
connection with the calculation and verification of the Quarterly
Contingent Calculation or the Final Contingent Calculation or any
other Person if required by Applicable Law, provided that such
Stockholder or other Person has agreed to be bound by the
confidentiality obligations set forth in Section 4.4.
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(b) The Stockholders' Representative may cause an audit to be made of
those books and records of Parent and the Surviving Corporation
that are necessary to review and audit the statements delivered
pursuant to Section 1.9(a) and the Quarterly Contingent
Calculation and the Final Contingent Calculation; provided,
however, the Stockholders' Representative shall have no right to
audit the same quarterly period more than one time. Any such audit
shall be conducted only by an independent certified accountant
selected by the Stockholders' Representative and reasonably
acceptable to Parent, after prior written notice to Parent, and
shall be conducted during regular business hours at Parent's and
the Surviving Corporation's offices and in such a manner so as not
to unreasonably interfere with Parent's and the Surviving
Corporation's normal business activities. Parent agrees to permit,
and to cause the Surviving Corporation to permit, such
accountants, during normal business hours, to have reasonable
access to, and to examine and make copies of, those books and
records of Parent and the Surviving Corporation that are necessary
or advisable to review and audit the Quarterly Contingent
Calculation, or the Final Contingent Calculation, as applicable.
Neither the Stockholders' Representative nor such auditors will
have the right to review or audit any other books and records of
Parent and the Surviving Corporation. In the event any such audit
reveals that Parent understated aggregate Net Product Revenues for
the periods audited by less than $100,000 or that Parent
overstated aggregate Net Product Revenues for the periods audited,
the Stockholders shall pay for the reasonable third party costs
and expenses of such audit. In the event any such audit reveals
that Parent understated aggregate Net Product Revenues for the
periods audited by $100,000 or more, Parent shall pay for the
reasonable third party costs and expenses of such audit.
(c) Subject to Section 8.6 (Right of Off-Set), no later than
forty-five (45) days following the last day of each fiscal quarter
of Parent during the Contingent Period, beginning with the first
quarter during the Contingent Period in which the cumulative Net
Product Revenues since the beginning of the Contingent Period
exceed an aggregate of Ten Million Dollars ($10,000,000), Parent
shall pay the Contingent Merger Consideration, if any, for such
fiscal quarter to the Payment Agent for distribution to the
Stockholders; provided, however, that Parent may withhold from the
Contingent Merger Consideration payment for the fiscal quarter
ending December 31, 2005 an amount equal to the Contingent Merger
Consideration that would otherwise by payable for such quarter
multiplied by a fraction, the numerator of which will be 150% of
the dollar amount of cumulative Uncollected Invoices related to
sales of the Product through the end of Parent's fifth (5th)
fiscal quarter during the Contingent Period, and the denominator
of which will be the cumulative Net Product Revenues through the
end of Parent's fifth (5th) fiscal quarter during the Contingent
Period. Subject to Section 8.6 (Right of Off-Set), within fifteen
(15) days following final determination of the Final Contingent
Calculation pursuant to Section 1.9(a) or (b), Parent shall pay
the balance of the Contingent Merger Consideration, if any, owed
hereunder to the Payment Agent for distribution to the
Stockholders.
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1.10 Closing Balance Sheet.
(a) Within sixty (60) days after the Closing Date, Parent shall
deliver to the Stockholders' Representative a balance sheet of
Company as of the Closing Date, prepared in accordance with GAAP,
including footnotes, from the books and records of Company, on a
basis consistent with the accounting methods, practices and
procedures followed by Company in the preparation of the Latest
Financial Statements and the Annual Financial Statements (as such
terms are defined in Section 2.6 below), except as described in
Section 2.6 of the Disclosure Schedule, and fairly presenting the
financial position of Company as of the Closing Date. The balance
sheet shall be accompanied by schedules and work papers providing
reasonable support for the information contained therein and a
written confirmation of the Chief Financial Officer of Parent
stating that, to Parent's knowledge, (a) the examination of the
balance sheet has been made in accordance with GAAP and (b) the
balance sheet has been prepared in accordance with GAAP based upon
information available to the Company, on a basis consistent with
the accounting methods, practices and procedures followed by
Company in the preparation of the Latest Financial Statements and
the Annual Financial Statements, except as described in Section
2.6 of the Disclosure Schedule or as otherwise provided in this
Section 1.10, and (c) setting forth the amount of the final
Purchase Price Adjustment and by whom to be paid pursuant to
Section 1.8 hereof.
(b) Within forty-five (45) days following the delivery of the balance
sheet referred to in Section 1.10(a), the Stockholders'
Representative may object to any of the information contained in
said balance sheet, accompanying schedules or work papers which
could affect the necessity or amount of any payment by Parent or
the Stockholders pursuant to Section 1.8. Any such objection shall
be made in writing delivered to Parent and shall state the
Stockholders' Representative's determination of the amount of the
Purchase Price Adjustment, accompanied by detailed schedules and
work papers providing reasonable support for such determination.
(c) In the event of a dispute or disagreement relating to the balance
sheet, schedules, work papers or final Purchase Price Adjustment
which Parent and the Stockholders' Representative are unable to
resolve by good faith discussions, either Parent or Stockholders'
Representative may elect to have all such disputes or
disagreements resolved by Deloitte & Touche LLP (the "Third
Accounting Firm"). The Third Accounting Firm shall make a
resolution of the balance sheet of Company as of the Closing Date
including a calculation of Net Equity as of the Closing Date and a
determination of the final Purchase Price Adjustment which shall
be final, binding and enforceable as an arbitration award for all
purposes. The Third Accounting Firm shall be instructed to use
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every reasonable effort to perform its services within thirty (30)
days of submission of the balance sheet to it and, in any case, as
soon as practicable after such submission. In the event any such
audit reveals an increase in the Purchase Price Adjustment of less
than five percent (5%) or a decrease in the Purchase Price
Adjustment from the amount of the adjustment asserted by the
Stockholders' Representative, the Stockholders shall pay the
entire costs and expenses for the Third Accounting Firm. In the
event any such audit reveals an increase in the Purchase Price
Adjustment greater than or equal to five percent (5%) from the
amount of the adjustment asserted by Parent, Parent shall pay the
entire costs and expenses for the services of the Third Accounting
Firm. As used in this Agreement, the term "Closing Balance Sheet"
shall mean the balance sheet of Company as of the Closing Date as
finally determined pursuant to this Section 1.10.
(d) Promptly after the Closing Balance Sheet and the Purchase Price
Adjustment become final and binding on the parties, the Estimated
Initial Merger Consideration shall be recalculated by giving
effect to such final and binding amounts (as recalculated, the
"Final Initial Merger Consideration"). If the Estimated Initial
Merger Consideration is greater than the Final Initial Merger
Consideration, the Escrow Agent shall immediately remit cash to
Parent, in accordance with the Escrow Agreement, in the amount by
which the Estimated Initial Merger Consideration exceeds the Final
Initial Merger Consideration. If the Final Initial Merger
Consideration is greater than the Estimated Initial Merger
Consideration, Parent shall deposit additional funds with the
Payment Agent for distribution to the Stockholders in accordance
with the Payment Agreement in the amount by which the Final
Initial Merger Consideration exceeds the Estimated Initial Merger
Consideration.
1.11 Cancellation and Conversion of Company Securities at the Effective
Time. As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any share of capital stock of the
Company or Merger Subsidiary:
(a) Subject to the terms and conditions hereof, each share of Company
Common Stock, issued and outstanding immediately prior to the
Effective Time (other than (i) Company Common Stock held in the
Company's treasury, (ii) Company Common Stock held by Parent,
Merger Subsidiary or any other Subsidiary of Parent, and (iii)
Dissenting Shares) shall automatically be converted into the right
to receive Merger Consideration in cash, payable to the holders
thereof upon surrender of the Certificates (as defined in Section
1.14 below) in accordance with their Percentage Interest, as set
forth in Schedule 1.11;
(b) Each share of the common stock, par value $.01 per share, of
Merger Subsidiary ("Merger Subsidiary Common Stock"), issued and
outstanding at the Effective Time of the Merger shall be converted
into one (1) share of common stock, par value $.01 per share, of
the Surviving Corporation ("Surviving Corporation Common Stock").
(c) Each share of Company Common Stock and Company Preferred Stock
held in the treasury of the Company and each share of Company
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Common Stock and Company Preferred Stock held by Parent, Merger
Subsidiary or any Subsidiary of Parent or Merger Subsidiary
immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of Parent, Merger
Subsidiary, any Subsidiary of Parent or Merger Subsidiary or the
Company, be canceled, retired and cease to exist without payment
of any consideration therefore and without any conversion thereof.
1.12 Company Preferred Stock; Stock Options; and Stock Appreciation Rights.
Prior to Closing, TherMatrx LLC shall convert all shares of Company
Preferred Stock owned by it into 5,175,000 shares of Company Common
Stock. Each Company Stock Option that is outstanding immediately prior
to the Effective Time, shall become fully vested, and the Company shall
seek to have all Company Stock Options exercised prior to Closing for
cash with respect to all shares of Company Common Stock subject to
Company Stock Options. The Company may loan to certain holders of
Company Stock Options funds sufficient pay the exercise price of such
options and withholding tax obligations. Such loans will be repaid with
such holder's share of the Merger Consideration and will secured by a
pledge of the shares of Company Common Stock purchased and guaranty of
payment by TherMatrx LLC. The form of promissory note, pledge agreement
and guaranty shall be subject to the reasonable approval of Parent,
which shall not be unreasonably withheld or delayed. The Company shall
seek to enter into agreement prior to Closing with holder of stock
appreciation rights set forth in Section 2.3 of the Disclosure Schedule
which will provide that the holder of such stock appreciation right
will be treated as a Stockholder and stock appreciation is treated as
an exercised Company Stock Option.
1.13 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time that are held by any
holder of shares of Company Capital Stock who has not voted in
favor of the Merger (if entitled to vote) and has properly
exercised and perfected appraisal rights in accordance with
Section 262 et. seq. of the DGCL (such holders are referred to as
"Dissenting Stockholders" and such shares are referred to as
"Dissenting Shares") will not be converted into the right to
receive the Merger Consideration, but will become entitled to the
right to receive such consideration as may be determined to be due
to the holders of such Dissenting Shares pursuant to the DGCL;
provided, however, that any holder of Dissenting Shares who will
have failed to perfect or who effectively will have withdrawn or
lost such rights of appraisal under the DGCL will forfeit the
right to appraisal of such shares of Company Capital Stock, and
such shares of Company Capital Stock will no longer be Dissenting
Shares and, as of the Effective Time, will be deemed to have been
converted into the right to receive the Merger Consideration.
(b) The Company will give Parent and Merger Subsidiary prompt notice
of any written demands for appraisal, withdrawals of demands for
appraisal and any other related instruments received by the
Company, and Parent will have the right to participate in all
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negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company will not, except with the prior
written consent of Parent, which consent shall not be unreasonably
withheld, delayed or conditioned, make any payment with respect
to, or settle or offer to settle, any such demands.
Notwithstanding anything to the contrary in this Section 1.13 if
(i) the Merger is terminated, rescinded or abandoned, or (ii) the
Stockholders revoke the authority to effect the Merger, then the
right of any Stockholder to be paid the fair value of such
Stockholder's shares of Company Capital Stock will cease. The
Surviving Corporation will comply with all obligations of the DGCL
with respect to Dissenting Stockholders.
(c) The holders of shares of Parent Common Stock shall not be entitled
to appraisal rights.
1.14 Payment Procedure; Exchange of Certificates.
(a) Bank of New York or such other bank as the parties may agree shall
act as the payment agent (in such capacity, the "Payment Agent")
pursuant to a payment agreement, to be entered into between the
Company and the Payment Agent (the "Payment Agreement"), for the
benefit of the holders of Company Common Stock and Company
Preferred Stock for the purpose of paying the Merger Consideration
upon surrender of certificates which immediately prior to the
Effective Time represented Company Common Stock or Company
Preferred Stock (in either case, the "Certificates").
(b) At the Closing, Parent shall deposit, or shall cause to be
deposited, with the Payment Agent pursuant to the Payment
Agreement, for the benefit of the Stockholders, cash in U.S.
dollars in an amount equal to the Net Initial Merger
Consideration.
(c) To the extent that sums are released by the Payment Agent or the
Escrow Agent to the Stockholders or the Parent in accordance with
this Agreement, the Payment Agreement or the Escrow Agreement, any
accumulated interest shall be distributed as set for the in the
Payment Agreement or the Escrow Agreement, as the case may be.
(d) As soon as reasonably practicable after the date hereof, the
Payment Agent shall mail to each holder of record of Certificates:
(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 Payment
Agent and shall be in such form and have such other provisions as
Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for a cash payment of the proper Merger
Consideration when and if it becomes payable under this Agreement.
Upon surrender of a Certificate for cancellation to the Payment
Agent or to such other agent or agents as may be appointed by the
Company, together with such letter of transmittal, duly executed
and upon the Effective Time, the holder of such Certificate shall
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be entitled to receive in exchange therefor by check or wire
transfer, as the case may be, an amount equal to the proper Merger
Consideration when and if it becomes payable under this Agreement,
and the Certificate so surrendered shall forthwith be canceled. No
interest shall be paid or accrued on any Merger Consideration upon
the surrender of any Certificates. In the event of a transfer of
ownership of Company Common Stock or Company Preferred Stock which
is not registered in the transfer records of the Company, payment
of the proper Merger Consideration payable under this Agreement
may be paid to a transferee if the Certificate representing such
Company Common Stock or Company Preferred Stock, as applicable, is
presented to the Payment Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that
any applicable stock transfer or other taxes required as a result
of such payment to a Person other than the registered holder of
such shares have been paid. Until surrendered and exchanged as
contemplated by this Section 1.14, each Certificate shall be
deemed at any time after the Effective Time to represent only the
right to receive upon such surrender an amount equal to the proper
Merger Consideration payable under this Agreement.
(e) In the event that any Certificate shall have been lost, stolen or
destroyed, the Payment Agent will pay the proper Merger
Consideration as may be required pursuant to this Agreement, but
for the failure to deliver such Certificate to the Payment Agent,
only after receipt by the Payment Agent of (i) an affidavit of
that fact by the holder claiming such Certificate has been lost,
stolen or destroyed, and (ii) a customary indemnification
agreement from such holder and TherMatrx LLC indemnifying Parent
and the Surviving Corporation against any claim that may be made
against Parent or the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(f) The Merger Consideration paid upon the surrender of Certificates
for exchange of Company Common Stock and Company Preferred Stock
in accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to such Company
Common Stock and Company Preferred Stock. After the Effective
Time, there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Company
Common Stock or Company Preferred Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in
this Article 1, except as otherwise provided by Applicable Law.
(g) Notwithstanding Section 1.14(d), neither the Surviving Corporation
nor Parent shall be liable to any holder of Company Common Stock
or Company Preferred Stock for any Merger Consideration delivered
to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) To the extent permitted by Applicable Law, any amounts of Merger
Consideration remaining unclaimed by any holder of Company Common
Stock or Company Preferred Stock four years after the Effective
Time (or such earlier date immediately prior to such times as such
amounts would otherwise escheat to or become property of any
governmental entity) shall become the property of the Parent,
subject to the rights of any such Stockholder to claim such
amounts from Parent.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to Parent and Merger Subsidiary to enter into
this Agreement, with the understanding that Parent and Merger Subsidiary will be
relying thereon in consummating the transactions contemplated hereunder, the
Company hereby represents and warrants to Parent and Merger Subsidiary that
except as set forth in the Disclosure Schedule delivered by the Company to
Parent and Merger Subsidiary on the date hereof (the "Disclosure Schedule") the
statements contained in this Article 2 are true and correct. The Disclosure
Schedule is arranged in sections corresponding to the sections and subsections
of this Article 2, and disclosure in one section of the Disclosure Schedule
shall constitute disclosure for all sections of the Disclosure Schedule only to
the extent to which the applicability of such disclosure is reasonably apparent.
2.1 Corporate Organization and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power
and authority, and all material governmental licenses, authorizations,
consents and approvals, required to carry on its business as now
conducted and to own, lease and operate the assets and properties of
the Company as now owned, leased and operated. The Company is duly
qualified or licensed to do business as a foreign corporation and is in
good standing in every jurisdiction in which the character or location
of its properties and assets owned, leased or operated by the Company
or the nature of the business conducted by the Company requires such
qualification or licensing, except where the failure to be so
qualified, licensed or in good standing in such jurisdiction, or to
have such authorizations, consents and approvals, could not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. The Disclosure Schedule contains a list of all jurisdictions
in which the Company is qualified or licensed to do business. The
Company does not have any Subsidiaries and does not, directly or
indirectly, own or control or have any capital, equity, partnership,
participation or other ownership interest in any corporation,
partnership, joint venture or other business association or entity. The
Company has heretofore delivered to Parent complete and accurate copies
of its Certificate of Incorporation and Bylaws, as currently in effect.
The Company does not manufacture, market or sell its Products outside
of the United States, have any facilities, owned or leased outside of
the United States or otherwise conduct any business or operations
outside of the United States.
2.2 Authorization. The Company has the full corporate power and authority
to enter into this Agreement and, subject to obtaining the necessary
approval of its stockholders with respect to the Merger, to carry out
the transactions contemplated herein. The Board of Directors of the
Company has taken all action required by Applicable Law, the Company's
Certificate of Incorporation and Bylaws and otherwise to duly and
validly authorize and approve the execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of
the transactions contemplated herein and no other corporate proceedings
on the part of the Company are, or will be, necessary to authorize this
11
Agreement or to consummate the transactions contemplated hereby. The
affirmative vote of holders of at least: (a) a majority of the
outstanding shares of Company Capital Stock, voting together as a
class; and (b) 66-2/3% of the outstanding shares of Company Preferred
Stock, voting separately as a class, are the only votes of the holders
of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and to consummate the Merger. This
Agreement has been, and the agreements, if any, required by Article 5
will be, duly and validly executed and delivered by the Company and
constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with their terms, subject to laws
of general application relating to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.3 Capitalization of the Company. The authorized capital stock of the
Company consists of (a) 14,000,000 shares of Company Common Stock,
3,338,426 shares of which are issued and outstanding; and (b) 6,000,000
shares of Company Preferred Stock, 5,175,000 shares of which are issued
and outstanding. All of the issued and outstanding shares of Company
Capital Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. All issued and outstanding
shares of Company Capital Stock are owned (of record) solely by the
Stockholders in the exact amounts as set forth in the Disclosure
Schedule. There are 1,737,322 shares of Company Common Stock subject to
outstanding Company Stock Options. Except as set forth in this Section
2.3 and the Disclosure Schedule, there are outstanding (w) no shares of
capital stock or other voting securities of the Company, (x) no
securities of the Company convertible into or exchangeable for shares
of capital stock or voting securities of the Company, (y) no options,
warrants, conversion privileges, contracts, understandings, agreements
or other rights to purchase or acquire from the Company, and, no
obligations of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, and (z) no equity equivalent
interests in the ownership or earnings of the Company or other similar
rights (collectively, "Company Securities"). Except as set forth in the
Disclosure Schedule, there are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any Company
Securities. There are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or by
which it is bound relating to the voting or registration of any shares
of capital stock of the Company. As of June 30, 2004, the aggregate
amount of accrued but unpaid dividends under the Company's Certificate
of Incorporation on Company Preferred Stock will be $4,559,862.
2.4 Non-Contravention. Neither the execution, delivery and performance by
the Company of this Agreement nor the consummation of the transactions
contemplated herein will (a) contravene or conflict with the
Certificate of Incorporation or Bylaws of the Company, (b) contravene
or conflict with or constitute a violation of any provision of any
Applicable Law binding upon or applicable to the Company or any of its
assets; (c) result in the creation or imposition of any Lien on any of
the Company's assets, other than Permitted Liens or (d) be in conflict
12
with, constitute (with or without due notice or lapse of time or both)
a default under, result in the loss of any material benefit under, or
give rise to any right of termination, cancellation, increased payments
or acceleration under any terms, conditions or provisions of any note,
bond, lease, mortgage, indenture, license, contract, franchise, permit,
instrument or other agreement or obligation to which the Company is a
party, or by which any of its properties or assets may be bound, except
in the cases of clause (b) where such conflicts or other occurrences
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
2.5 Consents and Approvals. Except as set forth on the Disclosure Schedule,
no consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with (hereinafter
sometimes separately referred to as a "Consent" and sometimes
collectively as "Consents") any individual or entity, including without
limitation any Governmental Authority or Person, is required in
connection with the execution, delivery or performance of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated herein, other than (a) approval of this
Agreement and the Merger by the Stockholders pursuant to the Company's
Certificate of Incorporation and the DGCL, (b) requirements of the DGCL
for filing of appropriate documents to effect the Merger, (c) filing
with the Federal Trade Commission and the Antitrust Division of the
Department of Justice of a pre-merger notification and report under the
HSR Act or (d) where the failure to make any such filing, or to obtain
such permit, authorization, Consent or approval, would not prevent or
delay consummation of the Merger or would not otherwise prevent the
Company from performing its obligations under this Agreement
2.6 Financial Statements; Undisclosed Liabilities.
(a) The Company has delivered to Parent true, correct and complete
copies of (i) the unaudited balance sheet, as of April 30, 2004 of
the Company (the "Latest Balance Sheet") and the unaudited
statements of income, stockholders' equity and cash flows of the
Company for the seven-month period ended April 30, 2004 (such
statements of income, stockholders' equity and cash flows and the
Latest Balance Sheet being herein referred to as the "Latest
Financial Statements") and (ii) the audited balance sheet, as of
September 30, 2001, 2002 and 2003 of the Company and the audited
statements of income, stockholders' equity and cash flows of the
Company for each of the years ended September 30, 2001, 2002 and
2003 (collectively, the "Annual Financial Statements"). The Latest
Financial Statements, the Annual Financial Statements are, and the
Estimated Closing Balance Sheet will be, based upon the
information contained in the books and records of the Company and
fairly and accurately present the financial condition of the
Company as of the dates thereof and results of operations for the
periods referred to therein. The Annual Financial Statements have
been prepared in accordance with GAAP, consistently applied.
Except as described in Section 2.6 of the Disclosure Schedule, the
Latest Financial Statements have been, and the Estimated Closing
Balance Sheet will be, prepared in accordance with GAAP applicable
to unaudited interim financial statements (and thus may not
contain all notes and may not contain prior period comparative
data which are required for compliance with GAAP), consistently
with the Annual Financial Statements, and reflect all adjustments
necessary to a fair and accurate statement of the financial
condition and results of operations for the interim periods
presented. The Company's internal controls and procedures are
sufficient to ensure that the Latest Financial Statements, the
Annual Financial Statements are, and the Estimated Closing Balance
Sheet will be, accurate in all material respects.
13
(b) All accounts, books and ledgers related to the business of the
Company are complete in all material respects, and there are no
material inaccuracies or discrepancies of any kind contained or
reflected therein. All of the Company's records, systems,
controls, data, or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by
any means (including any electronic, mechanical or photographic
process, whether computerized or not and including all means of
access thereto and therefrom) are under the exclusive ownership
(excluding licensed software programs) and direct control of the
Company.
(c) Except as and to the extent reflected in the Latest Balance Sheet
or the Disclosure Schedule, the Company does not have any
liabilities or obligations (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether
known or unknown, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or
inaction, or any state of facts existing, with respect to or based
upon transactions or events heretofore occurring, except for
liabilities which have arisen after the date of the Latest Balance
Sheet in the ordinary course of business, consistent with past
custom and practice to the extent set forth on the Closing Balance
Sheet (none of which is a liability for breach of contract, breach
of warranty, violation of Applicable Law, tort, infringement,
claim or lawsuit).
2.7 Absence of Certain Changes. Except as set forth in the Disclosure
Schedule or as otherwise authorized by this Agreement, since December
31, 2003, the Company has owned and operated its assets, properties and
businesses in the ordinary course of business and consistent with past
practice and there has not been:
(a) any change, effect, event, occurrence, state of facts or
development that individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect on
the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the
Company (other than any wholly-owned subsidiary) of any
outstanding shares of capital stock or other equity or debt
securities of, or other ownership interests in, the Company;
(c) any split, combination or reclassification of any of its capital
stock;
14
(d) any amendment of any provision of the Certificate of
Incorporation, Bylaws or other governing documents of, or of any
material term of any outstanding security issued by, the Company;
(e) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money, other than trade payables
incurred in the ordinary course of business and consistent with
past practice;
(f) any change in any method of accounting or accounting practice by
the Company, except for any such change required by reason of a
change in GAAP and concurred with by the Company's independent
public accountants;
(g) issuance of any equity or debt securities of the Company other
than pursuant to the Company Stock Plans or Company Stock Options
in the ordinary course of business and consistent with past
practice;
(h) acquisition or disposition of assets material to the Company,
except for sales of inventory in the ordinary course of business
consistent with past practice, any acquisition or disposition of
capital stock of any third party, or any merger or consolidation
with any third party, by the Company;
(i) any creation or assumption by the Company of any Lien;
(j) any individual capital expenditure (or series of related capital
expenditures) either involving more than Twenty Thousand Dollars
($20,000) or outside the ordinary course of business;
(k) any material damage, destruction or loss (whether or not covered
by insurance) from fire or other casualty to its tangible
property;
(l) any material increase in the base salary of any officer or
employee of the Company, except as required pursuant to an
employment agreement in effect as of the date hereof;
(m) adoption, amendment, modification, or termination of any bonus,
profit-sharing, incentive, severance or other similar plan for the
benefit of any of its directors, officers or employees;
(n) entry by the Company into any joint venture, partnership or
similar agreement with any Person; or
(o) any authorization of, or commitment or agreement to take any of,
the foregoing actions except as otherwise permitted by this
Agreement.
2.8 Assets and Properties.
(a) The Company does not own any real property. The Company has good
and valid right, title and interest in and to or, in the case of
leased properties or properties held under license, good and valid
15
leasehold or license interests in, all of its material assets and
properties, including, but not limited to, all of the machinery,
equipment, terminals, computers, vehicles, and all other assets
and properties (real, personal or mixed, tangible or intangible)
reflected in the Latest Balance Sheet and all of the material
assets purchased or otherwise acquired since the date of the
Latest Balance Sheet, except those assets and properties disposed
of in the ordinary course of business after the date of the Latest
Balance Sheet. Except as disclosed in the Disclosure Schedule, the
Company holds title to each such property and asset free and clear
of all Liens, except Permitted Liens.
(b) Except as disclosed in the Disclosure Schedule, (i) the current
use and operation of all real property is in compliance in all
material respect with all Applicable Laws (including without
limitation laws relating to parking, zoning and land use) and
public and private covenants and restrictions, and (ii) the
utilities and access for each such real property are adequate in
all material respects for the current use and operation of each
such real property. To the Company's knowledge, there are no
zoning, building code, occupancy restriction or other land-use
regulation proceedings, which could materially detrimentally
affect the use or operation of any real property, and the Company
has not received any written notice of any special assessment
proceedings affecting the real property, or applied for any change
to the zoning or land use status of the real property. The Company
has obtained all material licenses, permits, approvals, easements
and rights of way (and all such items are currently in full force
and effect) required from any Governmental Authority having
jurisdiction over each real property or from private parties for
the current use and operation of each real property. The Company
is not a foreign person, as the term foreign person is defined in
Section 1445(f)(3) of the Code.
2.9 Manufacturing and Marketing Rights. Except as set forth in the
Disclosure Schedule, the Company has not granted rights to manufacture,
produce, assemble, license, market, or sell the Product to any other
person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market
or sell the Product.
2.10 FDA and Regulatory Matters.
(a) The Company has obtained and maintains all necessary and
applicable approvals, clearances, authorizations, licenses and
registrations required by the FDA and any other Applicable law
which regulates the design, development, pre-clinical and clinical
testing, manufacture, labeling, sale, distribution and promotion
of its products in jurisdictions where it currently conducts such
activities with respect to each product (collectively, the
"Company Licenses"). The Company is in compliance in all material
respects with the terms and conditions of each Company License.
The Company is in compliance in all material respects with all
Applicable Laws regarding registration, license, certification for
each site at which a product is manufactured, labeled, sold, or
distributed. To the extent any product has been exported from the
United States, the Company has exported such product in compliance
16
in all material respects with Applicable Laws. All manufacturing
operations performed by or on behalf of the Company have been and
are being conducted in all material respects in compliance with
the Quality Systems regulations of the FDA. All non-clinical
laboratory studies of products sponsored by the Company and
intended to be used to support regulatory clearance or approval,
have been and are being conducted in compliance in all material
respects with the FDA's Good Laboratory Practice for Non-Clinical
Studies regulations (21 CFR Part 58) in the United States. The
Company is in compliance in all material respects with all
applicable reporting requirements for all Company Licenses or
plant registrations including, but not limited to, applicable
adverse event reporting requirements in the United States under
Applicable Law. The Disclosure Schedule sets forth a list of all
Company Licenses.
(b) The Company is in compliance in all material respects with all FDA
and other Applicable Laws relating to the maintenance, compilation
and filing of reports, including medical device reports, with
regard to the Company's products. The Disclosure Schedule sets
forth a list of all applicable adverse event reports related to
the Products, including any Medical Device Reports (as defined in
21 CFR 803). The Company has made available to Parent all
complaint review and analysis reports of the Company, including
information regarding complaints by product and root cause
analysis of closed complaints, which reports are correct in all
material respects.
(c) The Company has not received any written notice or other written
communication from the FDA (i) contesting the pre-market clearance
or approval of, the uses of or the labeling and promotion of any
of the Company's products, or (ii) otherwise alleging any
violation of Applicable Law by the Company.
(d) There have been no recalls, field notifications or seizures
ordered or adverse regulatory actions taken or, to the Company's
knowledge, threatened by the FDA or any other Governmental
Authority with respect to any of the Company's products, or, to
the Company's knowledge, any facilities where any such products
are produced, processed, packaged or stored. The Company has not
within the last three years, either voluntarily or at the request
of any Governmental Authority, initiated or participated in a
recall of any product or provided post-sale warnings regarding any
product.
(e) All clinical studies of Products sponsored by the Company have
been and are being conducted with reasonable care and in all
material respects in accordance with all Applicable Laws and the
stated protocols for such clinical trials. The Company has
provided to Parent all pertinent patient data, excluding patient
identifiers, from clinical and non-clinical studies of the
Products sponsored by the Company.
(f) All filings with and submissions to the FDA and any corollary
entity in any other jurisdiction made by the Company with regard
to the Products, whether oral, written or electronically
17
delivered, were true, accurate and complete in all material
respects as of the date made, and, to the extent required to be
updated, as so updated remain true, accurate and complete in all
material respects as of the date hereof, and do not materially
misstate any of the statements or information included therein, or
omit to state a material fact necessary to make the statements
therein not misleading.
2.11 Reimbursement/Billing.
(a) The Products are covered when ordered by an eligible provider and
when medically necessary for a specific patient who is eligible
for coverage and meets the criteria of the applicable coverage
policy for: (a) Medicare (Title XVIII of the Social Security Act
("Medicare")) in the amounts set forth in the Disclosure Schedule,
such amount being subject to periodic change, except for the
states listed on Disclosure Schedule; (b) all state Medicaid
programs (Title XIX of the Social Security Act ("Medicaid")),
except for the states listed on the Disclosure Schedule; and (c)
those private third party payors ("Third Party Payors") listed on
the Disclosure Schedule. The Company is neither a provider nor a
supplier under Medicare, Medicaid or any other
government-sponsored health care program, not including Veterans
Administration Hospitals and Clinics (collectively, "Government
Programs"), and does not xxxx any Government Program or Third
Party Payor for its products. The Company does not participate,
and has never participated, in any Government Programs, and it
does not xxxx, and has never billed, any Government Program,
directly or indirectly.
(b) There is no pending, nor to the knowledge of Company, threatened,
proceeding or investigation under any Government Program involving
the Company. The Company's sales and marketing practices are, and
have been, in compliance in all material respects with all
Applicable Laws and all policies of applicable Third Party Payors
and Government Programs.
(c) To Company's knowledge, the Company has not arranged with or
contracted with (by employment or otherwise) any person who is
excluded from participation in any Government Program for the
provision of items or services for which payment may be made under
any such Government Program. None of the officers, directors,
agents or managing employees (as such term is defined in 42 U.S.C.
ss. 1320a-5(b)) of the Company, has been excluded from any
Government Program or been subject to sanction pursuant to 42
U.S.C. ss. 1320a-7a or 1320a-8 or been convicted of a crime
described at 42 U.S.C. ss. 1320a-7b.
(d) The Company has not, and to the Company's knowledge, no director,
officer, employee or agent of the Company has, directly or
indirectly in connection with the Company: (i) offered or paid any
remuneration, in cash or in kind, to or made any financial
arrangements with, any past, present or potential customers, past
or present suppliers, patients, contractors or employees of Third
Party Payors or Government Programs in order to obtain business or
payments from such persons other than in the ordinary course of
business; (ii) given or agreed to give, any gift or gratuitous
18
payment of any kind, nature or description (whether in money,
property or services) to any customer or potential customer,
supplier or potential supplier, contractor, Third Party Payor or
any other person other than in connection with promotional or
entertainment activities in the ordinary course of business; or
(iii) made any false entries on any of the Company's books or
records for any purpose prohibited by Applicable Law.
(e) The Company is not, and to the Company's knowledge, no director,
officer or employee of the Company is, a party to any contract to
provide services, lease space or lease equipment to the Company
with any physician, health care facility, hospital or other person
who is in a position to make or influence referrals to the Company
where such contract or provision of services or space is
prohibited by Applicable Law.
2.12 Compliance with Applicable Laws. The Company has not violated or
infringed, nor is it in violation or infringement of, in any material
respect any Applicable Law or any order, writ, injunction or decree of
any Governmental Authority in connection with its activities. The
Company and its officers, directors, agents and employees have complied
in all material respects with all Applicable Laws, including, but not
limited to, Applicable Laws relating to Government Programs and to
billing and health care fraud (including the federal Anti-Kickback Law,
42 U.S.C. ss.1320a-7b, the Xxxxx I and II Laws, 42 U.S.C. ss.1395nn, as
amended, and the False Claims Act, 31 U.S.C. ss.3729 et seq. and any
regulations related thereto, as well as with any similar state
statutes). The Company has not received any written notice or, to its
knowledge, any other notice alleging a violation of any Applicable Law.
The Company is not a "covered entity" within the meaning of the HIPAA
Privacy Regulations. The Company (i) is not a party to a Corporate
Integrity Agreement with the Office of the Inspector General of the
Department of Health and Human Services, (ii) has no reporting
obligations pursuant to any settlement agreement entered into with any
governmental body, (iii) to its knowledge, has not been the subject of
any Government Program investigation conducted by any governmental
body, (iv) has not been a defendant in any qui tam/False Claims Act
litigation (other than by reason of an unsealed complaint of which the
Company has no knowledge), and (v) has not been served with or received
any search warrant, subpoena or civil investigation demand by any
governmental body.
2.13 Permits. The Disclosure Schedule sets forth all approvals,
authorizations, certificates, consents, licenses, orders and permits
and other similar authorizations of all Governmental Authorities (and
all other Persons) materially necessary for the Company to conduct its
business and own and operate its properties (the "Permits"). Except as
set forth in the Disclosure Schedule, each Permit is valid and in full
force and effect and none of the Permits will expire within six (6)
months of the Closing Date for any reason. The Company has conducted
its business in compliance with all material terms and conditions of
the Permits. The term Permits shall not include any Company License as
defined in Section 2.10.
2.14 Inventories. Except as set forth in the Disclosure Schedule, all
inventories of the Company reflected in the Latest Balance Sheet (a)
19
consist of items of merchantable quality and quantity usable and
salable in the ordinary course of business, (b) are salable at
prevailing market prices that are not less than the book value amounts
thereof or the price customarily charged by the Company therefor, (c)
conform to the specifications established therefor, and (d) have been
manufactured in accordance with all Applicable Laws. The quantities of
all inventories, materials and supplies of the Company are not
obsolete, damaged or slow-moving, and the present quantities of all
inventory, materials and supplies of the Company are reasonable in the
present circumstances of the business of the Company, as currently
conducted, except for items that are obsolete or below standard
quality, all of which are immaterial to the overall financial condition
of the Company, taken as a whole, and have been adequately allowed for
in the Latest Balance Sheet.
2.15 Receivables. The accounts receivables and other receivables reflected
on the Latest Balance Sheet, and those arising in the ordinary course
of business after the date thereof, are valid receivables that have
arisen in the ordinary course of business, are not subject to valid
counterclaims or setoffs, and, to the Company's knowledge, are
collectible in accordance with their terms, except as and to the extent
of the bad debt allowance reflected on the Latest Balance Sheet or as
otherwise disclosed on the Latest Balance Sheet or the notes thereto.
2.16 Litigation. Except as set forth in the Disclosure Schedule, (a) there
are no actions, suits, claims, hearings, arbitrations, proceedings
(public or private) or governmental investigations that have been
brought by or against any Governmental Authority or any other Person
(collectively, "Proceedings"), nor any investigations or reviews by any
Governmental Authority against or affecting the Company, pending or, to
the Company's knowledge, threatened, against or by the Company or any
of its assets or which seek to enjoin or rescind the transactions
contemplated by this Agreement; and (b) there are no existing orders,
judgments or decrees of any Governmental Authority naming the Company
as an affected party or otherwise affecting any of the assets or the
business of the Company.
2.17 Contracts.
(a) The Disclosure Schedule lists the following Contracts of the
Company, except that the contracts referred to in clause (xiii)
below may be listed on the updated Disclosure Schedule delivered
pursuant to Section 4.8 (collectively, the "Scheduled Contracts"):
(i) Each Contract providing for the lease of real property by
the Company or which is used by the Company in connection
with the operation of its business.
(ii) Each Contract relating to all machinery, tools, equipment,
motor vehicles, rolling stock and other tangible personal
property (other than inventory and supplies) owned, leased
or used by the Company, except for Contracts having
remaining payments of less than $10,000 which do not, in
the aggregate, have remaining payments of more than $25,000
or having a remaining term of longer than six (6) months or
20
that are not cancelable by the Company in its discretion
and without penalty upon notice of sixty (60) days or less.
(iii) Each Contract, other than Contracts for the sale of
Products or purchase of inventory, to which the Company is
a party that would reasonably be expected to involve
payments by or to the Company in excess of $25,000, or a
breach thereof would have a Material Adverse Effect on the
Company.
(iv) All Contracts relating to, or evidences of, or guarantees
of, or providing security for, indebtedness or the deferred
purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset).
(v) Each independent sales representative or distribution
agreement, supply agreement or similar Contracts relating
to or providing for the marketing or manufacturing of the
Company's products.
(vi) Each consulting, development, joint development, research
and development or similar Contracts relating to
development of the Company's products or Intellectual
Property and each Contract under which the Company has
granted or obtained a license to Intellectual Property,
other than commercial software licenses.
(vii) All acquisition, partnership, joint venture, teaming
arrangements or other similar Contracts.
(viii) Any Contract under which the Company has agreed not to
compete or has granted to a third party an exclusive right
that restricts or otherwise adversely affects the ability
of the Company to conduct its business.
(ix) All Benefit Plans.
(x) All Contracts with any "disqualified individual" (as
defined in Section 280G(c) of the Code) which contains any
severance or termination pay liabilities which would result
in a disallowance of the deduction for any "excess
parachute payment" (as defined in Section 280G(b)(l) of the
Code) under Section 280G of the Code.
(xi) Every Contract between the Company and any of the Company's
officers, directors or more than 5% stockholders, or any
entity in which any of the Company's officers, directors or
more than 5% stockholders has a greater than 2% equity
interest.
(xii) All Contracts for clinical or marketing trials relating to
the Company's products and all Contracts with physicians,
hospitals or other healthcare providers, or other
scientific or medical advisors.
21
(xiii) All Contracts not identified in clause (xii) which relate
to the Company's compliance with or obligation to comply
with the requirements of the HIPAA Privacy Regulations,
including without limitation all business associate
agreements, subcontractor agreements, confidentiality
agreements and similar contracts.
(b) The Company has delivered to Parent true and correct copies (or
summaries, in the case of any oral Contracts) of all such
Scheduled Contracts. Except as otherwise specified in the
Disclosure Schedule, none of the Scheduled Contracts contain a
provision requiring the consent of any party with respect to the
consummation of the transaction contemplated herein. No notice of
default arising under any Scheduled Contract has been delivered to
or by the Company. Each Scheduled Contract is a legal, valid and
binding obligation of the Company, and, to the Company's
knowledge, each other party thereto. To the Company's knowledge,
each Scheduled Contract is enforceable against each party thereto
in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to
general principles of equity, and neither the Company nor the
other party thereto is in breach, violation or default thereunder.
The Company is not a party to and is not bound by any contract,
agreement or instrument that currently has or would have a
Material Adverse Effect on the Company.
2.18 Benefit Plans. Except as set forth in the Disclosure Schedule:
(a) None of the Company or any ERISA Affiliate sponsors, maintains,
contributes to, is required to contribute to or has or could have
any liability of any nature, whether known or unknown, direct or
indirect, fixed or contingent, with respect to, any Pension Plan,
including, without limitation, any such plan that is excluded from
coverage by Section 4 of ERISA or is a "Multiemployer Plan" within
the meaning of Section 3(37) or 4001(a)(3) of ERISA. Each other
Pension Plan has been operated in all material respects in
accordance with its terms and in compliance in all material
respects with the applicable provisions of ERISA, the Code and all
other Applicable Law. None of the Company or any ERISA Affiliate
maintains a Pension Plan that is intended to be qualified under
Section 401(a) of the Code. All Pension Plans which the Company
operates as plans that are qualified under the provisions of
Section 408(p) of the Code satisfy in form and operation all
applicable qualification requirements. None of the Company or any
ERISA Affiliate has sponsored, maintained or contributed to any
Pension Plan which, during the preceding seven (7) years, has been
terminated, including by way of merger with or into another
Pension Plan.
(b) The Disclosure Schedule sets forth the name of each ERISA
Affiliate.
(c) None of the Company or any ERISA Affiliate has maintained or
contributed to any Pension Plan subject to Title IV of ERISA. None
of the Company or any ERISA Affiliate has maintained, contributed
to or participated in or agreed to participate in any Pension Plan
that is a Multiemployer Plan.
22
(d) None of the Company or any ERISA Affiliate sponsors, maintains,
contributes to, is required to contribute to, or has or could have
any liability of any nature, whether known or unknown, direct or
indirect, fixed or contingent, with respect to any Welfare Plan,
whether insured or otherwise, including, without limitation, any
such plan that is a Multiemployer Plan within the meaning of
Section 3(37) of ERISA. Each such Welfare Plan has been operated
in all material respects in accordance with its terms and in
compliance in all material respects with the applicable provisions
of ERISA, the Code and all other Applicable Law. Benefits under
each Welfare Plan are fully insured by an insurance company
unrelated to the Company or any ERISA Affiliate. No insurance
policy or contract requires or permits retroactive increase in
premiums or payments due thereunder. None of the Company or any
ERISA Affiliate has established or contributed to, is required to
contribute to or has or could have any liability of any nature,
whether known or unknown, direct or indirect, fixed or contingent,
with respect to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code, "welfare
benefit fund" within the meaning of Section 419 of the Code,
"qualified asset account" within the meaning of Section 419A of
the Code or "multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA. None of the Company or any
ERISA Affiliate maintains, contributes to or has or could have any
liability of any nature, whether known or unknown, direct or
indirect, fixed or contingent, with respect to medical, health,
life or other welfare benefits for present or future terminated
employees or their spouses or dependents other than as required by
Part 6 of Subtitle B of Title I of ERISA or any comparable state
law.
(e) None of the Company or any ERISA Affiliate is a party to,
maintains, contributes to, is required to contribute to or has or
could have any liability of any nature, whether known or unknown,
direct or indirect, fixed or contingent, with respect to any
Compensation Plan. Each Compensation Plan has been operated in all
material respects in accordance with its terms and in compliance
in all material respects with the applicable provisions of all
Applicable Law.
(f) There are no facts or circumstances which could, directly or
indirectly, subject the Company or any ERISA Affiliate to any (i)
excise tax or other liability under Chapters 43, 46 or 47 of
Subtitle D of the Code, (ii) penalty tax or other liability under
Chapter 68 of Subtitle F of the Code or (3) civil penalty, damages
or other liabilities arising under Section 502 of ERISA.
(g) Full payment has been made of all amounts which the Company or any
ERISA Affiliate is required, under Applicable Law, the terms of
any Benefit Plan, or any agreement relating to any Benefit Plan,
to have paid as a contribution, premium or other remittance
thereto or benefit thereunder. The Company and each ERISA
Affiliate has made adequate provisions for reserves or accruals in
accordance with GAAP to meet contribution, benefit or funding
obligations arising under Applicable Law or the terms of any
Benefit Plan or related agreement. There will be no change on or
before Closing Date in the operation of any Benefit Plan or any
documents with respect thereto which will result in an increase in
the benefit liabilities under such Benefit Plans, except as may be
required by law.
23
(h) The Company and each ERISA Affiliate has timely complied in all
material respects with all reporting and disclosure obligations
with respect to the Benefit Plans imposed by the Code, ERISA or
other Applicable Law.
(i) There are no pending or, to the Company's knowledge, threatened
audits, investigations, claims, suits, grievances or other
proceedings, and there are no facts that could give rise thereto,
involving, directly or indirectly, any Benefit Plan, or any rights
or benefits thereunder, other than the ordinary and usual claims
for benefits by participants, dependents or beneficiaries.
(j) The transactions contemplated herein do not result in any payment
(whether of severance pay or otherwise), forgiveness of debt,
distribution, increase in benefits, obligation to fund, or the
acceleration of accrual, vesting, funding or payment of any
contribution or benefit under any Benefit Plan.
(k) No employer other than the Company and/or an ERISA Affiliate is
permitted to participate or participates in the Benefit Plans. No
leased employees (as defined in Section 414(n) of the Code) or
independent contractors are eligible for, or participate in, any
Benefit Plans.
(l) No action or omission of the Company or any ERISA Affiliate or any
director, officer, employee, or agent thereof in any way
restricts, impairs or prohibits the Parent, the Company, any ERISA
Affiliate or any successor from amending, merging, or terminating
any Benefit Plan in accordance with the express terms of any such
plan and Applicable Law.
(m) The Disclosure Schedule lists and the Company has delivered to the
Parent true and complete copies of all Benefit Plan documents and
related trust agreements or other agreements or contracts
evidencing any funding vehicle with respect thereto, including all
amendments. The Company has delivered to the Parent true and
complete copies of: (i) the three most recent annual reports on
Treasury Form 5500, including all schedules and attachments
thereto, with respect to any Benefit Plan for which such a report
is required; (ii) the form of summary plan description, including
any summary of material modifications thereto or other
modifications communicated to participants, currently in effect
with respect to each Benefit Plan; (iii) the FORM 5305 - SIMPLE
for the Pension Plan intended to qualify under Section 408(p) of
the Code; and (iv) all professional opinions, material internal
memoranda, material correspondence with regulatory authorities and
administrative policies, manuals, interpretations and the like
with respect to each Benefit Plan.
(n) With respect to each Welfare Plan that is a group health plan, the
Company is in compliance with the HIPAA Privacy Regulations,
because either (i) such plan is a fully insured group health plan,
and the Company is not involved in plan administration nor
receives "protected health information" or only receives
enrollment/disenrollment information and "summary health
information" for purposes of obtaining premium bids or amending or
24
terminating such group health plan, or (ii) such plan is a
self-funded group health plan, administered solely by the Company
and, since April 14, 2003, has had fewer than 50 participants.
2.19 Labor and Employment Matters.
(a) The Disclosure Schedule sets forth a list of the current
employees, officers and directors of the Company. The Company has
previously delivered to Parent a complete and accurate list of all
current employees, officers and directors of the Company that
includes their base salaries and bonus. Except as set forth in the
Disclosure Schedule, all employees of the Company are employed on
an "at-will" basis. The Disclosure Schedule identifies all
employees who are currently on leave for any reason or receiving
disability or workers' compensation or any other similar type of
benefit from the Company.
(b) The Company is and has been in compliance in all material respects
with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
including without limitation any such Applicable Laws respecting
employment discrimination and occupational safety and health
requirements, and has not and is not engaged in any unfair labor
practice. There is no unfair labor practice complaint against the
Company pending or, to the Company's knowledge, threatened before
the National Labor Relations Board or any other comparable
Governmental Authority. There is no labor strike, dispute,
slowdown or stoppage actually pending or, to the Company's
knowledge, threatened against or directly affecting the Company.
No labor representation question exists respecting the employees
of the Company and there is not pending or, to the Company's
knowledge, threatened any activity intended or likely to result in
a labor representation vote respecting the employees of the
Company. No grievance or any arbitration proceeding arising out of
or under collective bargaining agreements is pending and no claims
therefor exist or, to the Company's knowledge, have been
threatened. No collective bargaining agreement is binding and in
force against the Company or currently being negotiated by the
Company. The Company has not experienced any significant work
stoppage or other significant labor difficulty. The Company is not
delinquent in payments to any persons for any wages, salaries,
commissions, bonuses or other direct or indirect compensation for
any services performed by them or amounts required to be
reimbursed to such persons, including without limitation any
amounts due under any Benefit Plan. Upon termination of the
employment of any person, neither the Company, Parent nor any
subsidiary of Parent will, by reason of any agreement or
understanding to which the Company is a party, be liable to any of
such persons for so-called "severance pay" or any other payments,
except as may be set forth in the Disclosure Schedule. Within the
twelve-month period prior to the date hereof there has not been
any expression of intention to the Company by any officer or key
employee to terminate such employment.
25
(c) All individuals who are performing or have performed services for
the Company or any of its Affiliates and who are or were
classified by the Company or any of its Affiliates as "independent
contractors" qualify for such classification under Section 530 of
the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of
1986, as applicable, and such individuals are not entitled to any
benefits under the Benefit Plans maintained by the Company.
2.20 Intellectual Property.
(a) The Disclosure Schedule lists all Intellectual Property that is
registered with, has been applied for, or has been issued by the
U.S. Patent and Trademark Office or a corresponding foreign
governmental or public authority. The Company has delivered or
made available to Parent complete and accurate copies of
correspondence and file histories (including office actions)
relating to the patents and patent applications listed in the
Disclosure Schedule.
(b) The Disclosure Schedule lists all Intellectual Property that has
been licensed to or from third parties, including a list of each
material license agreement.
(c) Each material item of Intellectual Property owned or used by the
Company immediately prior to the Effective Time hereunder will be
owned or available for use by the Parent or its Subsidiaries on
identical terms and conditions immediately after the Effective
Time.
(d) The Company owns, free and clear of any Lien, and possesses all
right, title and interest, or holds a valid license, in and to all
Intellectual Property, and has taken all reasonable action to
protect the Intellectual Property. To the Company's knowledge, all
patents included in the Intellectual Property are valid and
enforceable. To the Company's knowledge, the Intellectual Property
owned or licensed by the Company constitutes all the intellectual
property necessary to the conduct of the business of the Company
as it is currently conducted. Except as set forth in the
Disclosure Schedule, there are no royalties, fees, honoraria or
other payments payable by the Company to any Person by reason of
the ownership, development, modification, use, license,
sublicense, sale, distribution or other disposition of the
Intellectual Property other than salaries and sales commissions
paid to employees and sales agents in the ordinary course of
business. The Company has taken all reasonable security measures
to protect the secrecy, confidentiality and value of the
Intellectual Property.
(e) The Disclosure Schedule lists the Internet domain names included
in the Intellectual Property. The Company is the registrant of the
Internet domain names included in the Intellectual Property, free
and clear of all Liens. The Company is not aware of any pending or
threatened actions, suits, claims, litigation or proceedings
relating to the domain names included in the Intellectual
Property. The Company has operated the websites identified in the
Disclosure Schedule as being operated by the Company.
26
(f) All consultants and contractors, who have contributed to or
participated in the conception or development, or both, of the
Intellectual Property on behalf of the Company have executed
appropriate instruments of assignment in favor of the Company as
assignee that have conveyed to the Company effective, sole and
exclusive ownership of all tangible and intangible property
arising thereby.
(g) To the Company's knowledge, the conduct of the Company's business
does not infringe, misappropriate or conflict with any
intellectual property right of any other Person, and the Company
has not received any notice from any third party alleging any
infringement, misappropriation or violation by the Company of any
intellectual property right of any third party or challenging the
Company's ownership to any of the Intellectual Property. No claim
by any third party contesting the validity of any Intellectual
Property has been made in writing, is, to the Company's knowledge,
currently outstanding, threatened or reasonably expected to arise.
Except as set forth in the Disclosure Schedule, to the knowledge
of the Company, no third party is infringing any Intellectual
Property right of the Company.
2.21 Environmental Compliance. Except as set forth in the Disclosure
Schedule:
(a) The Company is not engaged in and has not permitted, direct or
indirect, operations or activities upon, or any use or occupancy
of the Properties (which Properties are listed on the Disclosure
Schedule), or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use,
generation, emission, release, discharge, refining, dumping or
disposal of any Environmentally Regulated Materials (whether legal
or illegal, accidental or intentional, direct or indirect) on,
under, in or about the Properties, which Properties are listed on
the Disclosure Schedule, or transported any Environmentally
Regulated Materials to, from or across the Properties, nor are any
Environmentally Regulated Materials presently constructed,
deposited, stored, placed or otherwise located on, under, in or
about the Properties. To the Company's knowledge no
Environmentally Regulated Materials have migrated from the
Properties upon or beneath other properties, and, to the Company's
knowledge no Environmentally Regulated Materials have migrated or
threatened to migrate from other properties upon, about or beneath
the Properties. To the Company's knowledge, the Properties do not
contain any: (i) underground or aboveground storage tanks; (ii)
asbestos; (iii) equipment containing polychlorinated biphenyls
("PCBs"); (iv) underground injection xxxxx; or(v) septic tanks in
which process waste water or any Environmentally Regulated
Materials have been disposed.
(b) The Company is in material compliance with applicable
Environmental, Safety and Health Laws including, but not limited
to, Proposition 65 notification requirements and has obtained all
Permits required under applicable Environmental, Safety and Health
Laws.
27
(c) No enforcement, investigation, cleanup, removal, remediation or
response or other governmental or regulatory actions have been,
asserted or, to the Company's knowledge, threatened with respect
to operations conducted on the Properties by the Company or
against the Company with respect to or regarding the Properties
pursuant to any Environmental, Safety and Health Laws. The Company
has not received any claim or notice that it has failed to comply
with any Environmental, Safety and Health Laws including, but not
limited to, Proposition 65.
(d) To the Company's knowledge, there are no past or present events,
conditions, circumstances, incidents, actions or omissions
relating to or affecting the Company or its business or assets
that violate, or would reasonably be expected to violate after the
Closing, any Environmental, Safety and Health Laws, or that would
reasonably be expected to give rise to any Environmental
Liability.
(e) The Company is not aware of any past or present events,
conditions, circumstances, activities, practices, incidents,
actions or plans with respect to or of the Company which may
reasonably be expected to interfere with or prevent compliance or
continued compliance with Environmental, Safety and Health Laws.
(f) All machinery, tools, devices and equipment operated by the
Company on the Properties have been operated in material
compliance with all Environmental, Safety and Health Laws, and all
such equipment currently is operational and in good condition,
reasonable wear and tear excepted.
(g) The Company has delivered to Parent copies of all environmental
documents, studies and reports in its possession or under its
control relating to: (i) any facilities or real property ever
owned, operated or leased by the Company; or (ii) any actual
Environmental Liability of the Company.
2.22 Insurance. The Disclosure Schedule contains an accurate and complete
list of all insurance policies owned or held by the Company, including,
but not limited to, fire and other casualty, general liability, theft,
life, workers' compensation, health, directors and officers, business
interruption and other forms of insurance owned or held by the Company,
specifying the insurer the policy number, and the term of the coverage.
All present policies are in full force and effect and all premiums with
respect thereto have been paid. The Company has not been denied any
form of insurance and no policy of insurance has been revoked or
rescinded during the past five (5) years, except as described on the
Disclosure Schedule.
2.23 Tax Matters.
(a) Except as set forth in the Disclosure Schedule, the Company, and
any combined or unitary group of which the Company is or was a
28
member, has prepared and timely filed or will timely prepare and
timely file all material Tax Returns any of them is required to
file (taking into account any extensions) on or prior to the
Closing Date. As of the time of filing, such Tax Returns were or
will be accurate and correct in all material respects and did not
or will not contain a disclosure statement under Section 6662 of
the Code (or any predecessor provision or comparable provision of
state, local or foreign law). The Company has made or will make
all such Tax Returns available to Parent, with copies of such Tax
Returns filed after the effective date of this Agreement provided
to Parent at least three (3) Business Days prior to filing such
Tax Return.
(b) The Company has paid or adequately provided for (on its Latest
Financial Statements and Estimated Closing Balance Sheet in
accordance with GAAP (exclusive of any reserves for deferred Taxes
established to reflect timing differences between book and taxable
income pursuant to Statement of Financial Accounting Standards No.
109)) all Taxes (whether or not shown on any Tax Return) that are
due and owing with respect to all taxable periods (or portions
thereof) ending on or before the Closing Date.
(c) The Company has not received any written notice of any claim for
assessment or collection of Taxes that is presently being asserted
against the Company, and the Company is not a party to any pending
action, proceeding, or investigation by any Governmental
Authority, nor has any such action, proceeding or investigation
been threatened in a writing delivered to the Company. No claim
has been made in writing by any jurisdiction where the Company
does not file Tax Returns that the Company may be subject to Tax
by that jurisdiction.
(d) Except as set forth in the Disclosure Schedule, the Company, is
not a party to any agreement, contract, arrangement or plan that
(i) has resulted or would result, separately or in the aggregate,
in connection with this Agreement or any change of control of the
Company, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code; or (ii) would obligate
the Company to provide "gross-up" benefits with respect to any
excise tax due on any "excess parachute payments" within the
meaning of Section 280G of the Code.
(e) All deficiencies and assessments of Taxes of the Company resulting
from an examination of any Tax Returns by any Governmental
Authority on or before the Closing Date have been or will be paid
and, to the Company's knowledge, there are no pending examinations
currently being made by any Governmental Authority nor has there
been any written or oral notification to the Company of any
intention to make an examination of any Tax Returns by any
Governmental Authority. There are no outstanding agreements or
waivers extending the statutory period of limitations applicable
to any Tax Return for any period.
(f) For purposes of computing Taxes and the filing of Tax Returns, the
Company has not failed to treat as "employees" any individual
providing services to the Company who reasonably would be expected
to be classified as an "employee" under the applicable rules or
regulations of any Governmental Authority with respect to such
classification.
29
(g) The Company has complied in all material respects with all
Applicable Laws relating to the withholding of Taxes and the
payment thereof (including, without limitation, withholding of
Taxes under Sections 1441 and 1442 of the Code, or similar
provisions under any foreign laws), and timely and properly
withheld from individual employee wages and paid over to the
proper Governmental Authority all amounts required to be so
withheld and paid over under all Applicable Laws.
(h) The Company is not involved in, subject to, or a party to any
joint venture, partnership, contract or other arrangement that is
treated as a "partnership" for federal, state, local or foreign
income Tax purposes.
(i) The Company has not requested any extension of time within which
to file any Tax Return, which Tax Return has not since been filed.
(j) The Company has not made an election under Section 341(f) of the
Code for any taxable years not yet closed for statute of
limitation purposes.
(k) The Company is, and at all times has been, a corporation taxable
as corporation for United States income tax purposes.
(l) The Company is not, nor has been at any time, a United States real
property holding corporation within the meaning of Section
897(c)(2) of the Code.
(m) The Company is not a party to or bound by any obligations under
any Tax sharing, Tax allocation, Tax indemnity or similar
agreement or arrangement.
(n) The Company has not, within three (3) years preceding the date
hereof, been either a "distributing" or "controlled" corporation
(as such terms are defined in Section 355(a)(1) of the Code) in a
transaction structured to qualify as a tax-free distribution under
Section 355 of the Code.
(o) The Company has not received any written ruling related to Taxes,
entered into any agreement with a taxing authority relating to
Taxes or authorized any person to represent them before a taxing
authority pursuant to a power of attorney or otherwise.
(p) There are no liens for Taxes upon any of the assets or properties
of the Company other than liens for Taxes not yet due and payable
and Permitted Liens. There is no outstanding closing agreement,
ruling request, request to consent to change a method of
accounting, subpoena or request for information with or by a
Governmental Authority with respect to the Company, its income,
assets, properties, payroll, operation or business.
30
(q) The Company is not nor has been a party to any transaction where a
deferred intercompany gain was generated under Section 1502 of the
Code and the Treasury Regulations promulgated thereunder.
(r) Prior to the transaction contemplated by this Agreement, the
Company has not been subject to an "ownership change" with the
meaning of Section 382(g) of the Code and no "Section 382
limitation" within the meaning of Section 382 of the Code applies
to limit the Company's ability to utilize its net operating losses
or other Tax attributes.
2.24 Bank Accounts; Powers of Attorney. The Disclosure Schedule sets forth:
(a) the names of all financial institutions, investment banking and
brokerage houses, and other similar institutions at which the Company
maintains accounts, deposits, safe deposit boxes of any nature, and the
names of all persons authorized to draw thereon or make withdrawals
therefrom and a description of such accounts; and (b) the names of all
persons or entities holding general or special powers of attorney from
the Company and copies thereof.
2.25 Orders, Commitments and Returns. All accepted and unfulfilled orders
for the sale of products and the performance of services entered into
by the Company and all outstanding contracts or commitments for the
purchase of supplies, materials and services by or from the Company
were made in the ordinary course of business. The Company has not
received any material claims against the Company to return products by
reason of alleged over-shipments, defective products or otherwise, or
of products in the hands of customers, retailers or distributors under
an understanding that such products would be returnable.
2.26 Product Liability Claims. The Company has never received a claim, or
incurred any uninsured or insured liability, for or based upon failure
to warn, Proposition 65, breach of product warranty (other than
warranty service and repair claims incurred in the ordinary course of
business and expensed as warranty or repair expense on the Latest
Financial Statements for the period in which incurred), strict
liability in tort, general negligence, negligent manufacture of
product, negligent provision of services or any other allegation of
liability, including or resulting in, but not limited to, product
recalls, arising from the materials, design, testing, manufacture,
packaging, labeling (including instructions for use) or sale of its
products or from the provision of services ("Product Liability Claim").
The Company has disclosed to Parent each Product Liability Claim
received by the Company.
2.27 Warranties. All products manufactured or sold, and all services
provided, by the Company have complied in all material respects, and
are in compliance with all material contractual requirements,
warranties or covenants, express or implied, applicable thereto. No
product or service manufactured, sold, delivered or performed by the
Company is subject to any guaranty, warranty or other indemnity beyond
the applicable standard terms and conditions set forth in the
Disclosure Schedule. The terms of all standard and all material
non-standard product and service warranties and product return, sales
credit, discount, warehouse allowance, advertising allowance, demo
sales and credit policies of the Company are specifically set forth in
the Disclosure Schedule. The Company has delivered to Parent prior to
the date hereof complete and accurate copies of all such warranties and
policies.
31
2.28 Relations with Suppliers and Customers. No material current supplier of
the Company has canceled any contract or order for provision of, and,
to the Company's knowledge, there has been no threat by any such
supplier not to provide, raw materials, products, supplies or services
to the business of the Company either prior to or following the
Effective Time. The Company has not received any information from any
customer that accounted for more than 5% of the revenues of the Company
during the last full fiscal year to the effect that such customer
intends to materially decrease the amount of business it does with the
Company either prior to or following the Effective Time. The Disclosure
Schedule lists each supplier to the Company that is the source of a
particular raw material, product, supply or service with respect to
which locating and qualifying a replacement source would involve
significant cost or delay.
2.29 Indemnification Obligations. Except as set forth in the Disclosure
Schedule, the Company is not a party to any Contract which contains any
provisions requiring the Company to indemnify any Person (excluding
indemnities contained in the Company's standard terms and conditions of
sale, copies of which have been provided to Parent).
2.30 Absence of Certain Business Practices. Neither the Company, nor, to the
Company's knowledge, any director, officer, employee or agent of the
Company, has, directly or indirectly, given or agreed to give any gift
or similar benefit or agreed to make or made any payment to any
customer, supplier, governmental employee or other person who is or may
be in a position to help or hinder the business of the Company (or
assist it in connection with any actual or proposed transaction) which
(a) would reasonably be expected to subject the Company, Parent or
Merger Subsidiary to any damage or penalty in any civil, criminal or
governmental litigation proceeding, or (b) violated or violates any
Applicable Law.
2.31 Brokers. Except as set forth in the Disclosure Schedule, neither the
Company, nor any of its directors, officers or employees, has employed
any broker, finder, or financial advisor or incurred any liability for
any brokerage fee or commission, finder's fee or financial advisory
fee, in connection with the transactions contemplated hereby.
2.32 Minute Books. The minute books of the Company, as previously made
available to Parent and its representatives, contain, in all material
respects, complete and accurate records of all meetings of and
corporate actions or written consents by the stockholders, Boards of
Directors, and committees of the Boards of Directors of the Company.
2.33 Disclosure. No representation or warranty by Company in this Agreement,
including the Disclosure Schedule and the Exhibits hereto, and no
statement contained or to be contained in any document or certificate
to be delivered by the Company pursuant to Article 5, contains or will
contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. To Company's knowledge, except as set forth in the
Disclosure Schedule, there has been no event, transaction or
information which has come to the attention of the Company which, as it
relates directly to the business of Company, could reasonably be
expected to have a Material Adverse Effect on the Company.
32
2.34 Investigation by Parent. Notwithstanding anything to the contrary in
this Agreement, (a) no investigation by Parent shall affect the
representations and warranties of the Company under this Agreement or
contained in any other writing to be furnished to Parent in connection
with the transactions contemplated hereunder and (b) such
representations and warranties shall not be affected or deemed waived
because Parent should have known that any of the same is or might be
inaccurate in any respect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUBSIDIARY
As a material inducement to the Company to enter into this Agreement,
with the understanding that the Company and the Stockholders will be relying
thereon in consummating the transactions contemplated hereunder, Parent and
Merger Subsidiary hereby, jointly and severally, represent and warrant to the
Company that the statements contained in this Article 3 are true and correct.
3.1 Corporate Existence and Power. Parent and Merger Subsidiary are
corporations duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and each has
all requisite corporate power and authority required to own, operate
and lease its respective assets and properties as now owned, leased and
operated and to carry on its respective business as now being
conducted. Parent and Merger Subsidiary are each duly qualified or
licensed to do business as a foreign corporation and are in good
standing in every jurisdiction in which the character or location of
their properties and assets owned, leased or operated by them or the
nature of their business require such licensing or qualification,
except where the failure to be so qualified, licensed or in good
standing in such jurisdiction would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or Merger
Subsidiary. Merger Subsidiary is a recently-formed Delaware corporation
that has not conducted, and prior to the Effective Time will not
conduct, any activities other than those incident to its formation and
in connection with the consummation of the Merger and any of its other
obligations set forth herein.
3.2 Authorization. Parent and Merger Subsidiary have the requisite
corporate power and authority to enter into this Agreement and to carry
out the transactions contemplated hereunder. The Boards of Directors of
Parent and Merger Subsidiary and Parent, as the sole shareholder of
Merger Subsidiary, have taken all action required by Applicable Law,
their respective Certificates of Incorporation and Bylaws and otherwise
to duly and validly authorize and approve the execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions
contemplated herein and no other corporate proceedings on the part of
Parent or Merger Subsidiary are, or will be, necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.
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This Agreement has been duly and validly executed and delivered by each
of Parent and Merger Subsidiary and, assuming the due authorization,
execution and delivery by the Company of this Agreement, constitutes
the legal, valid and binding obligations of Parent and Merger
Subsidiary enforceable against each of them in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.3 Consents and Approvals. No Consent by any individual or entity,
including without limitation any Governmental Authority or Person, is
required in connection with the execution, delivery or performance of
this Agreement by Parent and Merger Subsidiary or the consummation by
Parent and Merger Subsidiary of the transactions contemplated herein,
other than (a) requirements of the DGCL for filing of appropriate
documents to effect the Merger, (b) filing with the Federal Trade
Commission and the Antitrust Division of the Department of Justice of a
pre-merger notification and report under the HSR Act or (c) where the
failure to make any such filing, or to obtain such permit,
authorization, Consent or approval, would not prevent or delay
consummation of the Merger or would not otherwise prevent Parent or
Merger Subsidiary from performing their obligations under this
Agreement.
3.4 Available Capital Resources. The Parent has existing cash reserves and
borrowing capacity under existing credit facilities necessary to pay
the Merger Consideration and satisfy the obligations of Parent and
Merger Subsidiary hereunder.
3.5 Disclosure. No representation or warranty by Parent or Merger
Subsidiary in this Agreement and no statement contained or to be
contained in any document, certificate or other writing furnished or to
be furnished by either Parent or Merger Subsidiary to the Company in
connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3.6 Non-Contravention. Neither the execution, delivery and performance by
Parent or Merger Subsidiary of this Agreement nor the consummation of
the transactions contemplated herein will (a) contravene or conflict
with the respective Certificate of Incorporation or Bylaws of Parent
and Merger Subsidiary; (b) contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon or
applicable to Parent or Merger Subsidiary or any of the Parent's or
Merger Subsidiary's assets (c) result in the creation or imposition of
any Lien on any of Parent's or Merger Subsidiary's assets, other than
Permitted Liens or (d) be in conflict with, constitute (with or without
due notice or lapse of time or both) a default under, result in the
loss of any material benefit under, or give rise to any right of
termination, cancellation, increased payments or acceleration under any
terms, conditions or provisions of any note, bond, lease, mortgage,
indenture, license, contract, franchise, permit, instrument or other
agreement or obligation to which Parent or Merger Subsidiary is a
party, or by which any of their respective properties or assets may be
bound, except in the cases of clause (b) where such conflicts or other
occurrences would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent or Merger
Subsidiary.
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3.7 Brokers. Except for the engagement by Parent of Xxxxx Xxxxxxx
Companies, neither Parent nor Merger Subsidiary, nor any of their
directors, officers or employees has employed any broker, finder, or
financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with
the transactions contemplated hereby. Parent shall be solely
responsible for all fees payable to Xxxxx Xxxxxxx Companies in
connection with such engagement.
3.8 Litigation. There are no Proceedings nor any investigations or reviews
by any Governmental Authority against or affecting the Parent or any of
its Subsidiaries, pending or, to Parent's and Merger Subsidiary's
knowledge, threatened, against or by the Parent or any of its
Subsidiaries or any of their assets or which (a) challenge or seek to
prevent, enjoin, alter, rescind or delay the transactions contemplated
by this Agreement or (b) which, if adversely determined, could
materially affect Parent's ability to pay the Merger Consideration.
3.9 AMS Reports; Financial Statements. Parent has made available to the
Principal Stockholders via XXXXX true and complete copies of (i) AMS
Holdings' Annual Report on Form 10-K, for the fiscal year ended January
3, 2004, as filed with the SEC under the Exchange Act, (ii) AMS
Holdings' proxy statements relating to all of the meetings of
shareholders (whether annual or special) of AMS Holdings since January
1, 2004, as filed with the SEC, and (iii) all other reports, statements
and registration statements and amendments thereto (including, without
limitation, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K) required to be filed by AMS Holdings with the SEC under the
Securities Act and/or the Exchange Act, as applicable, since January 3,
2004. The reports and statements set forth in clauses (i) through
(iii), above, including all exhibits and information incorporated by
reference therein, are referred to collectively herein as the "AMS
Reports." Since January 3, 2004, AMS Holdings has filed all AMS Reports
required to be filed by it with the SEC under the Securities Act and/or
the Exchange Act, as applicable. As of their respective filing dates
(and if amended or supplemented by a filing prior to the date of this
Agreement, then as of the date of such amended or supplemented filing),
the AMS Reports (i) complied in all material respects with the
then-applicable requirements of the Securities Act and the Exchange
Act, as applicable, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. No
Subsidiary of AMS Holdings is required to file any forms, reports or
other documents with the SEC. The audited consolidated financial
statements and unaudited interim financial statements of AMS Holdings
included in the AMS Reports have been prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in
the notes thereto) and present fairly, in all material respects, the
financial position of AMS Holdings and its Subsidiaries as at the dates
thereof and the results of their operations and cash flows for the
periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end audit or other adjustments,
and the fact that certain information and notes have been condensed or
omitted in accordance with the Exchange Act. Since the date of filing
with the SEC of AMS Holdings' most recent Quarterly Report on Form
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10-Q, with respect to Parent and the Merger Subsidiary, there has not
been any change, effect, event, occurrence, state of facts or
development that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect on Parent or
Merger Subsidiary.
ARTICLE 4
COVENANTS
4.1 Conduct of the Business. Except as contemplated by this Agreement or to
the extent that Parent otherwise consents in writing, during the period
from the date of this Agreement until the earlier of the termination of
this Agreement or the Closing, the Company shall maintain its assets
and properties and carry on its businesses and operations in the
ordinary course of business in a manner consistent with past practice;
and the Company shall use commercially reasonable efforts to preserve
intact its business organization, existing business relationships
(including without limitation its relationships with officers,
employees, dealers, distributors, independent contractors, customers
and suppliers), good will and going concern value.
4.2 Company's Agreements as to Specified Matters. Except, as specifically
set forth on the Disclosure Schedule, for payment of Transaction
Expenses, or as contemplated by this Agreement or as may be otherwise
agreed in writing by Parent, from the date hereof until the earlier of
the termination of this Agreement or the Closing, the Company shall
not:
(a) Amend its Certificate of Incorporation or Bylaws (or other similar
governing instruments);
(b) Except for trade payables incurred in the ordinary course of
business and consistent with past practice, create, incur or
assume any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse the obligations of any
Person, or make any loans, advances or capital contributions to,
or investments in, any other Person;
(c) Pay, discharge or satisfy any claims, liabilities or obligations
in an amount in excess of $25,000 in the aggregate, other than in
the ordinary course of business, consistent with past practice;
(d) Permit or allow any of its properties or assets which are material
to the operation of its business to be subjected to any Lien,
except Permitted Liens;
(e) Write down the value of any inventory or write off as
uncollectible any notes or accounts receivable or any trade
accounts or trade notes, other than in the ordinary cause of
business consistent with past practice;
(f) Cancel or amend any debts, waive any claims or rights or sell,
transfer or otherwise dispose of any properties or assets, other
than for such debts, claims, rights, properties or assets which,
individually or in the aggregate, are not material to the conduct
of its business, other than in the ordinary course of business
consistent with past practice;
36
(g) License, sell, transfer, pledge, modify, disclose, dispose of or
permit to lapse any right to the use of any Intellectual Property
Rights other than for such Intellectual Property Rights which,
individually or in the aggregate, are not material to the conduct
of their businesses;
(h) Sell, assign, lease, license, transfer or otherwise dispose of, or
mortgage, pledge or encumber (other than with Permitted Liens),
any of their respective assets, except for sales of inventory in
the ordinary course of business consistent with past practice;
(i) (i) Terminate, enter into, adopt, institute or otherwise become
subject to or amend in any material respect any collective
bargaining agreement or employment or similar agreement or
arrangement with any of its directors, officers or employees; (ii)
terminate, enter into, adopt, institute or otherwise become
subject to or amend in any material respect any Benefit Plan;
(iii) contribute, set aside for contribution or authorize the
contribution of any amounts for any such Benefit Plan except as
required (and not discretionary) by the terms of such Benefit
Plan; or (iv) grant or become obligated to grant any bonus or
general increase in the compensation of any directors, officers or
employees (including without limitation any such increase pursuant
to any Benefit Plan) except as required pursuant to any
contractual obligation in existence as of the date hereof;
(j) Make or enter into any commitment for capital expenditures for
additions to property, plant or equipment individually in excess
of Twenty-Five Thousand Dollars ($25,000);
(k) Except as specifically contemplated by this Agreement and except
for the payment of dividends that are accrued but unpaid under the
Company's Certificate of Incorporation on Company Preferred Stock
(i) declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or other securities
(including without limitation distributions in redemption or
liquidation) or redeem, purchase or otherwise acquire any shares
of its capital stock or other securities; (ii) issue, grant or
sell any shares of its capital stock or equity securities of any
class, or any options, warrants, conversion or other rights to
purchase or acquire any such shares or equity securities or any
securities convertible into or exchangeable for such shares or
equity securities, except issuance of Company Common Stock
pursuant to the exercise of Company Stock Options outstanding on
the date hereof; (iii) become a party to any merger, exchange,
reorganization, recapitalization, liquidation, dissolution or
other similar corporate transaction; or (iv) organize any new
subsidiary, acquire any capital stock or other equity securities
or other ownership interest in, or assets of, any person or entity
or otherwise make any investment by purchase of stock or
securities, contributions to capital, property transfer or
purchase of any properties or assets of any person or entity;
37
(l) Pay, lend or advance any amounts to, or sell, transfer or lease
any properties or assets to, or enter into any agreement or
arrangement with, any director, officer, employee or stockholder;
(m) Terminate, enter into or amend in any material respect any
Scheduled Contract, or, outside of the ordinary course of
business, take any action or omit to take any action which will
cause a breach, violation or default (however defined) under any
Scheduled Contract;
(n) Resolve any dispute or examination related to Taxes, make any
election with respect to Taxes or apply for any change in Tax
accounting method; or
(o) Agree, whether in writing or otherwise, to take any action
described in this subsection.
4.3 Full Access. The Company shall afford to Parent and its directors,
officers, employees, counsel, accountants, investment advisors and
other authorized representatives and agents at Parent's expense,
reasonable access to the facilities, properties, books and records of
the Company in order that Parent may have full opportunity to make such
investigations as it shall desire to make of the affairs of the
Company; provided, however, that any such investigation shall be
conducted upon five (5) days written notice in such a manner as not to
interfere unreasonably with business operations; and the Company shall
furnish such additional financial and operating data and other
information as Parent shall, from time to time, reasonably request,
including, without limitation, access to the working papers of their
independent certified public accountants.
4.4 Confidentiality. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information relating to any other
party hereto furnished or made available to it in connection with the
transactions contemplated herein ("Information") for any purpose or in
any manner other than solely in connection with its evaluation or
consummation of the transactions contemplated by this Agreement in a
manner that the disclosing party has approved and shall in no event use
or permit the use of any of such Information in a manner or for a
purpose detrimental to such other party, and that it will not disclose,
divulge, provide or make accessible (collectively, "Disclose"), or
permit the Disclosure of, any of the Information to any person or
entity, other than solely to its responsible directors, officers,
employees, investment advisors, accountants, counsel and other
authorized representatives and agents (collectively, the
"Representatives") who have a "need to know" to carry out the purposes
of this Agreement, except as may be required by judicial or
administrative process or, in the opinion of such party's regular
counsel, by other requirements of Applicable Law; provided, however,
that prior to any Disclosure of any Information permitted hereunder,
the disclosing party shall first obtain the recipients' undertaking to
comply with the provisions of this subsection with respect to such
Information. Each party shall instruct its Representatives to observe
38
the terms of this Agreement and shall be responsible for any breach of
this Agreement by any of its Representatives. The term "Information" as
used herein shall not include any information relating to a party which
the party receiving such information can show: (i) to have been
rightfully in its possession prior to its receipt from another party
hereto; (ii) to be now or to later become generally available to the
public through no fault of the receiving party; (iii) to have been
received separately by the receiving party in an unrestricted manner
from a person entitled to disclose such information; or (iv) to have
been developed independently by the receiving party without regard to
any Information received in connection with this transaction. Each
party hereto also agrees to promptly return to the party from whom
originally received all original and duplicate copies of materials
containing Information and to destroy any summaries, analyses or
extracts thereof or based thereon (whether in hard copy form or
intangible media) should the transactions contemplated herein not
occur. Upon the return of all of Information by the recipient of such
Information to the disclosing party, the recipient shall deliver
written certification that it does not have any copies of Information
in its possession. A party hereto shall be deemed to have satisfied its
obligations to hold the Information confidential if it exercises the
same care as it takes with respect to its own similar information,
which shall in no event be less than reasonable care. The provisions of
this Section 4.4 shall survive for five (5) years after any termination
of this Agreement.
4.5 Filings; Consents; Removal of Objections. Subject to the terms and
conditions herein, the parties hereto shall use commercially reasonable
efforts to take or cause to be taken all actions and do or cause to be
done all things necessary, proper or advisable under Applicable Laws to
consummate and make effective, as soon as reasonably practicable, the
transactions contemplated hereby, including, without limitation,
obtaining all Consents of any person or entity, whether private or
governmental, required in connection with the consummation of the
transactions contemplated herein. In furtherance, and not in limitation
of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and
they respectively agree to exert commercially reasonable efforts to
that end, including, without limitation: (a) the removal or
satisfaction, if possible, of any objections to the validity or
legality of the transactions contemplated herein; and (b) the
satisfaction of the conditions to consummation of the transactions
contemplated hereby.
4.6 Further Assurances; Cooperation; Notification.
(a) Each party hereto shall, before, at and after Closing, execute and
deliver such instruments and take such other actions as the other
party or parties, as the case may be, may reasonably require in
order to carry out the intent of this Agreement including the
satisfaction of all conditions contained in Articles 5 and 6 of
this Agreement.
(b) To the extent permitted by Applicable Law and provided that Parent
is not in material breach of this Agreement and not otherwise
prohibited by any contract to which the Company is a party, the
Company shall cooperate with Parent to promptly develop plans for
the management of the businesses after the Closing, including,
without limitation, plans relating to productivity, marketing,
operations and improvements, and the Company shall further
cooperate with Parent to provide for the implementation of such
plans as soon as practicable after the Closing. Subject to
Applicable Law and any other confidentiality obligations, Company
shall confer on a regular and reasonable basis with one or more
representatives of Parent to report on material operational
matters and the general status of ongoing operations.
39
(c) At all times from the date hereof until the Closing, each party
shall promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or is reasonably
likely to result in a failure by such party to satisfy the
conditions specified in Articles 5 or 6, as applicable.
4.7 Approval of Stockholders. As promptly as practicable after the
execution of this Agreement, the Company will take all action necessary
in accordance with the DGCL and its Certificate of Incorporation and
Bylaws to convene a meeting of the Stockholders to consider and vote
upon or to solicit consent in writing regarding the adoption and
approval of this Agreement and the consummation of the transactions
contemplated hereby (the "Stockholder Approval"). The Board of
Directors of the Company has on the date of this Agreement unanimously
adopted a resolution recommending that the Stockholders approve the
Merger and this Agreement and the consummation of the transactions
contemplated herein.
4.8 Update Disclosure; Breaches. Not less than two (2) Business Days prior
the Closing, the Company shall supplement or amend the Disclosure
Schedule (a) if any representation or warranty made by the Company in
this Agreement was when made, or has subsequently become, untrue in any
material respect, and (b) of the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which may cause any condition
to the obligations of any party hereto to effect the transactions
contemplated by this Agreement not to be satisfied. For purposes of
determining the accuracy as of the Closing of the representations and
warranties of the Company contained in Article 2 in order to determine
the fulfillment of the condition set forth in Section 5.1 and to
determine whether a material breach has occurred pursuant to Section
7.1(d), the Disclosure Schedule will be deemed to exclude any material
information contained in any update to the Disclosure Schedule
delivered after the date of this Agreement. If Parent has a right to
terminate this Agreement pursuant to Section 7.1(d) and if Parent does
not so terminate this Agreement by delivery of written notice to the
Company within ten (10) Business Days after its receipt of such
information but prior to the Closing Date, Parent will be deemed to
have waived its right to terminate this Agreement on account of the
matter or matters therein contained (including any claim that the
closing condition set forth in Section 5.1 has not been satisfied), and
if the Closing takes place, the Disclosure Schedule, as so updated,
will be deemed to be the Disclosure Schedule for all purposes of this
Agreement, including without limitation, for purposes of Section 8.2.
4.9 No Solicitation. The Company agrees (i) it will negotiate exclusively
with Parent and its authorized representatives regarding the
transaction contemplated hereby and will not, directly or indirectly,
encourage or solicit the submission of, entertain inquiries, proposals
or offers from, or enter into any agreement or negotiate with any
person or entity (other than Parent) for the acquisition of the Company
(whether by merger, combination, sale of assets, sale of stock or
otherwise) or other disposition of assets or technology other than in
the ordinary course of business, and (ii) it will not furnish to any
person any information with respect to any transaction prohibited by
this Section 4.9. The Company agrees to take the necessary steps to
40
promptly inform any such third party of the obligations undertaken in
this Section 4.9 and this Agreement. The Principal Stockholders and the
Company agree to immediately inform Parent of any such inquiry from any
such third party, including the material terms thereof (including
without limitation, any terms regarding price) and the identity of the
Person making such inquiry, and to keep the Parent informed, on a
current basis, of the status and terms of any such proposals or offers.
Notwithstanding the foregoing, in the event that, prior to obtaining
the Stockholder Approval, the Company's Board of Directors receives a
Superior Proposal, the Company's Board of Directors may, if it
determines in good faith, by resolution duly adopted after consultation
with outside legal counsel to the Company, that such action is required
in order for the Company's Board of Directors to comply with its
fiduciary duties under Applicable Law, approve or recommend such
Superior Proposal and terminate this Agreement as permitted pursuant to
the terms of Section 7.1(h); provided that:
(a) the Company notifies Parent in writing that it intends to take
such action, which notice must identify the party making such
proposal, set forth the material terms of such proposal, and have
attached to it the most current version of any such written
agreement;
(b) Parent shall not have proposed, within five (5) Business Days
after receipt of such notice from the Company, to amend this
Agreement to provide for terms as favorable as or superior to
those of the Superior Proposal;
(c) for a period of five (5) Business Days after receipt of Parent's
proposal to amend this Agreement, the Company shall have
reasonably considered and discussed in good faith all proposals
submitted by the Parent and, without limiting the foregoing, met
with, and caused its financial advisors and legal advisors to meet
with, Parent and its advisors from time to time as reasonably
requested by Parent to reasonably consider and discuss in good
faith the Parent's proposals; and
(d) the Company's Board of Directors in good faith determines, after
consultation with its financial and legal advisors, that after
taking into account any amendments to this Agreement proposed by
the Parent as of the end of such five (5) Business Day
negotiation, the Parent's proposal is not at least as favorable to
the stockholders of the Company as the Superior Proposal.
4.10 Public Announcements. None of the parties hereto shall make any public
announcement with respect to the transactions contemplated herein
without the prior consent of the other parties, which consent shall not
be unreasonably withheld or delayed, unless specifically ordered to do
so by a court of competent jurisdiction after consulting with the other
party or unless required by Applicable Law or regulation including, but
no limited to, the rules and regulation of the Securities and Exchange
Commission and the Nasdaq Stock Market.
41
4.11 Preparation of Tax Returns: Tax Matters.
(a) Tax Returns.
(i) The Company shall file or cause to be filed when due all
Tax Returns that are required to be filed by or with
respect to the Company on or before the Closing Date and
shall remit (or cause to be remitted) any Taxes due in
respect of such Tax Returns.
(ii) Parent shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to
the Company after the Closing Date and shall remit (or
cause to be remitted) any Taxes due in respect of such Tax
Returns; provided that, notwithstanding any other provision
of this Agreement, within 10 days of the Parent's
remittance of such Taxes, the Stockholders shall reimburse
Parent for the portion of such Taxes attributable to the
portion of any Straddle Period (as hereinafter defined)
ending on the Closing Date, except to the extent a reserve
with respect to such Taxes was established on the Closing
Balance Sheet (exclusive of any reserves for deferred Taxes
established to reflect timing differences between book and
taxable income pursuant to Statement of Financial
Accounting Standards No. 109). Any Tax Return required to
be filed by Parent with respect to the Company for any
taxable year or period that begins before and ends after
the Closing Date (a "Straddle Period") shall be submitted
to the Stockholders' Representative no less than ten (10)
days prior to the filing of such Tax Return for review by
the Stockholders' Representative, and Parent shall consider
in good faith any proposed revisions to such Tax Returns as
the Stockholders' Representative may reasonably request.
(iii) To the extent permitted or required by law or
administrative practice, (x) the taxable year of the
Company which includes the Closing Date shall be treated as
closing on and including the Closing Date and,
notwithstanding the foregoing, (y) all transactions not in
the ordinary course of business occurring after the Closing
shall be reported on Parent's consolidated United States
federal income Tax Return to the extent permitted by
Treasury Regulationss.1.1502-76(b)(1)(ii)(B) and shall be
similarly reported on other Tax Returns of the Parent to
the extent permitted by law. Where it is necessary to
apportion between the Stockholders and Parent the Tax
liability of the Company for a Straddle Period (which is
not treated under the immediately preceding sentence as
closing on the Closing Date), such liability shall be
apportioned between the period deemed to end at the Closing
Date and the period deemed to begin at the beginning of the
day following the Closing Date on the basis of an interim
closing of the books, except that Taxes imposed on a
periodic basis shall be allocated on a daily basis.
42
(b) Transfer Taxes. All sales, use, stock or realty transfer, or
similar Taxes resulting directly from the transactions
contemplated by this Agreement ("Transfer Taxes") shall be borne
equally by the Stockholders (to the extent of their Percentage
Interest) on the one hand, and Parent on the other hand. The
Stockholders and Parent shall cooperate with each other and,
subject to the other terms of this Agreement, take any action
reasonably requested by the other parties hereto which does not
cause such party to incur any cost or material inconvenience in
order to minimize Transfer Taxes. Notwithstanding the provisions
of Section 4.11(a), which shall not apply to Tax Returns relating
to Transfer Taxes resulting directly from the transactions
contemplated hereby, any Tax Returns that must be filed in
connection with such Transfer Taxes shall be prepared and filed
when due by the party primarily or customarily responsible under
the applicable local law for filing such Tax Returns, and such
party will use its reasonable efforts to provide such Tax Returns
to the other parties hereto at least ten days prior to the due
date for such Tax Returns, and the other Party shall pay its
portion of such Taxes no later than two business days prior to the
due date for such Taxes.
(c) Assistance and Cooperation. After the Closing Date, each of the
Stockholders and Parent shall (and shall cause their respective
Affiliates to) at the sole expense of the requesting party:
(i) timely sign and deliver such certificates or forms as may
be necessary or appropriate to establish an exemption from
(or otherwise reduce), or file Tax Returns or other reports
with respect to, Transfer Taxes;
(ii) assist the other parties hereto in preparing any Tax
Returns which such other party is responsible for preparing
and filing in accordance with Section 4.11(a); and
(iii) cooperate fully in preparing for any audits of, or disputes
with any federal, state or local Taxing authorities
regarding, any Tax Returns of the Company.
4.12 Post-Closing Obligations of Parent and the Surviving Corporation.
During the Contingent Period, Parent will and, to the extent
applicable, will cause its Affiliates to (a) use commercially
reasonable efforts to maintain and increase sales of the Products, and
(b) in good faith not undertake any action the primary purpose of which
is to negatively impact the amount of Contingent Merger Consideration
to be paid hereunder. In furtherance of the foregoing covenant, during
the Contingent Period, Parent will and, to the extent applicable, will
cause its Affiliates to, (i) not enter into any sales agreements with
respect to the Product with any Affiliates of Parent whose revenues are
not consolidated with Parent's revenues on pricing and other terms that
have not been negotiated at "arms length" and which are reasonable and
customary, (ii) not divest or sell any division responsible for selling
43
and marketing the assets constituting the Product, unless express
provision has been made with any such successor entity to assume
Parent's obligations pursuant to this Section 4.12; provided, however,
that notwithstanding any such divestiture, Parent shall remain liable
for payment of any Contingent Merger Consideration that becomes due and
payable under this Agreement, after resolution of any disputes with
respect to the amount of the Contingent Merger Consideration in
accordance with this Agreement, that such successor entity fails to pay
when it becomes due and payable, (iii) maintain the FDA approvals for
the Product that exist on the date hereof; (iv) use commercially
reasonable efforts to maintain inventory in quantities of the Product
sufficient to support sales orders; (v) shall cause to have in place
valid and binding insurance policies (including, without limitation,
product liability insurance policies) insuring the Surviving
Corporation, its assets, properties and business in scope and amount
similar that which Parent maintains for Parent, its assets, properties
and business; (vi) not compromise or settle an invoice related to the
sale of a Product in exchange for payment of an invoice or any other
benefit related to the sale of another product sold by Parent or one of
its Affiliates; and (vii) devote resources to the marketing and sale of
the Product that are at least as great, in the aggregate, as the
resources that the Company devoted to the marketing and sale of the
Product prior to Closing.
4.13 Charter and Bylaws. For a period of six (6) years after the Effective
Time, neither Parent nor Merger Subsidiary will amend the Certificate
of Incorporation or the Bylaws of the Surviving Corporation to provide
for indemnification provisions and limitation of liability provisions
that are any less favorable to the officers and directors of the
Company than the indemnification and limitation of liability provisions
contained in the Certificate of Incorporation and Bylaws of the Company
as in effect on the date hereof.
ARTICLE 5
CONDITIONS TO PARENT'S AND MERGER SUBSIDIARY'S OBLIGATIONS
The obligation of Parent and Merger Subsidiary to effect the
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived by Parent (on behalf of itself and Merger Subsidiary):
5.1 Representations and Warranties True. The representations and warranties
of the Company contained in this Agreement qualified by "materiality"
or "Material Adverse Effect" shall be true and correct in all respects
and the representations and warranties of the Company not so qualified
shall be true and correct in all material respects, in each case, as of
the date when made and at and as of the Closing as though such
representations and warranties were made at and as of such time (it
being understood that, in determining the accuracy of such
representations and warranties for purposes of this Section 5.1, any
disclosure made pursuant to Section 4.8, shall be disregarded), except
for changes specifically permitted or contemplated by this Agreement,
and except insofar as the representations and warranties relate
expressly and solely to a particular date or period, in which case they
shall be true and correct in all material respects at the Closing with
respect to such date or period.
5.2 Performance. The Company shall have performed and complied in all
material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with
by the Company on or prior to the Closing.
44
5.3 Certificate of Merger. The Certificate of Merger shall have been filed
with the Secretary of State of the State of Delaware.
5.4 Estimated Closing Balance Sheet. Parent shall have received the
Estimated Closing Balance Sheet, which shall be prepared in accordance
with this Agreement, subject entirely to Parent's rights under Section
1.10.
5.5 Required Approvals and Consents.
(a) All action required by Applicable Law and otherwise to be taken by
the Board of Directors of the Company and the Stockholders to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby shall have been duly and validly taken.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) All Consents of or from all Governmental Authorities required
hereunder to consummate the transactions contemplated herein shall
have been delivered, made or obtained, and Parent shall have
received copies thereof. This Section 5.5(c) shall not constitute
a condition to the obligations of Parent and Merger Subsidiary to
consummate the Merger if any of Parent or Merger Subsidiary fails,
or fails to cause any of its Subsidiaries, to timely make any
filing with or give any notice to any Governmental Authority, or
to use its commercially reasonable efforts as set forth in Section
4.5 to obtain any approval from any Governmental Authority under
the HSR Act or any other Applicable Law, required of Parent or
Merger Subsidiary or any of their Subsidiaries.
5.6 No Proceeding or Litigation. No suit, action, investigation, inquiry or
other proceeding by any Governmental Authority or other person or
entity shall have been instituted or threatened that (a) questions the
validity or legality of the transactions contemplated hereby, (b)
imposes or seeks to impose material limitations on the ability of
Parent or any of its Affiliates to acquire or hold or to exercise full
rights of ownership of any securities of the Company; (c) seeks to
prohibit direct or indirect ownership or operation by Parent or any of
its Affiliates of all or any portion of the business or assets of the
Company, or to compel Parent or any of its Affiliates or the Company to
dispose of or to hold separately all or a material portion of the
business or assets of Parent and its Affiliates or of the Company, as a
result of the transactions contemplated hereby, or (d) is reasonably
expected either individually or in the aggregate, to have a Material
Adverse Effect on the Company; provided that this Section 5.6 shall not
constitute a condition to the obligations of Parent and Merger
Subsidiary to consummate the Merger if Parent, Merger Subsidiary or any
other Subsidiary of Parent files suit or institutes proceedings with
respect to the Merger and/or the other transactions contemplated
herein.
5.7 Legislation. No Applicable Law shall have been enacted which prohibits
the consummation of the transactions contemplated hereby or the
satisfaction of any of the conditions to the consummation of such
transaction.
45
5.8 No Material Adverse Effect. Parent shall not have discovered any fact,
event or circumstance which has not been disclosed to Parent in the
Disclosure Schedule as of the date of this Agreement which has had, or
would reasonably be expected to have, a Material Adverse Effect on the
Company.
5.9 Certificates. Parent shall have received such certificates of the
Company's officers, in a form and substance reasonably satisfactory to
Parent, dated the Closing Date, to evidence compliance with the
conditions set forth in this Article 5 and such other matters as may be
reasonably requested by Parent.
5.10 Other Receipts; Good Standing. Parent shall have received copies of the
Certificate of Incorporation of the Company, certified by the Secretary
of State of the State of Delaware; and Certificates of Good Standing
(or their equivalent) from the Secretaries of State of the States of
Delaware and Illinois evidencing the good standing (or its equivalent)
of the Company in such jurisdictions.
5.11 Opinions of Company Counsel. Parent shall have received an opinion
from, counsel to the Company, dated the Closing Date, in form and
substance reasonably acceptable to Parent.
5.12 Escrow Agreement. The Company, the Stockholders' Representative and
Escrow Agent shall have executed and delivered the Escrow Agreement.
5.13 Dissenting Shares. Not more than 5% of the issued and outstanding
shares of Company Capital Stock as of the Closing Date shall be
Dissenting Shares.
5.14 Officer and Director Releases. Parent shall have received Letters of
Resignation and Release of Claims, dated effective as of the Effective
Time, in substantially the form of Exhibit C from the officers and
directors of the Company and the Principal Stockholders.
5.15 Principal Stockholder Releases. Parent shall have received a general
release of Claims from the Principal Stockholders, dated effective as
of the Effective Time, in substantially the form delivered by Parent to
the Principal Stockholders on or before the date hereof.
5.16 MRI Agreement. The Company and Manufacturing & Research, Inc. shall
have entered into an agreement, in form and content reasonably
satisfactory to Parent, confirming that the Company owns all
intellectual property relating to the Product developed during the
course of the manufacturing relationship between the Company and
Manufacturing & Research, Inc.
5.17 Intellectual Property Assignment. The employees of the Company
designated by Parent on or before the date hereof shall have entered
into an agreement with the Company, in substantially the form delivered
by Parent to the Company on or before the date hereof, confirming that
the Company owns all intellectual property relating to the Product
developed during the course of their employment with the Company.
46
5.18 Release of Security Interest. Mt. Prospect National Bank shall have
released its security interest in the Company's assets and a UCC-3
financing statement terminating such security interest shall have been
delivered to Parent or filed in accordance Applicable Law.
ARTICLE 6
CONDITIONS TO COMPANY'S OBLIGATIONS
The obligation of the Company to effect the transactions contemplated
herein shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions, any of which may be waived by the Company:
6.1 Representations and Warranties True. The representations and warranties
of Parent and Merger Subsidiary contained in this Agreement qualified
by "materiality" or "Material Adverse Effect" shall be true and correct
in all respects and the representations and warranties of Parent and
Merger Subsidiary not so qualified shall be true and correct in all
material respects, in each case, as of the date when made and at and as
of the Closing, as though such representations and warranties were made
at and as of such time, except for changes specifically permitted or
contemplated in this Agreement, and except insofar as the
representations and warranties relate expressly and solely to a
particular date or period, in which case they shall be true and correct
in all material respects at the Closing with respect to such date or
period.
6.2 Performance. Parent and Merger Subsidiary shall have performed and
complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed
or complied with by Parent and Merger Subsidiary at or prior to the
Closing.
6.3 Certificate of Merger. The Certificate of Merger shall have been filed
with the Secretary of State of the State of Delaware.
6.4 Corporate Approvals.
(a) The Boards of Directors of Parent and Merger Subsidiary and
Parent, as sole stockholder of Merger Subsidiary, shall have
approved the transactions contemplated hereby. All corporate
action required to be taken by Parent and Merger Subsidiary to
authorize the execution, delivery and performance of this
Agreement by Parent and Merger Subsidiary and the consummation of
the transactions contemplated hereby shall have been duly and
validly taken.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) All Consents of or from all Governmental Authorities required
hereunder to consummate the transactions contemplated herein. This
Section 6.4(c) shall not constitute a condition to the obligations
of Company to consummate the Merger if Company fails, or fails to
cause any of its Subsidiaries, to timely make any filing with or
give any notice to any Governmental Authority, or to use its
commercially reasonable efforts as set forth in Section 4.5 to
obtain any approval from any Governmental Authority under the HSR
Act or any other Applicable Law, required of Company or any of its
Subsidiaries.
47
6.5 No Proceeding or Litigation. No suit, action, investigation, inquiry or
other proceeding by any Governmental Authority or other person or
entity shall have been instituted or threatened that (a) questions the
validity or legality of the transactions contemplated hereby, or (b) is
reasonably expected either individually or in the aggregate, to have a
Material Adverse Effect on Parent and/or Merger Subsidiary; provided
that this Section 6.5 shall not constitute a condition to the
obligations of Company to consummate the Merger if Company or any of
its Subsidiaries files suit or institutes proceedings with respect to
the Merger and/or the other transactions contemplated herein.
6.6 Legislation. No Applicable Law shall have been enacted which prohibits
the consummation of the transactions contemplated hereby or the
satisfaction of any of the conditions to the consummation of such
transaction.
6.7 No Material Adverse Effect. The Company shall not have discovered any
fact, event or circumstance which has not been disclosed to the Company
as of the date of this Agreement or disclosed in any AMS Report filed
with the SEC on or prior to the date of this Agreement which has had,
or could reasonably be expected to have, a Material Adverse Effect on
Parent or its Affiliates, taken as a whole.
6.8 Certificates. Parent and Merger Subsidiary shall have furnished the
Company with such certificates of Parent's and Merger Subsidiary's
officers, in a form and substance reasonably acceptable to the Company,
dated the Closing Date, to evidence compliance with the conditions set
forth in this Article 6 and such other matters as may be reasonably
requested by the Company.
6.9 Other Receipts; Good Standing. The Company shall have received copies
of the Certificate of Incorporation, or similar governing document of
Parent and Merger Subsidiary, certified by the Secretary of State of
the state of incorporation of Parent and Merger Subsidiary; and
Certificates of Good Standing (or their equivalent) from the Secretary
of State of each state in which Parent and Merger Subsidiary is
incorporated.
6.10 Opinion of Parent Counsel. Parent shall have delivered to Company an
opinion from Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP, counsel to Parent and
Merger Subsidiary, dated the Closing Date, in form and content
reasonable acceptable to the Company.
6.11 Escrow Agreement. Parent and the Escrow Agent shall have executed and
delivered the Escrow Agreement and the appropriate funding obligations
with respect thereto shall have been satisfied.
6.12 Security Agreement. Parent, the Surviving Corporation and the
Stockholders' Representative shall have executed and delivered the
Security Agreement.
6.13 AMS Holdings Guaranty. AMS Holdings shall have executed and delivered
the Guaranty.
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ARTICLE 7
TERMINATION
7.1 Methods of Termination. Subject to the other provisions of this Article
7, this Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time notwithstanding approval thereof by
the Stockholders, at any time prior to the Closing:
(a) By mutual written consent of Parent, Merger Subsidiary and the
Company; or
(b) By Parent and Merger Subsidiary on or after the Termination Date,
or such later date as may be established pursuant to Section 1.3,
if any of the conditions provided for in Article 5 of this
Agreement have not been reasonably satisfied or waived in writing
by Parent prior to such date (unless the failure results primarily
from a breach by Parent or Merger Subsidiary of any
representation, warranty or covenant contained in this Agreement);
or
(c) By the Company on or after the Termination Date, or such later
date as may be established pursuant to Section 1.3, if any of the
conditions provided for in Article 6 of this Agreement have not
been reasonably satisfied or waived in writing by the Company
prior to such date (unless the failure results primarily from a
breach by the Company of any representation, warranty or covenant
contained in this Agreement); or
(d) By Parent and Merger Subsidiary if there has been a material
breach of any representation, warranty, covenant or agreement
which remains uncured for thirty (30) days after written notice
thereof on the part of the Company set forth in this Agreement; or
(e) By the Company if there has been a material breach of any
representation, warranty, covenant or agreement which remains
uncured for thirty (30) days after written notice thereof on the
part of Parent or Merger Subsidiary set forth in this Agreement;
or
(f) By either party if any court of competent jurisdiction or any
other governmental body has issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated hereby and
such order, decree, ruling or other action has become final and
nonappealable; or
(g) By Parent upon written notice to the Company if, prior to
obtaining the Stockholder Approval, the Board of Directors of the
Company (i) withdraws, modifies or changes its recommendation
regarding the approval of this Agreement or the Merger in a manner
adverse to Parent; (ii) approves, accepts or enters into a
definitive agreement for an Acquisition Proposal; or (iii)
recommends to the Stockholders an Acquisition Proposal; or
49
(h) By the Company upon written notice to Parent if, prior to
obtaining the Stockholder Approval, the Board of Directors of the
Company (i) approves, accepts or enters into a definitive
agreement for an Acquisition Proposal; or (ii) recommends to the
Stockholders an Acquisition Proposal, in each case pursuant to
Section 6.2.
7.2 Procedure Upon Termination. In the event of termination and abandonment
pursuant to Section 7.1, written notice thereof will forthwith be given
to the other party or parties, and, subject to Article 8, the
transactions contemplated herein will be abandoned, without further
action by any party hereto.
7.3 Effect of Termination. If this Agreement is terminated as provided
herein:
(a) each party will, upon request, return all documents, work papers
and other material of any other party (and all copies thereof)
relating to the transactions contemplated herein, whether so
obtained before or after the execution hereof, to the party
furnishing the same;
(b) the obligations of Sections 4.4, 4.10, 7.3, 7.4 and 7.5 and 12.3
and Article 9 will survive termination of this Agreement; and
(c) any and all remedies available to each party either in law or
equity shall be preserved and survive the termination of this
Agreement.
7.4 Termination Fee. In recognition of the time, efforts and expenses
expended and incurred by Parent with respect to the Company and the
opportunity that the acquisition of the Company presents to Parent, if:
(a) this Agreement is terminated either (i) by Parent pursuant to
Section 7.1(g); or (ii) by the Company pursuant to Section 7.1(h), and
(b) following such a termination the Company consummates a transaction
contemplated by an Acquisition Proposal relating to the Company within
twelve (12) months following the date the Agreement is so terminated,
the Company will pay to Parent a fee in the amount of Five Million
Dollars ($5,000,000) (the "Termination Fee"). The Company acknowledges
that the provisions of this Section 7.4 are an integral part of the
transactions contemplated by this Agreement and are not a penalty.
Parent agrees that payment by the Company of the Termination Fee to it
will constitute the sole and exclusive remedies of Parent and the
Merger Subsidiary upon termination of this Agreement pursuant to
Section 7.1(g) or 7.1(h), regardless of the circumstances giving rise
to such termination. In no event will the Company be required to pay
more than one Termination Fee.
7.5 Non-Solicitation. If this Agreement is terminated pursuant to Section
7.1(a), (b), (c), (e) or (f) without the Closing occurring, neither
Parent nor any of its Affiliates will solicit for employment any
employee or officer of the Company for a period of one (1) year after
such termination. This Section 7.4 shall not preclude Parent or its
Affiliates from soliciting or hiring any such person who responds to
any advertisement that is not specifically directed to employees of the
Company or who has been terminated by the Company prior to commencement
of employment discussions between Parent or one of its Affiliates and
such person.
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ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 Survival. The representations and warranties of each party contained in
this Agreement, and the indemnification obligations of the Company and
the Stockholders with respect thereto, will survive the Closing and
shall expire eighteen (18) months after the Closing Date.
Notwithstanding the preceding sentence, the representations and
warranties contained in Sections 2.17 (Benefit Plans), 2.20
(Environmental Compliance) and 2.22 (Tax Matters), and the
indemnification obligations of the Company and the Stockholders with
respect thereto, shall survive the Closing for a period of six (6)
months after all applicable statutes of limitations with respect to any
claims governing the respective matters set forth therein have expired.
Notwithstanding the foregoing, any representation or warranty that
would otherwise terminate in accordance with this Section 8.1 shall
continue to survive, if a notice of Claim pursuant to this Article 8
shall have been timely given under Section 8.4 on or prior to such
termination date, until the related claim has been satisfied or
otherwise resolved as provided herein, provided, however, that such
representation or warranty shall survive solely in connection with such
claim and no other claims may be made with respect thereto. The
covenants set forth in this Agreement that are to be performed on or
prior to Closing shall survive for a period of eighteen (18) months
after the Closing, and all other covenants shall survive for the period
of time set forth in the particular covenant, and, if no time is set
forth, such covenant shall survive the Closing indefinitely. The right
to indemnification or any other remedy based on representations,
warranties, covenants and obligations in this Agreement will not be
affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or
obligation.
8.2 Indemnification by Stockholders. Subject to Section 8.5, the
Stockholders (pro rata based on a Stockholder's Percentage Interest)
agree to indemnify, defend and hold harmless Parent, its directors,
officers, employees, agents, advisors and Affiliates (collectively, the
"Parent Indemnitees"), from and against any and all Damages asserted
against, relating to, imposed upon, suffered or incurred by Parent
Indemnitees in connection with enforcing their indemnification rights
pursuant to this Section 8.2 by reason of or resulting from (a) any
untrue representation of, or breach of warranty by, the Company in any
part of this Agreement, (b) any nonfulfillment of any covenant,
agreement or undertaking of the Company in any part of this Agreement,
(c) any third party claim relating to the Company, whether presently in
existence or arising hereafter, arising from or related to any medical
procedure performed on or before the Closing Date which utilized the
Product, regardless of whether such claim arises out of or constitutes
a breach of any representation, warranty or covenant in this Agreement,
(d) any Liabilities for Taxes of the Company or any respective
predecessor in interest with respect to any tax period or portion
51
thereof ending on or before the Closing Date, regardless of whether
such Liabilities for Taxes arise out of or constitute a breach of any
representation, warranty or covenant in this Agreement, (e) any
payments made to Dissenting Stockholders pursuant to the DGCL in excess
of the Merger Consideration per share of Company Common Stock or
Company Preferred Stock held by Dissenting Stockholders, (f) any
negative Purchase Price Adjustment that has not been paid pursuant to
Section 1.8(b) and 1.10(d); and (g) any claim that the conduct of the
Company's business on or before the Closing Date infringed,
misappropriated or conflicted with any intellectual property right of
any other Person, regardless of whether such claim arises out of or
constitutes a breach of the representation and warranty set forth in
the first sentence of Section 2.20(g) (each of the above shall be
referred to herein as the "Stockholders' Indemnification Liability").
Notwithstanding the foregoing, if the Closing does not occur,
indemnification obligations set forth in this Section 8.2 shall be the
obligations of the Company and not the Stockholders.
8.3 Indemnification by Parent. Subject to Section 8.5, Parent and Surviving
Corporation agree to indemnify, defend and hold harmless each of the
Stockholders, its directors, officers, employees, agents, advisors and
Affiliates and, prior to but not after Closing, the Company, its
directors, officers, employees, agents, advisors and Affiliates
(collectively, the "Stockholders Indemnitees") from and against any and
all Damages asserted against, relating to, imposed upon, suffered or
incurred by the Stockholder Indemnitees in connection with enforcing
their indemnification rights pursuant to this Section 8.3 by reason of
or resulting from (a) any untrue representation of, or breach of
warranty by, Parent or Merger Subsidiary in any part of this Agreement,
(b) any nonfulfillment of any covenant, agreement or undertaking of
Parent or Merger Subsidiary in any part of this Agreement; (c) any
liability of the Surviving Corporation arising out of the operation of
the Surviving Corporation, any Subsidiary of the Surviving Corporation
or any of their respective businesses after the Closing Date; (d) any
Liabilities for Taxes of the Surviving Corporation, any Subsidiary of
the Surviving Corporation or any respective predecessor in interest
with respect to any tax period or part thereof beginning after the
Closing Date; (e) any Product Liability Claim or other third party
claim relating to the Surviving Corporation or any Subsidiary of the
Surviving Corporation, arising from acts, events, conditions or
circumstances occurring after the Closing Date; (f) the amount by which
any payment made to Dissenting Stockholders pursuant to DGCL is less
than the Merger Consideration per share of the Company Common Stock or
Company Preferred Stock held by Dissenting Stockholders, and (g) any
positive Purchase Price Adjustment that has not been paid pursuant to
Section 1.8(b) and 1.10(d) (each of the above shall be referred to
herein as the "Parent's Indemnification Liability").
8.4 Claims for Indemnification.
(a) Subject to Section 8.1, whenever any claim arises for
indemnification hereunder the party seeking indemnification (the
"Indemnified Party"), will promptly notify in writing the party
from whom indemnification is sought (the "Indemnifying Party") of
the claim and, when known, the facts constituting the basis for
such claim; provided, however, that any failure to give such
notice will not waive any rights of the Indemnified Party, except
52
to the extent the rights of the Indemnifying Party are materially
prejudiced. In the event that the Stockholders are seeking
indemnification as the Indemnified Party hereunder, or
indemnification is sought against the Stockholders as an
Indemnifying Party hereunder, then in either such case, the
Stockholders' Representative shall be entitled to act on behalf
of, and receive notice on behalf of, the Stockholders for any and
all purposes stated therein. In the case of any such claim for
indemnification hereunder resulting from or in connection with any
claim or legal proceedings of a third party (a "Third Party
Claim"), the notice to the Indemnifying Party will specify with
reasonable specificity, if known, the basis under which the right
to indemnification is being asserted and the amount or an estimate
of the amount of the liability arising therefrom; provided,
however, that any failure to give such notice will not waive any
rights of the Indemnified Party, except to the extent the rights
of the Indemnifying Party are materially prejudiced. The
Indemnifying Party shall have the sole right to dispute and defend
all Third Party Claims and thereafter so defend and pay any
adverse final judgment or award or settlement amount in regard
thereto. Such defense shall be controlled by the Indemnifying
Party, and the cost of such defense shall be borne by the
Indemnifying Party, except that the Indemnified Party shall have
the right to participate in such defense at its own expense. The
Indemnified Party shall cooperate in all reasonable respects in
the investigation, trial and defense of any such claim, including
making personnel, books, and records relevant to the claim
available to the Indemnifying Party, without charge, except for
reasonable out-of-pocket expenses. If the Indemnifying Party fails
to take action within thirty (30) of receipt of notice of an
indemnification claim by the Indemnified Party, then the
Indemnified Party shall have the right to pay, compromise or
defend any Third Party Claim and to assert the amount of any
payment on the Third Party Claim plus the reasonable expenses of
defense or settlement of the claim. The Indemnified Party shall
also have the right and upon delivery of advance written notice to
such effect to the Indemnifying Party, exercisable in good faith,
to take such action as may be reasonably necessary to avoid a
default judgment prior to the assumption of the defense of the
Third Party Claim by the Indemnifying Party, so long as the
Indemnifying Party has received due and timely notice from the
Indemnified Party as set forth above, and any reasonable expenses
incurred by Indemnified Party so acting shall be paid by the
Indemnifying Party; provided that the Indemnifying Party agrees
that the Third Party claim is a bona fide indemnification claim
under this Agreement. Except as otherwise provided herein, the
Indemnified Party will not, except at its own cost and expense,
settle or compromise any Third Party Claim for which it is
entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which will not be unreasonably
withheld, delayed or conditioned. The parties intend that all
indemnification claims be made as promptly as practicable.
(b) If the Indemnifying Party is of the opinion that the Indemnified
Party is not entitled to indemnification, or is not entitled to
indemnification in the amount claimed in such notice, the
Indemnifying Party will deliver, within ten (10) Business Days
after the receipt of such written notice, a written objection to
such claim and written specifications in reasonable detail, if
53
known, of the aspects or details objected to, and the grounds for
such objection. If a claim, including the amount thereof, by an
Indemnified Party is expressly admitted in writing by an
Indemnifying Party or if an arbitration award is made in favor of
an Indemnified Party, the Indemnified Party, as a non-exclusive
remedy, will have the right to set-off the amount of such claim or
award against any amount yet owed, whether due or to become due,
by the Indemnified Party or any Subsidiary thereof to any
Indemnifying Party by reason of this Agreement or any agreement or
arrangement or contract to be entered into at the Closing.
8.5 Indemnification Limits.
(a) Subject to the remainder of this Section 8.5 and except for fraud
and except for the rights of Stockholders' Representative pursuant
to Article 10, the indemnification provisions set forth in this
Article 8 shall be the sole and exclusive remedy for the
Indemnified Party for a breach of any representation, warranty or
covenant by the Indemnifying Party or for any Damages arising out
of or related to this Agreement and shall be in lieu of any rights
the Indemnified Party may have under Applicable Law or in equity
with respect to any such breaches or otherwise. Except for claims
based on fraud or breach of the representations and warranties
contained in Sections 2.17 (Benefit Plans), 2.20 (Environmental
Compliance) and 2.22 (Tax Matters), the maximum aggregate
liability of all Stockholders under Section 8.2 shall be limited
to thirty percent (30%) of the Merger Consideration. The maximum
liability of each particular Stockholder under Section 8.2 shall
be limited to such Stockholder's Percentage Interest in each of
the Escrow Fund and the Contingent Merger Consideration, if any.
Except for claims based on fraud or related to the Parent's
failure to make any payment due under Sections 1.8 or 1.9, the
maximum aggregate liability of Parent and the Surviving
Corporation under Section 8.3 shall be limited to an amount equal
to thirty percent (30%) of the Merger Consideration.
(b) Except as expressly provided otherwise herein, and subject to the
provisions of Section 8.4, neither the Stockholders nor Parent, as
the case may be, will be entitled to indemnification for any
Damages under this Article 8 unless the aggregate of all Damages,
other than Damages arising solely under clause (g) of Section 8.2,
is more than Three Hundred Thousand U.S. Dollars ($300,000) (the
"Basket Amount"), other than (i) Damages under clauses (d), (e)
and (f) of Section 8.2 or clauses (d) and (f) of Section 8.3,
which shall not be subject to the Basket Amount and (ii) Damages
arising solely under clause (g) of Section 8.2 which shall be
subject to a Three Hundred Thousand U.S. Dollars ($300,000)
deductible (the "Deductible Amount"). When the aggregate amount of
all such Damages hereunder equals or exceeds the Basket Amount,
the Parent or the Stockholders, as the case may be, will be
entitled to full indemnification of all claims, including the
Three Hundred Thousand U.S. Dollars ($300,000) that amounted to
the Basket Amount. The parties hereto agree that the Basket Amount
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is not a deductible amount, nor that the Basket Amount will be
deemed to be a definition of "material" for any purpose in this
Agreement. In no event will any Damages under clause (g) of
Section 8.2 be applied to the Basket Amount, unless the event that
gave rise to such Damages is also a breach of a representation or
warranty in this Agreement. Notwithstanding the foregoing (x)
Parent Indemnitees shall not be entitled to indemnification for
any individual claim that results in Damages of less than
Twenty-Five Thousand Dollars, excluding for purposes of this
sentence only any costs incurred by Parent Indemnitees in
investigating or defending such claim, including attorneys' fees
or any diminution in the value of the Company based on such claim
(a "De Minimis Claim"), and (y) no De Minimis Claim shall applied
to the Basket Amount or the Deductible Amount.
(c) The parties shall make appropriate adjustments for any insurance
benefits actually realized by the Indemnified Party in determining
Damages for purposes of this Article 8.
(d) In no event will Parent Indemnitees be entitled to indemnification
for any liability that is reflected on the Closing Balance Sheet.
8.6 Right of Off-Set. Parent shall be entitled to set-off against any
amounts otherwise payable by Parent to the Stockholders under this
Agreement (including without limitation the Contingent Merger
Consideration) any amounts to which Parent is entitled based on a claim
for indemnification by Parent under this Article 8 (collectively, the
"Set-Off Amounts") which is asserted by Parent in good faith; provided
that Parent deposits any such Set-Off Amounts in an escrow account to
be held by the Escrow Agent pending resolution of any such claim.
Neither the exercise of, nor the failure to exercise, such right of
set-off will constitute an election of remedies nor limit Parent in any
manner in the enforcement of any other remedies that may be available
to it.
8.7 Escrow Funds. The Escrow Funds will be held in an interest-bearing
escrow account as established pursuant to the Escrow Agreement for the
purpose of satisfying claims by an Indemnified Party for
indemnification under this Article 8 and will be released to an
Indemnified Party only in accordance with the terms of the Escrow
Agreement. Subject to, and in accordance with, the terms and conditions
set forth in the Escrow Agreement, the Escrow Agent shall deliver or
cause to be delivered to the Payment Agent the balance, if any, of the
Escrow Funds.
8.8 Expenses of Stockholders' Representative. The reasonable out-of-pocket
costs and expenses of the Stockholders' Representative incurred on the
Stockholders' behalf in connection with this Agreement or the Escrow
Agreement (including legal and other fees incurred in connection with
the defense of claims under Article 8 ) shall be paid out of the Escrow
Funds; provided, that in the event the Escrow Funds are insufficient or
have been released pursuant to the terms of the Escrow Agreement then
such costs and expenses shall be paid out of the Contingent Merger
Consideration, if any.
ARTICLE 9
ARBITRATION
9.1 Dispute. Except for any controversy, claim or dispute arising out of
the failure by any party to this Agreement to consummate the Merger and
the transactions contemplated by this Agreement and subject to the last
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sentence of this Section 9.1, any controversy, claim or dispute of
whatever nature arising between the parties under this Agreement or in
connection with the transactions contemplated hereunder, including
those arising out of or relating to the breach, termination,
enforceability, scope or validity hereof, whether such claim existed
prior to or arises on or after the Effective Time (a "Dispute"), shall
be resolved by mediation or, failing mediation, by binding arbitration.
The agreement to mediate and arbitrate contained in this Article 9
shall continue in full force and effect despite the expiration,
rescission or termination of this Agreement. Notwithstanding the
foregoing, prior to Closing either party may seek injunctive relief
with respect to any controversy or claim arising out of or relating to
any provision of this Agreement in any court of competent jurisdiction.
9.2 Mediation. No party shall commence an arbitration proceeding pursuant
to the provisions set forth below unless such party shall first give a
written notice (a "Dispute Notice") to the other parties setting forth
the nature of the Dispute. The parties shall attempt in good faith to
resolve the Dispute by mediation under the CPR Institute for Dispute
Resolution ("CPR") Model Mediation Procedure for Business Disputes (the
"CPR Procedure") in effect at the time of the Dispute. If the parties
cannot agree on the selection of a mediator within twenty (20) days
after receipt of the Dispute Notice, the mediator will be selected in
accordance with the CPR Procedure.
9.3 Arbitration.
(a) If the Dispute has not been resolved by mediation as provided in
Sections 9.1 and 9.2 within sixty (60) days after receipt of the
Dispute Notice or such greater period as the parties may agree
upon in writing, or if a party fails to participate in a
mediation, then the Dispute shall be determined by binding
arbitration. The arbitration shall take place in Minneapolis,
Minnesota if initiated by the Stockholders' Representative and New
York, New York if initiated by Parent. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA") in effect on the date
on which the Dispute Notice is sent, subject to any modifications
contained in this Agreement. The Dispute shall be determined by
one (1) arbitrator, except that if the Dispute involves an amount
in excess of One Million Dollars ($1,000,000), exclusive of
interest and costs, three (3) arbitrators shall be appointed.
Persons eligible to serve as arbitrators shall be members of the
AAA Large, Complex Case Panel or a CPR Panel of Distinguished
Neutrals, or persons who have professional credentials similar to
those persons listed on such AAA or CPR panels. The award shall be
final and binding on the parties hereto and shall be in writing
and include the findings of fact and conclusions of law upon which
it is based.
(b) The arbitration shall be governed by the substantive laws of the
State of Minnesota, without regard to conflicts-of-law rules, and
by the arbitration law of the Federal Arbitration Act (Title 9,
U.S. Code). Judgment upon the award rendered may be entered in any
court having jurisdiction.
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(c) Except as otherwise required by law, the parties and the
arbitrator(s) agree to keep confidential and not disclose to third
parties any information or documents obtained in connection with
the arbitration process, including the resolution of the Dispute.
If a party fails to proceed with arbitration as provided in this
Agreement, or unsuccessfully seeks to stay the arbitration, or
fails to comply with the arbitration award, or is unsuccessful in
vacating or modifying the award pursuant to a petition or
application for judicial review, the other party or parties, as
applicable, shall be entitled to be awarded costs, including
reasonable attorneys' fees, paid or incurred in successfully
compelling such arbitration or defending against the attempt to
stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
ARTICLE 10
STOCKHOLDERS' REPRESENTATIVE
10.1 Authorization of Stockholders' Representative.
(a) Upon adoption of this Agreement by the board of directors of the
Company and the approval of the Merger and the terms of this
Agreement by the Stockholders, TherMatrx Investment Holdings LLC
is hereby appointed, authorized and empowered to (i) enter into
this Agreement, the Escrow Agreement, the Payment Agreement and
the Security Agreement on behalf of the Stockholders and (ii) act
as the Stockholders' Representative (the "Stockholders'
Representative"), for the benefit of the Stockholders, in
connection with and to facilitate the consummation of the
transactions contemplated hereby (including, without limitation,
in connection with the payment of any amounts pursuant to Sections
1.8 and 1.9), as the exclusive agent and attorney-in-fact to act
on behalf of each Stockholder with respect to this Agreement for
the purposes and with the powers and authority hereinafter set
forth in this Section 10.1, which shall include the power and
authority:
(i) to execute and deliver such waivers and consents in
connection with this Agreement and the consummation of the
transactions contemplated hereby as the Stockholders'
Representative, in its sole and reasonable discretion, may
deem necessary or desirable;
(ii) to deliver all stock certificates at the Closing;
(iii) to collect and receive all moneys and other proceeds and
property payable to the Stockholders pursuant to the terms
of this Agreement, including, without limitation, amounts
payable pursuant to Sections 1.8 and 1.9, subject to any
applicable withholding and retention laws, to disburse and
pay the same to each of the Stockholders and to the extent
of, and in accordance with, their Percentage Interest in
the Merger Consideration;
(iv) as a Stockholders' Representative, to enforce and protect
the rights and interests of the Stockholders (including the
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Stockholders' Representative, in its capacity as a
Stockholder) and to enforce and protect the rights and
interests of the Stockholders' Representative arising out
of or under or in any manner relating to this Agreement,
the Escrow Agreement, the Payment Agreement and each other
agreement, document, instrument or certificate referred to
herein or therein or the transactions provided for herein
or therein and to take any and all actions which the
Stockholders' Representative believe is necessary or
appropriate under this Agreement for and on behalf of the
Stockholders, including, without limitation, defending all
indemnification claims by Parent, consenting to,
compromising or settling indemnification claims, conducting
negotiations with Parent and its representatives regarding
such claims, and engaging counsel, accountants or other
representatives in connection with the foregoing matters,
and, in connection therewith, to (i) assert any claim or
institute any action, proceeding or investigation; (ii)
investigate, defend, contest or litigate any claim, action,
proceeding or investigation initiated by Parent, the
Surviving Corporation or any Person, or by any federal,
state or local Governmental Authority against the
Stockholders' Representative and/or any of the
Stockholders, and receive process on behalf of any or all
Stockholders or in any such claim, action, proceeding or
investigation and compromise or settle on such terms as the
Stockholders' Representative shall determine to be
appropriate, and give receipts, releases and discharges
with respect to, any such claim, action, proceeding or
investigation; (iii) file any proofs of debt, claims and
petitions as the Stockholders' Representative may deem
advisable or necessary; and (iv) file and prosecute appeals
from any decision, judgment or award rendered in any such
action, proceeding or investigation, it being understood
that the Stockholders' Representative shall not have any
obligation to take any such actions, and shall not have any
liability for any failure to take any such actions;
(v) to refrain from enforcing any right of the Stockholders or
any of them and/or the Stockholders' Representative arising
out of or under or in any manner relating to this
Agreement, or any other agreement, instrument or document
in connection with the foregoing; provided, however, that
no such failure to act on the part of the Stockholders'
Representative, shall be deemed a waiver of any such right
or interest by the Stockholders' Representative or by the
Stockholders unless such waiver is in writing signed by the
waiving party or by the Stockholders' Representative; and
(vi) to make, execute, acknowledge and deliver all such other
agreement, guarantees, orders, receipts, endorsements,
notices, requests, instructions, certificates, stock
powers, letters and other writings, and, in general, to do
any and all things and to take any and all action that the
Stockholders' Representative, in its sole and reasonable
discretion, may consider necessary or proper or convenient
in connection with or to carry out the transactions
contemplated by this Agreement, the Escrow Agreement, the
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Payment Agreement and all other agreements, documents or
instruments referred to herein or therein or executed in
connection herewith and therewith, including, without
limitation, the execution, delivery and performance of the
Escrow Agreement on behalf of the Stockholders.
(b) The Stockholders' Representative shall not be entitled to any fee,
commission or other compensation for the performance of its
services hereunder, but shall be entitled to the payment from the
consideration payable to the Stockholders of all its expenses
incurred as the Stockholders' Representative. In connection with
this Agreement, and any instrument, agreement or document relating
hereto or thereto, and in exercising or failing to exercise all or
any of the powers conferred upon the Stockholders' Representative
hereunder (A) the Stockholders' Representative shall incur no
responsibility whatsoever to any Stockholders by reason of any
error in judgment or other act or omission performed or omitted
hereunder or any such other agreement, instrument or document,
excepting only responsibility for any act taken which is
determined through final non-appealable judgment to constitute
gross negligence or willful misconduct, and (B) the Stockholders'
Representative shall be entitled to rely on the advice of counsel,
public accountants or other independent experts experienced in the
matter at issue, and any error in judgment or other act or
omission of the Stockholders' Representative pursuant to such
advice shall in no event subject the Stockholders' Representative
to liability to any Stockholders. Each Stockholder shall and
hereby does indemnify, pro rata based upon each such Stockholder's
Percentage Interest, the Stockholders' Representative against all
losses, damages, liabilities, claims, obligations, costs and
expenses, including reasonable attorneys', accountants' and other
experts' fees and the amount of any judgment against them, of any
nature whatsoever (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or threatened or
any claims whatsoever), arising out of or in connection with any
claim, investigation, challenge, action or proceeding or in
connection with any appeal thereof, relating to the acts or
omissions of the Stockholders' Representative hereunder or
otherwise. The foregoing indemnification shall not be deemed
exclusive of any other right to which the Stockholders'
Representative may be entitled apart from the provisions hereof.
The foregoing indemnification shall not apply in the event of any
action or proceeding which finally adjudicates the liability of
the Stockholders' Representative hereunder for his or her gross
negligence or willful misconduct. In the event of any
indemnification hereunder, upon written notice from the
Stockholders' Representative to the Stockholders as to the
existence of a deficiency toward the payment of any such
indemnification amount, each Stockholder shall promptly deliver to
the Stockholders' Representative full payment of his or her
ratable share of the amount of such deficiency, in accordance with
such Stockholder's Percentage Interest. Notwithstanding anything
contained herein to the contrary, the Stockholders' Representative
shall be entitled to set-off and direct the Payment Agent to
set-off against any amounts payable by the Stockholders'
Representative under this Agreement any amounts which the
Stockholders' Representative is entitled based on a claim for
indemnification by the Stockholders' Representative from the
Stockholders pursuant to this Section 10.1(b).
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(c) All of the indemnities, immunities and powers granted to the
Stockholders' Representative under this Agreement shall survive
the Closing and/or any termination of this Agreement, the Escrow
Agreement and/or the Payment Agreement.
(d) Any claim, action, suit, or other proceeding, whether in law or
equity, to enforce any right, benefit or remedy granted to
Stockholders under this Agreement or the Escrow Agreement shall be
asserted, brought, prosecuted or maintained only by the
Stockholders' Representative. With respect to any matter
contemplated by this Article 10, the Stockholders shall be bound
by any determination in favor of or against the Stockholders'
Representative or the terms of any settlement or release to which
the Stockholders' Representative shall become a party.
(e) Notwithstanding anything herein to the contrary, each Stockholder
hereby acknowledges that none of Parent, Merger Subsidiary, nor
the Company shall have any responsibility or obligation whatsoever
to any Stockholder or to any other party with respect to or
arising out of any actions taken or any inaction by the
Stockholders' Representative and nothing contained herein shall
limit or affect in any manner whatsoever the responsibilities or
obligations of the Stockholders' Representative to, howsoever
arising, or release the Stockholders' Representative from any
liabilities with respect to, Parent, Merger Subsidiary, or the
Company. The grant of authority provided for herein (i) is coupled
with an interest and shall be irrevocable and survive the death,
incompetency, bankruptcy or liquidation of any Stockholder; and
(ii) shall survive the delivery of an assignment by a Stockholder
of the whole or any fraction of his or her interest hereunder,
including his or her Percentage Interest.
(f) Parent shall be entitled to rely in good faith upon any
certification, notice, direction, request, waiver or consent given
to Parent by the Stockholders' Representative (or its designated
representatives).
(g) In connection with this Agreement, and any instrument, agreement
or document relating hereto or thereto, and in exercising or
failing to exercise all or any of the powers conferred upon the
Stockholders' Representative hereunder, the Stockholders'
Representative (in its capacity as a Stockholders' Representative)
shall incur no responsibility whatsoever to Parent, Merger
Subsidiary, the Company, the Surviving Corporation or any Parent
Indemnitees by reason of any error in judgment or other act or
omission performed or omitted hereunder or any such other
agreement, instrument or document for any Damages or otherwise.
The Stockholders hereby assume full liability for any breach of
this Agreement by the Stockholders' Representative (in its
capacity as Stockholders' Representative) determined by a majority
in interest of the Stockholders.
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(h) The Stockholders' Representative (in its capacity as Stockholders'
Representative) shall not have any liability whatsoever to Parent,
Merger Subsidiary, the Surviving Corporation, the Company, the
Stockholders or any Parent Indemnitees for indemnification or
otherwise pursuant to this Agreement, the Escrow Agreement, the
Payment Agreement or any agreement entered into or certificate
delivered in connection with the Closing or the transactions
contemplated by this Agreement.
(i) The Stockholders' Representative may resign as such upon thirty
(30) days following the giving of prior written notice. Upon such
resignation the resigning Stockholders Representative shall be
fully released and relieved of all duties and responsibilities
under this Agreement. In the event that the Stockholders'
Representative has resigned, Oracle Strategic Capital, LLC shall
become the Stockholders' representative. In the event that Oracle
Strategic Capital, LLC, resigns or refuses to serve as
Stockholders' Representative, the Stockholders shall appoint a
successor Stockholders' Representative by written consent of
Stockholders holding a majority of the Percentage Interest.
(j) Notwithstanding anything created herein to the contrary,
Stockholders' Representative may, in its sole and reasonable
discretion, determine not to take any action that it is authorized
to do pursuant to the terms of this Agreement, and in the event
the Stockholders' Representative refrains from taking such action,
the Stockholders' Representative shall not be liable to any Person
as a result of such inaction.
ARTICLE 11
DEFINITIONS
11.1 Definitions. The following terms, as used herein, have the following
meanings:
(a) "Acquisition Proposal" shall mean any inquiry, offer or proposal,
or any indication of interest in making any offer or proposal,
relating to (i) a possible transaction or series of related
transactions pursuant to which any Person acquires 25% or more of
the outstanding shares of the Company Capital Stock, including
without limitation a tender offer or an exchange offer which, if
consummated, would result in any Person acquiring 25% or more of
the outstanding shares of the Company Capital Stock, (ii) a
possible merger or other business combination involving the
Company pursuant to which any Person acquires securities
representing 25% or more of the aggregate voting power of all
outstanding securities of the company surviving the merger or
business combination, or (iii) any other transaction pursuant to
which any Person might acquire control of assets of the Company
having a fair market value equal to 25% or more of the fair value
of all of the consolidated assets of the Company immediately prior
to such a transaction; provided, however, that the term
"Acquisition Proposal" shall not include the Merger and the other
transactions contemplated by this Agreement.
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(b) "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under direct
or indirect common control with such other Person, through the
ownership of all or part of any Person, or (ii) any Person who may
be deemed to be an "affiliate" under Rule 145 of the Securities
Act of 1933, as amended.
(c) "AMS Holdings" means American Medical Systems Holdings, Inc., a
Delaware corporation and the parent corporation of Parent.
(d) "Applicable Law" means, with respect to any Person, any federal,
state or local common law or duty, caselaw or ruling, statute,
law, ordinance, policy, guidance, rule, administrative
interpretation, regulation, code, order, writ, injunction,
directive, judgment, decree or other requirement of any
Governmental Authority (including any Environmental, Safety and
Health Laws) applicable to such Person or any of its Affiliates or
Plan Affiliates or any of their respective properties, assets,
officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's,
consultant's or agent's activities on behalf of such Person or any
of its Affiliates or Plan Affiliates).
(e) "Benefit Plan" means all Pension Plans, Welfare Plans and
Compensation Plans.
(f) "Bundled Product" means the Product and other products that are
not the Product sold in a bundle of products that are priced
together.
(g) "Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Minneapolis, Minnesota are
authorized or required by law to close.
(h) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, as set forth in Section 4980B of the Code,
part 6 of Title I of ERISA and applicable regulations issued
thereunder.
(i) "Code" means the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
(j) "Company Capital Stock" means Company Common Stock and Company
Preferred Stock.
(k) "Company Common Stock" means the common stock, $.001 par value, of
the Company.
(l) "Company Preferred Stock" means the convertible preferred stock,
$.001 par value, of the Company.
(m) "Company Stock Option" means an option to purchase a share of the
Company's Common Stock granted pursuant to the Company Stock
Option Plan.
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(n) "Company Stock Option Plan" means the Company's Amended and
Restated 1997 Stock Option Plan.
(o) "Compensation Plan" means any material benefit or arrangement that
is not either a Pension Plan or a Welfare Plan, including, without
limitation, (i) each employment or consulting agreement, (ii) each
arrangement providing for insurance coverage or workers'
compensation benefits, (iii) each bonus, incentive bonus or
deferred bonus arrangement, (iv) each arrangement providing
termination allowance, severance or similar benefits, (v) each
equity compensation plan, (vi) each current or deferred
compensation agreement, arrangement or policy, and (vii) each
compensation policy and practice maintained by the Company or any
ERISA Affiliate of the Company covering the employees, former
employees, directors and former directors of the Company and the
beneficiaries of any of them.
(p) "Contingent Merger Consideration" shall have the meaning set forth
in Section 1.9.
(q) "Contracts" means all contracts, agreements, options, leases,
licenses, sales and accepted purchase orders, commitments and
other instruments of any kind, whether written or oral, to which
the Company is a party on the Closing Date, including the
Scheduled Contracts.
(r) "Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities,
judgments, awards, fines, sanctions, penalties, charges and
amounts paid in settlement, without giving effect to any
qualifications as to materiality or Material Adverse Effect
contained in any representation or warranty contained herein,
including, but not limited to, (i) interest on cash disbursements
in respect of any of the foregoing at the "prime rate" as
published in The Wall Street Journal, from time to time from the
date each such cash disbursement is made until the Person
incurring the same shall have been indemnified in respect thereof,
and (ii) reasonable costs, fees and expenses of attorneys,
accountants, bankers and other agents of the Person incurring such
expenses. The term "Damages" shall not include any punitive,
exemplary or consequential damages or lost profits.
(s) "Environmental, Safety and Health Laws" means all Applicable Laws
in any way relating to Environmentally Regulated Materials, toxic
torts, occupational health and safety, or the environment,
including, without limitation, the Safe Drinking Water and Toxic
Enforcement Act ("Proposition 65"), the Federal Resource
Conservation and Recovery Act ("RCRA"), the Federal Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"),
the Federal Clean Air Act, the Federal Water Pollution Control
Act, the Federal Safe Drinking Water Act, the Federal Toxic
Substances Control Act ("TSCA"), the Federal National
Environmental Policy Act, the Federal Insecticide Fungicide and
Rodenticide Act, the Federal Emergency Planning and Community
Right to Know Act, the Federal Hazard Communication Act, the
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Federal Occupational Safety and Health Act, any requirements
promulgated pursuant to these Applicable Laws, amendments, or
restatements thereof or similar enactments thereof, as is now or
at any time hereafter may be in effect, or any analogous foreign,
state or local Applicable Laws.
(t) "Environmental Liabilities" means all Liabilities of a Person
(whether such Liabilities are owed by such Person to Governmental
Authorities, third parties, or otherwise) whether currently in
existence or arising hereafter which arise under or relate to any
Environmental Law.
(u) "Environmentally Regulated Material" means any element, compound,
waste, pollutant, contaminant, substance, material or any mixture
thereof: (i) the presence of which requires investigation or
remediation under any Applicable Law; (ii) that is defined as a
"hazardous waste" or "hazardous substance," or chemicals known to
cause cancer or reproductive toxicity under any Applicable Law;
(iii) that is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic or mutagenic or otherwise hazardous and
is regulated by any Governmental Authority having or asserting
jurisdiction over the Company; (iv) the presence of which causes a
nuisance, trespass or other tortious condition; (v) the presence
of which poses a hazard to the health or safety of Persons; (vi)
without limitation, that contains gasoline, diesel fuel or other
petroleum hydrocarbons, polychlorinated biphenols (PCBs), or
asbestos, (vii) that gives rise to any exposure prohibition or
warning requirement under any Environmental Law; or (viii) that is
otherwise regulated in any way under any Environmental Law.
(v) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(w) "ERISA Affiliate" means any "person," within the meaning of
Section 7701(a)(1) of the Code, that together with the Company is
considered a single employer pursuant to Section 414(b), (c), (m)
or (o) of the Code or Section 3(5) or 4001(b)(1) of ERISA.
(x) "Escrow Agent" shall have the meaning set forth in Section 1.8(a).
(y) "Escrow Agreement" means the agreement, in substantially the form
attached hereto as Exhibit D, to be entered into by and among
Parent, the Stockholders' Representative and the Escrow Agent,
pursuant to which a portion of the Initial Merger Consideration
will be held in escrow in accordance with Section 1.8.
(z) "Estimated Initial Merger Consideration" shall have the meaning
set forth in Section 1.8(a).
(aa) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(bb) "FDA" means the United States Food and Drug Administration.
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(cc) "Final Initial Merger Consideration" shall have the meaning set
forth in Section 1.10(d).
(dd) "GAAP" means generally accepted accounting principles in the
United States.
(ee) "Governmental Authority" means any federal, territorial, state or
local governmental authority, quasi-governmental authority,
instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or
other subdivision, department or branch of any of the foregoing.
(ff) "Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
(gg) "Guaranty" means the Guaranty, in substantially the form attached
hereto as Exhibit E, executed by AMS Holdings in favor of the
Stockholders' Representative.
(hh) "HIPAA Privacy Regulations" means the regulations (Title 45, Parts
160 and 164, of the Code of Federal Regulations) issued by the
U.S. Department of Health and Human Services pursuant to the
Health Insurance Portability and Accountability Act of 1996.
(ii) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
(jj) "IRS" means the Internal Revenue Service.
(kk) "Intellectual Property" shall mean all rights in patents, patent
applications, registered trademarks, commercially significant
unregistered trademarks, trademark applications, service xxxx
registrations and service xxxx applications, trade names,
commercially significant trade dress, logos, slogans, tag lines,
uniform resource locators, Internet domain names, Internet domain
name applications, corporate names, copyright applications,
registered copyrighted works and commercially significant
unregistered copyrightable works (including proprietary software,
books, written materials, prerecorded video or audio tapes, and
other copyrightable works), software, trade secrets, know-how,
technical documentation, specifications, data, designs and other
intellectual property and proprietary rights, other than
off-the-shelf computer programs, used in or necessary to the
conduct of the business of the Company as currently conducted.
(ll) "Knowledge", "know", "known", and all other words of similar
meaning, whether or not capitalized, when used with respect to the
Company, shall mean (i) the actual knowledge of any of Xxxxxxx
Xxxxxx or Xx Xxxxxx, as such knowledge has been obtained in the
normal conduct of the business of the Company, and including such
knowledge as either such Person would have obtained upon the
exercise of reasonable diligence or (b) the actual knowledge of
any of Xxxxxxxxx Xxxxx, as such knowledge has been obtained in the
normal conduct in her area of responsibility for the business of
the Company, and including such knowledge as such Person would
have obtained upon the exercise of reasonable diligence in her
area of responsibility for the Company.
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(mm) "Liability" or "Liabilities" means any liabilities, obligations or
claims of any kind whatsoever whether absolute, accrued or
unaccrued, fixed or contingent, matured or unmatured, asserted or
unasserted, known or unknown, direct or indirect, contingent or
otherwise and whether due or to become due, including without
limitation any foreign or domestic tax liabilities or deferred tax
liabilities incurred in respect of or measured by the Company's
income, or any other debts, liabilities or obligations relating to
or arising out of any act, omission, transaction, circumstance,
sale of goods or services, state of facts or other condition which
occurred or existed on or before the date hereof, whether or not
known, due or payable, whether or not the same is required to be
accrued on the financial statements or is disclosed on the
Disclosure Schedule.
(nn) "Lien" means, with respect to any asset, any mortgage, title
defect or objection, lien, pledge, charge, security interest,
hypothecation, restriction, encumbrance, adverse claim or charge
of any kind in respect of such asset.
(oo) "Material Adverse Effect" means, with respect to any Person or any
of its Subsidiaries (together as one party for purposes of this
Section), an individual or cumulative adverse change in or effect
on the business, customers, customer relations, operations,
properties, working capital condition (financial or otherwise),
assets, properties or liabilities of such party which is, or would
be reasonably expected to be, materially adverse to the business,
properties, working capital condition (financial or otherwise),
assets or liabilities of such party and its Subsidiaries taken as
a whole, other than as a result of (A) changes, conditions or
events that are generally applicable to the industry in which such
Person operates or the U.S. economy in general, or acts of war,
armed hostilities or terrorism or (B) changes in Applicable Law or
U.S. GAAP or interpretations thereof.
(pp) "Merger Consideration" means the aggregate consideration that
becomes payable to the Stockholders under this Agreement,
including the Final Initial Merger Consideration and the
Contingent Merger Consideration.
(qq) "Net Initial Merger Consideration" shall have the meaning set
forth in Section 1.8(a).
(rr) "Net Product Revenues" means Parent's properly recognized
consolidated aggregate gross revenues from sales of the Products
during the Contingent Period, calculated in accordance with GAAP
consistently applied by Parent in accordance with its audited
revenue recognition policies, less (i) the sum of the following
deductions paid by Parent where applicable: shipping, handling,
66
freight and similar costs of Parent; third party commissions;
sales, use or other excise or similar taxes imposed upon
particular sales of the Products (excluding income taxes); customs
duties; allowances or credits to customers because of rejections
or returns of Product; trade or quantity discounts and fees given
by Parent to distributors or customers, less (ii) the amount of
such recognized revenues that are not collected by June 30, 2006.
If the Closing occurs after July 5, 2004, "Net Product Revenues"
shall include, for the period beginning on July 5, 2004 and ending
on the Closing Date, the Company's properly recognized
consolidated aggregate gross revenues from sales of the Products,
calculated in accordance with GAAP consistently applied by the
Company in accordance with Parent's audited revenue recognition
policies, less (i) the sum of the following deductions paid by the
Company where applicable: shipping, handling, freight and similar
costs of the Company; third party commissions; sales, use or other
excise or similar taxes imposed upon particular sales of the
Products (excluding income taxes); customs duties; allowances or
credits to customers because of rejections or returns of Product;
trade or quantity discounts and fees given by the Company to
distributors or customers, less (ii) the amount of such recognized
revenues that are not collected by June 30, 2006. If Parent or its
Affiliates provides a purchaser of a Product with a money-back
guaranty or similar right to refund that extends more than ninety
(90) days from the date of shipment, and the purchaser pays for
such Product by June 30, 2006, such sale shall be included in "Net
Product Revenues." The term "Net Product Revenues" shall not
include revenue received by Parent (or any of its Affiliates) from
transactions with an Affiliate of Parent, as long as any resale of
Products by such Affiliate is included in Parent's consolidated
revenues. Whenever a Product is sold as part of a Bundled Product,
the "Net Product Revenue" for the Product resulting from such sale
of such Bundled Product shall be the product of (X) the net
revenues reported by Parent or its Affiliate, whichever is
applicable, for such Bundled Product multiplied by (Y) a fraction,
the numerator of which is the per unit average selling price of
such Product and the denominator of which is the sum of the
aggregate per unit average selling prices of all products,
including the Product, included in such Bundled Product.
(ss) "Payment Agent" shall have the meaning set forth in Section
1.14(a).
(tt) "Pension Plan" means an "employee pension benefit plan" as such
term is defined in Section 3(2) of ERISA.
(uu) "Percentage Interest" with respect to each Stockholder shall mean
such Stockholder's percentage equity interest in the Company
determined by dividing the number of shares of Company Common
Stock owned by such Stockholder (assuming the exercise in full of
all Company Stock Options and the conversion of all shares of
Company Preferred Stock into Company Common Stock owned by such
Stockholder), divided by the total number of outstanding shares of
Company Common Stock (assuming the exercise in full of all
outstanding Company Stock Options and the conversion of all
outstanding shares of Company Preferred Stock into Company Common
Stock), as set forth on Schedule 1.11.
(vv) "Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet
due, or for Taxes the validity of which are being contested in
67
good faith by appropriate proceedings; (ii) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Persons and other Liens imposed by
Applicable Law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith; (iii)
Liens relating to deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance
and other types of social security or to secure the performance of
leases, trade contracts or other similar agreements; (iv) Liens
and Encumbrances specifically identified in the Latest Balance
Sheet; (v) Liens securing executory obligations under any lease
that constitutes an "operating lease" under GAAP; and (vi) other
Liens set forth on the Disclosure Schedule; provided, however,
that, with respect to each of clauses (i) through (v), to the
extent that any such Lien on any of the Company's assets arose
prior to the date of the Latest Balance Sheet and relates to, or
secures the payment of, a Liability that is required to be accrued
for under GAAP, such Lien shall not be a Permitted Lien unless all
such Liabilities have been fully accrued or otherwise reflected on
the Latest Balance Sheet. Notwithstanding the foregoing, no Lien
arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Benefit Plan sponsored
by, maintained by or contributed to by the Company or any of its
ERISA Affiliates or arising in connection with any excise tax or
penalty tax with respect to such Benefit Plan shall be a Permitted
Lien.
(ww) "Person" means an individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or
organization, including a Governmental Authority.
(xx) "Plan Affiliate" means, with respect to any Person, any Benefit
Plan sponsored by, maintained by or contributed to by such Person,
and with respect to any Benefit Plan, any Person sponsoring,
maintaining or contributing to such plan or arrangement.
(yy) Product" or "Products" means (a) the TherMatrx Dose Optimized
Thermotherapy, consisting of a console, treatment catheter and
temperature sensors, and, to the extent sold separately, the
thermistor as a separate component, and (b) any products
developed, modified or derived directly therefrom for the
treatment of benign prostate hyperplasia that are individually
covered by, or collectively part of, any claim in any valid and
unexpired patent listed in Section 2.20 of the Disclosure Schedule
or any patent issuing from any patent application listed in
Section 2.20 of the Disclosure Schedule, including any divisional,
continuation, reissue or reexamination thereof.
(zz) "Properties" means any real property owned or leased by or to the
Company.
(aaa)"Scheduled Contracts" shall have the meaning set forth in Section
2.17(a).
(bbb) "SEC" means the Securities and Exchange Commission.
68
(ccc)"Security Agreement" means the agreement, in substantially the
form attached hereto as Exhibit F, to be entered into by and among
Parent, the Surviving Corporation and the Stockholders'
Representative.
(ddd) "Securities Act" means the Securities Act of 1933, as amended.
(eee)"Set-Off Amounts" shall have the meaning set forth in Section
8.6.
(fff)"Severance Accruals" means severance and retention payments
payable to employees of the Company at or after the Closing,
pursuant to (x) written agreements between the Company and such
employees entered into prior to or in connection with the Closing
or (y) benefit plans adopted by the Company prior to or in
connection with the Closing.
(ggg)"Stockholders" means the Persons who hold of record immediately
prior to the Effective Time shares of Company Common Stock or
Company Preferred Stock.
(hhh)"Stockholders' Representative" has the meaning set forth in
Article 10.
(iii)"Subsidiary" or "Subsidiaries" of any specified Person shall mean
any corporation fifty percent (50%) or more of the outstanding
capital stock of which, or any partnership, joint venture, limited
liability company or other entity fifty percent (50%) or more of
the ownership interests of which, is directly or indirectly owned
or controlled by such specified Person, or any such corporation,
partnership, joint venture, limited liability company, or other
entity which may otherwise be controlled, directly or indirectly,
by such Person.
(jjj)"Superior Proposal" means an unsolicited, bona fide written
Acquisition Proposal for all of the outstanding shares of the
capital stock or all of the voting power of the Company which the
Company's Board of Directors determines in good faith to be more
favorable to the Stockholders than the Merger, after consultation
with the Company's legal advisors and its financial advisor,
taking into account all the terms and conditions of the
Acquisition Proposal and this Agreement, and all legal, financial,
regulatory and other aspects of such Acquisition Proposal deemed
relevant by the Company's Board of Directors, including the
Termination Fee.
(kkk)"Tax" or "Taxes" means all taxes imposed of any nature including
federal, state, local or foreign net income tax, alternative or
add-on minimum tax, profits or excess profits tax, franchise tax,
gross income, adjusted gross income or gross receipts tax,
employment related tax (including employee withholding or employer
payroll tax, FICA or FUTA), real or personal property tax or ad
valorem tax, sales or use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance
tax, prohibited transaction tax, premiums tax, environmental tax,
intangibles tax or occupation tax, together with any interest or
any penalty, addition to tax or additional amount imposed by any
69
Governmental Authority (domestic or foreign) responsible for the
imposition of any such tax. The term Tax shall also include any
Liability of the Company for the Taxes of any other Person under
U.S. Treasury Regulations Section 1.1502-6 (or similar provisions
of state, local or foreign law), as a transferee or successor by
contract or otherwise.
(lll)"Tax Return" means all returns, declarations, reports, estimates,
forms, information returns and statements or other information
required to be filed with respect to any Tax.
(mmm)"Transaction Expenses" means all fees and expenses incurred by or
on behalf of the Company in connection with the Merger payable to
a third party including, without limitation, all legal,
accounting, financial advisory, investment banking, consulting and
all other fees and expenses of third parties incurred in
connection with the negotiation and preparation of this Agreement
and the transactions contemplated hereby.
(nnn)"Uncollected Invoices" means any invoice issued by Parent or one
of its Affiliates related to the sale of the Product that remains
uncollected after payment of such invoice is due despite the
commercially reasonable and good faith efforts of Parent or one of
its Affiliates to collect such invoice, which shall not be less
vigorous than the manner that Parent or such Affiliate attempts to
collect invoices related to other products sold by Parent or such
Affiliate.
(ooo)"U.S. Government" means the United States Government, including
any agencies, commissions, branches, instrumentalities and
departments thereof.
(ppp)"Welfare Plan" means an "employee welfare benefit plan" as such
term is defined in Section 3(1) of ERISA (including without
limitation a plan excluded from coverage by Section 4 of ERISA).
ARTICLE 12
MISCELLANEOUS
12.1 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given (a) if personally delivered, when so delivered, (b) if mailed,
two (2) Business Days after having been sent by registered or certified
mail, return receipt requested, postage prepaid and addressed to the
intended recipient as set forth below, (c) if given by facsimile, once
such notice or other communication is transmitted to the facsimile
number specified below and electronic confirmation is received,
provided that such notice or other communication is promptly thereafter
mailed in accordance with the provisions of clause (b) above, or (d) if
sent through an overnight delivery service in circumstances to which
such service guarantees next day delivery, the day following being so
sent:
70
If to the Company prior to Closing:
To: TherMatrx, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Xxxx Xxxxxxx, P.C.
1350 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
If to the Company after Closing or to the Parent or Merger Subsidiary:
To: American Medical Systems, Inc.
00000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP
3300 Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
If to the Stockholders' Representative:
To: TherMatrx Investment Holdings LLC
c/o Oracle Investment Management LLC
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Fax: (000) 000-0000
71
With a copies to:
Xxxxxxx Xxxxxx
00 Xxxxx Xxxxx Xxx Xxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
and
Xxxx Xxxxxxx, P.C.
1350 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
12.2 Amendments; No Waivers.
(a) Subject to Applicable Law, any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by all parties
hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or
subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
12.3 Expenses. All costs, fees and expenses incurred in connection with the
negotiation, preparation, execution, delivery and performance of this
Agreement and in closing and carrying out the transactions contemplated
hereby shall be paid by the party incurring such cost or expense. This
Section 12.3 shall survive the termination of this Agreement.
72
12.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign either this Agreement
or any of its rights, interests or obligations hereunder without the
prior written approval of each other party.
12.5 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Minnesota
(regardless of the laws that might otherwise govern under applicable
principles of conflicts of law).
12.6 Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
This Agreement may be executed and delivered via facsimile.
12.7 Entire Agreement. This Agreement (including the Disclosure Schedule,
all Exhibits and Schedules and all other agreements referred to herein
or therein which are hereby incorporated by reference and the other
agreements executed simultaneously herewith) constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject
matter of this Agreement, including, without limitation, the Term
Sheet, dated April 15, 2004. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
12.8 Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
All references to an Article or Section include all subparts thereof.
12.9 Severability. If any provision of this Agreement, or the application
thereof to any Person, place or circumstance, shall be held by a court
of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other
Persons, places and circumstances shall remain in full force and effect
only if, after excluding the portion deemed to be unenforceable, the
remaining terms shall provide for the consummation of the transactions
contemplated hereby in substantially the same manner as originally set
forth at the later of the date this Agreement was executed or last
amended.
12.10 Construction. The parties hereto intend that each representation,
warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that
the party has not breached shall not detract from or mitigate the fact
that the party is in breach of the first representation, warranty or
covenant.
73
12.11 Third Party Beneficiaries. No provision of this Agreement shall create
any third party beneficiary rights in any Person, including any
employee of Parent or Merger Subsidiary or employee or former employee
of the Company or any Affiliate thereof (including any beneficiary or
dependent thereof).
(Following Page is the Signature Page)
74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN MEDICAL SYSTEMS, INC. THERMATRX, INC.
a Delaware corporation a Delaware corporation
By: By:
---------------------------------- -----------------------------------
Name: Name:
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
LEIO ACQUISITION CORP. THERMATRX INVESTMENT HOLDINGS LLC,
a Delaware corporation as a Principal Stockholder
a Delaware limited liability company
By:
--------------------------------- By:
-----------------------------------
Name: Xxxxxxx Xxxxxx
--------------------------------
Title: By: Oracle Strategic Partners, L.P.
-------------------------------
By: Oracle Strategic Capital LLC
By:
---------------------------
Name:
--------------------------
Title:
--------------------------
THERMATRX INVESTMENT HOLDINGS LLC, BSD MEDICAL CORPORATION, as a
as Stockholders' Representative Principal Stockholder
a Delaware limited liability company a Delaware corporation
By: By:
--------------------------------- -----------------------------------
Xxxxxxx Xxxxxx
Name:
---------------------------------
By: Oracle Strategic Partners, L.P.
Title:
--------------------------------
By: Oracle Strategic Capital LLC
By:
----------------------------
Name:
--------------------------
Title:
-------------------------------
75
EXHIBITS
--------
EXHIBIT A Form of Certificate of Merger
EXHIBIT B Certificate of Incorporation of Surviving Corporation
EXHIBIT C Form of Letter of Resignation and Release of Claims
EXHIBIT D Form of Escrow Agreement
EXHIBIT E Form of Guaranty
EXHIBIT F Form of Security Agreement
SCHEDULES
---------
SCHEUDLE 1.11 Percentage Interests
i
Table of Contents
-----------------
Page
-----
ARTICLE 1 THE MERGER; CONVERSION OF SHARES...................................1
1.1 The Merger.........................................................1
1.2 Effective Time.....................................................1
1.3 Closing of the Merger..............................................1
1.4 Effects of the Merger..............................................2
1.5 Certificate of Incorporation of the Surviving Corporation..........2
1.6 Bylaws of the Surviving Corporation................................2
1.7 Directors and Officers of the Surviving Corporation................2
1.8 Initial Merger Consideration.......................................2
1.9 Contingent Merger Consideration....................................4
1.10 Closing Balance Sheet..............................................6
1.11 Cancellation and Conversion of Company Securities at the
Effective Time.....................................................7
1.12 Company Preferred Stock; Stock Options; and Stock
Appreciation Rights................................................8
1.13 Dissenting Shares..................................................8
1.14 Payment Procedure; Exchange of Certificates........................9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................11
2.1 Corporate Organization and Power..................................11
2.2 Authorization.....................................................11
2.3 Capitalization of the Company.....................................12
2.4 Non-Contravention.................................................12
2.5 Consents and Approvals............................................13
2.6 Financial Statements; Undisclosed Liabilities.....................13
2.7 Absence of Certain Changes........................................14
2.8 Assets and Properties.............................................15
2.9 Manufacturing and Marketing Rights................................16
2.10 FDA and Regulatory Matters........................................16
2.11 Reimbursement/Billing.............................................18
2.12 Compliance with Applicable Laws...................................19
2.13 Permits...........................................................19
2.14 Inventories.......................................................19
2.15 Receivables.......................................................20
2.16 Litigation........................................................20
2.17 Contracts.........................................................20
2.18 Benefit Plans.....................................................22
2.19 Labor and Employment Matters......................................25
2.20 Intellectual Property.............................................26
2.21 Environmental Compliance..........................................27
2.22 Insurance.........................................................28
ii
2.23 Tax Matters.......................................................28
2.24 Bank Accounts; Powers of Attorney.................................31
2.25 Orders, Commitments and Returns...................................31
2.26 Product Liability Claims..........................................31
2.27 Warranties........................................................31
2.28 Relations with Suppliers and Customers............................32
2.29 Indemnification Obligations.......................................32
2.30 Absence of Certain Business Practices.............................32
2.31 Brokers...........................................................32
2.32 Minute Books......................................................32
2.33 Disclosure........................................................32
2.34 Investigation by Parent...........................................33
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY........................................................33
3.1 Corporate Existence and Power.....................................33
3.2 Authorization.....................................................33
3.3 Consents and Approvals............................................34
3.4 Available Capital Resources.......................................34
3.5 Disclosure........................................................34
3.6 Non-Contravention.................................................34
3.7 Brokers...........................................................35
3.8 Litigation........................................................35
3.9 AMS Reports; Financial Statements.................................35
ARTICLE 4 COVENANTS.........................................................36
4.1 Conduct of the Business...........................................36
4.2 Company's Agreements as to Specified Matters......................36
4.3 Full Access.......................................................38
4.4 Confidentiality...................................................38
4.5 Filings; Consents; Removal of Objections..........................39
4.6 Further Assurances; Cooperation; Notification.....................39
4.7 Approval of Stockholders..........................................40
4.8 Update Disclosure; Breaches.......................................40
4.9 No Solicitation...................................................40
4.10 Public Announcements..............................................41
4.11 Preparation of Tax Returns: Tax Matters...........................42
4.12 Post-Closing Obligations of Parent and the Surviving
Corporation.......................................................43
4.13 Charter and Bylaws................................................44
ARTICLE 5 CONDITIONS TO PARENT'S AND MERGER SUBSIDIARY'S
OBLIGATIONS.......................................................44
5.1 Representations and Warranties True...............................44
5.2 Performance.......................................................44
5.3 Certificate of Merger.............................................45
5.4 Estimated Closing Balance Sheet...................................45
5.5 Required Approvals and Consents...................................45
iii
5.6 No Proceeding or Litigation.......................................46
5.10 Other Receipts; Good Standing.....................................46
5.11 Opinions of Company Counsel.......................................46
5.12 Escrow Agreement..................................................46
5.13 Dissenting Shares.................................................46
5.14 Officer and Director Releases.....................................46
5.15 Principal Stockholder Releases....................................46
5.16 MRI Agreement.....................................................46
5.17 Intellectual Property Assignment..................................46
5.18 Release of Security Interest......................................47
ARTICLE 6 CONDITIONS TO COMPANY'S OBLIGATIONS...............................47
6.1 Representations and Warranties True...............................47
6.2 Performance.......................................................47
6.3 Certificate of Merger.............................................47
6.4 Corporate Approvals...............................................47
6.5 No Proceeding or Litigation.......................................48
6.6 Legislation.......................................................48
6.7 No Material Adverse Effect........................................48
6.8 Certificates......................................................48
6.9 Other Receipts; Good Standing.....................................48
6.10 Opinion of Parent Counsel.........................................48
6.11 Escrow Agreement..................................................48
6.12 Security Agreement................................................48
6.13 AMS Holdings Guaranty.............................................48
ARTICLE 7 TERMINATION.......................................................49
7.1 Methods of Termination............................................49
7.2 Procedure Upon Termination........................................50
7.3 Effect of Termination.............................................50
7.4 Termination Fee...................................................50
7.5 Non-Solicitation..................................................50
ARTICLE 8 SURVIVAL AND INDEMNIFICATION......................................51
8.1 Survival..........................................................51
8.2 Indemnification by Stockholders...................................51
8.3 Indemnification by Parent.........................................52
8.4 Claims for Indemnification........................................52
8.5 Indemnification Limits............................................54
8.6 Right of Off-Set..................................................55
8.7 Escrow Funds......................................................55
8.8 Expenses of Stockholders' Representative..........................55
ARTICLE 9 ARBITRATION.......................................................55
9.1 Dispute...........................................................55
9.2 Mediation.........................................................56
9.3 Arbitration.......................................................56
iv
ARTICLE 10 STOCKHOLDERS' REPRESENTATIVE.....................................57
10.1 Authorization of Stockholders' Representative.....................57
ARTICLE 11 DEFINITIONS......................................................61
11.1 Definitions.......................................................61
ARTICLE 12 MISCELLANEOUS....................................................70
12.1 Notices...........................................................70
12.2 Amendments; No Waivers............................................72
12.3 Expenses..........................................................72
12.4 Successors and Assigns............................................73
12.5 Governing Law.....................................................73
12.6 Counterparts; Effectiveness.......................................73
12.7 Entire Agreement..................................................73
12.8 Captions..........................................................73
12.9 Severability......................................................73
12.10 Construction......................................................73
12.11 Third Party Beneficiaries.........................................74
v