Exhibit 2
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDICAL GRAPHICS CORPORATION,
A MINNESOTA CORPORATION,
ANGEION CORPORATION,
A MINNESOTA CORPORATION,
AND
ANG ACQUISITION CORP.,
A MINNESOTA CORPORATION
DATED: SEPTEMBER 22, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS.............................................................................. 1
1.1. Defined Terms..................................................................... 1
1.2. Other Defined Terms............................................................... 7
1.3. Interpretation Provisions......................................................... 8
ARTICLE II. THE MERGER.............................................................................. 8
2.1. The Merger........................................................................ 8
2.2. Effective Time.................................................................... 8
2.3 Closing........................................................................... 8
2.4. Articles of Incorporation and By-laws............................................. 9
2.5. Directors......................................................................... 9
2.6. Officers.......................................................................... 9
2.7. Effect of Merger.................................................................. 9
ARTICLE III. EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY.................................. 10
3.1. Effect on Capital Stock........................................................... 10
3.2. Payment; Exchange of Certificates................................................. 11
3.3. Treatment of Employee and Director Options; Warrants; Class A Stock; Accrued
Interests in Stock Purchase Plan.................................................. 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 13
4.1. Organization and Capitalization................................................... 13
4.2. Authorization..................................................................... 14
4.3. Subsidiaries...................................................................... 15
4.4. No Conflict....................................................................... 15
4.5. SEC Documents..................................................................... 16
4.6. Compliance with Health Care Laws.................................................. 16
4.7. Undisclosed Liabilities........................................................... 17
4.8. Absence of Certain Changes or Events.............................................. 17
4.9. Contracts; No Defaults............................................................ 18
4.10. Transactions with Affiliates...................................................... 20
4.11. Machinery and Equipment and Other Property........................................ 20
4.12. Intellectual Property............................................................. 20
4.13. Real Property..................................................................... 21
4.14. Litigation and Proceedings........................................................ 22
4.15. Employee Benefit Plans............................................................ 22
4.16. Labor Relations................................................................... 24
4.17. Legal Compliance.................................................................. 25
4.18. Environmental Matters............................................................. 25
4.19. Taxes............................................................................. 26
4.20. Governmental Authorities; Consents................................................ 28
4.21. Licenses, Permits and Authorizations.............................................. 28
4.22. Insurance......................................................................... 28
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4.23. Customers and Suppliers........................................................... 28
4.24. Year 2000 Compatibility........................................................... 29
4.25. Brokers'Fees...................................................................... 29
4.26. Board Recommendation.............................................................. 29
4.27. Required Company Vote............................................................. 29
4.28. Proxy Statement................................................................... 29
4.29. Full Disclosure................................................................... 29
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB......................................... 30
5.1. Organization...................................................................... 30
5.2. Authorization..................................................................... 30
5.3. No Conflict....................................................................... 30
5.4. Litigation and Proceedings........................................................ 30
5.5. Governmental Authorities; Consents................................................ 30
5.6. Brokers'Fees...................................................................... 31
5.7. Proxy Statement................................................................... 31
5.8. Full Disclosure................................................................... 31
ARTICLE VI. COVENANTS OF THE COMPANY, PARENT AND SUB................................................ 31
6.1. Conduct of Business Prior to Closing.............................................. 31
6.2. Investigation by Parent; Confidentiality.......................................... 33
6.3. Consents and Efforts.............................................................. 33
6.4. No Solicitation................................................................... 34
6.5. Meeting of Shareholders........................................................... 36
6.6. Proxy Statement................................................................... 36
6.7. Director and Officer Liability.................................................... 37
6.8. Notices of Certain Events......................................................... 37
6.9. Further Assurances................................................................ 37
6.10. Financial Statements, Etc......................................................... 38
6.11. Year 2000 Remediation............................................................. 38
ARTICLE VII. CONDITIONS TO THE MERGER............................................................... 38
7.1. Conditions to the Obligations of each Party....................................... 38
7.2. Conditions to the Obligations of the Company...................................... 38
7.3. Conditions to the Obligations of Sub and Parent................................... 39
ARTICLE VIII. MISCELLANEOUS......................................................................... 40
8.1. Termination....................................................................... 40
8.2. Assignment........................................................................ 42
8.3. Notices........................................................................... 42
8.4. Entire Agreement; Waivers......................................................... 43
8.5. Multiple Counterparts............................................................. 43
8.6. Invalidity........................................................................ 43
8.7. Fees and Expenses................................................................. 43
8.8. Cumulative Remedies............................................................... 43
8.9. Governing Law..................................................................... 43
8.10. Amendment......................................................................... 43
8.11. Public Announcements.............................................................. 43
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8.12. Enforcement of Agreement.......................................................... 44
8.13. Non-Survival of Representations, Warranties....................................... 44
8.14. No Third Party Beneficiaries...................................................... 44
iii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT"), dated
September 22, 1999, is by and among MEDICAL GRAPHICS CORPORATION, a Minnesota
corporation (the "COMPANY"), ANGEION CORPORATION, a Minnesota corporation
("PARENT"), and ANG ACQUISITION CORP., a Minnesota corporation ("SUB").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved this Agreement and deem it advisable and in the best
interests of Parent, Sub and the Company and of their respective shareholders
to consummate the transaction provided for herein in which Sub will merge
with and into the Company (the "MERGER");
WHEREAS, pursuant to the Merger, each outstanding share of the
common stock, par value $0.05 per share, of the Company (the "COMPANY COMMON
STOCK") shall be converted into the right to receive the Merger Consideration
(as defined below), upon the terms and subject to the conditions set forth
herein;
WHEREAS, Parent, Sub and the Company (Sub and the Company sometimes
being referred to herein as the "CONSTITUENT CORPORATIONS") are hereby
adopting a plan of merger, providing for the merger of Sub with and into the
Company, with the Company being the surviving corporation. The Merger will be
consummated in accordance with this Agreement upon the filing by the Company
and Sub of Articles of Merger with the Minnesota Secretary of State (the
"ARTICLES OF MERGER"), such Merger to be consummated as of the Effective Time
(as defined below) of the Merger;
WHEREAS, upon consummation of the Merger, the separate corporate
existence of Sub shall cease and the Company, as the surviving corporation in
the Merger (hereinafter referred to for the periods at and after the
Effective Time of the Merger as the "SURVIVING CORPORATION"), shall continue
its corporate existence under the Minnesota Business Corporation Act (the
"MBCA"); and
WHEREAS, the Board of Directors of each of the Constituent
Corporations has directed that this Agreement be submitted to a vote of the
shareholders of the Constituent Corporations in accordance with the MBCA, and
Parent, as sole shareholder of Sub, has duly approved this Agreement in
accordance with the MBCA.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
1.1. DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"AFFILIATE" shall mean, with respect to any Person, any other Person
which controls, is controlled by, or is under common control with, such Person.
For purposes of the preceding sentence, the term
"control" shall mean the power, direct or indirect, to direct or cause the
direction of the management and policies of a Person through the ownership of
voting securities, by contract or otherwise, whether or not such power is
exercised.
"ASSETS" shall mean all of the Company's and its Subsidiaries'
right, title and interest in and to all properties, assets and rights of any
kind, whether tangible or intangible, real or personal, owned by the Company
or any of its Subsidiaries or in which the Company or any of its Subsidiaries
has any interest whatsoever.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy (written or oral)
and each plan, arrangement, program, agreement or commitment (written or
oral) providing for insurance coverage (including, without limitation, any
self-insurance arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any
"voluntary employees' beneficiary association" as defined in Section
501(c)(9) of the Code providing for the same or other benefits) or for
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation
or post-retirement insurance, compensation or benefits which (i) is not a
Welfare Plan, Pension Plan or Multiemployer Plan, (ii) is entered into,
maintained, contributed to or required to be contributed to, as the case may
be, by the Company, its Subsidiaries or any ERISA Affiliate or under which
the Company, its Subsidiaries or any ERISA Affiliate may incur any liability,
and (iii) covers any employee or former employee of the Company, its
Subsidiaries or any ERISA Affiliate (with respect to their relationship with
any such entity).
"CLASS A STOCK" shall mean that certain class of Company stock
issued pursuant to the Certificate of Rights and Preferences of Class A Stock
of Medical Graphics Corporation filed with the Minnesota Secretary of State
on March 31, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" shall mean the Confidential Information
Agreement dated July 20, 1999, by and between Parent and the Company
"CONTRACT" shall mean any agreement, contract, lease, note, loan,
evidence of Indebtedness, purchase order, letter of credit, franchise
agreement, undertaking, covenant not to compete, employment agreement,
license, instrument, obligation, commitment, purchase and sale order,
quotation or other commitment to which the Company or its Subsidiaries is a
party or which relates to the Company's or its Subsidiaries' businesses or
any of the Assets, whether oral or written, express or implied, and which
pursuant to its terms has not expired, terminated or been fully performed by
the parties thereto.
"DISSENTING SHAREHOLDERS" shall mean those Shareholders who hold
Dissenting Shares.
"DISSENTING SHARES" shall mean any shares held by Shareholders who
are entitled to exercise dissenters' rights with respect to their shares
under the MBCA, and who have properly exercised their dissenters' rights by
filing with the Company a written notice of intent to demand the fair value
of their shares of Company Common Stock under the MBCA, perfected their
dissenters' rights and not subsequently withdrawn or lost their dissenters'
rights with respect to their Company Common Stock in accordance with the MBCA.
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans, and Welfare Plans.
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"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law,
and includes, without limitation, any agreement to give any of the foregoing
in the future, and any contingent or conditional sale agreement or other
title retention agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" shall mean all notices of violation, liens,
claims, demands, suits, and causes of action for any damage, including,
without limitation, personal injury, property damage (including, without
limitation, any depreciation or diminution of property values), lost use of
property or consequential damages, arising directly or indirectly out of
Environmental Conditions or Environmental Laws. By way of example only (and
not by way of limitation), Environmental Claims include (i) violations of or
obligations under any Contract or Permit related to Environmental Laws or
Environmental Conditions between the Company or its Subsidiaries and any
other Person, (ii) actual or threatened damages to natural resources, (iii)
claims for nuisance or its statutory equivalent, (iv) claims for the recovery
of response costs, or administrative or judicial orders directing the
performance of investigations, responses or remedial actions under any
Environmental Laws, (v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to any Environmental Law,
(vi) claims related to Environmental Laws or Environmental Conditions for
restitution, contribution, or indemnity, (vii) fines, penalties or liens of
any kind against property related to Environmental Laws or Environmental
Conditions, (viii) claims related to Environmental Laws or Environmental
Conditions for injunctive relief or other orders or notices of violation from
any Governmental Authority, and (ix) claims relating to exposure to or injury
from Environmental Conditions.
"ENVIRONMENTAL CONDITIONS" shall mean the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water,
ground water, any present or potential drinking water supply, subsurface
strata or ambient air.
"ENVIRONMENTAL LAWS" shall mean all applicable foreign, federal,
state, district and local laws, all rules or regulations promulgated
thereunder, and all orders, consent decrees, judgments, notices and Permits
relating to pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata), including, without limitation, (i) laws relating to
emissions, discharges, releases or threatened releases of Hazardous
Substances into the environment and (ii) laws relating to the identification,
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, recovery, transport or other handling of Hazardous Substances.
Environmental Laws shall include, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and
Recovery Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe
Drinking Water Act, as amended, the Clean Air Act, as amended and all
analogous laws promulgated or issued by any Governmental Authority.
"ENVIRONMENTAL REPORTS" shall mean any and all written analyses,
summaries or explanations, in the possession or control of the Company or its
Subsidiaries, of (i) any Environmental Conditions in, on or about the current
or former properties of the Company or its Subsidiaries or (ii) the Company's
or its Subsidiaries' compliance with, or liability under, any Environmental
Laws.
"EQUITY SECURITIES" of any Person shall mean (i) shares of capital
stock or other equity securities of such Person, including, with respect to
the Company, the Company Common Stock and the Class A Stock, (ii)
subscriptions, calls, warrants, options or commitments of any kind or
character relating to, or entitling any Person to purchase or otherwise
acquire, any capital stock or other
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equity securities of such Person, (iii) securities convertible into or
exercisable or exchangeable for shares of capital stock or other equity
securities of such Person, and (iv) equity equivalents, interests in the
ownership or earnings of, or stock appreciation, phantom stock or other
similar rights of, or with respect to, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under
"common control" with, or a member of an "affiliated service group" with, or
otherwise required to be aggregated with, the Company or any of its
Subsidiaries as set forth in Section 414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITIES" shall mean all plants, offices, manufacturing
facilities, stores, warehouses, administration buildings and all real
property and related facilities owned, leased or used by the Company or its
Subsidiaries.
"GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
"GOVERNMENTAL AUTHORITY" means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of any
government, including the United States or any state, county, city or other
political subdivision or any foreign government.
"HAZARDOUS SUBSTANCES" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive,
reactive, toxic or otherwise hazardous substances or materials (whether
solids, liquids or gases) subject to regulation, control or remediation under
Environmental Laws. By way of example only, the term Hazardous Substances
includes petroleum, urea formaldehyde, flammable, explosive and radioactive
materials, PCBs, pesticides, herbicides, asbestos, sludge, slag, acids,
metals, solvents and waste waters.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"IMPROVEMENTS" shall mean any buildings, facilities, other
structures and improvements, building systems and fixtures located on or
under any real property owned or leased by the Company or its Subsidiaries.
"INDEBTEDNESS" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables incurred in the ordinary course of business), (iv)
under capital leases or (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"JUNE 30 BALANCE SHEET" shall mean the consolidated balance sheet of
the Company and its consolidated Subsidiaries as of June 30, 1999.
"JUNE 30 BALANCE SHEET DATE" shall mean June 30, 1999.
"LAWS" means all laws, statutes, rules, regulations, ordinances,
policies and other pronouncements having the effect of law of any
Governmental Authority.
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"LEASES" shall mean all of the leases or subleases for personal or
real property to which the Company or its Subsidiaries is a party or by which
the Company, its Subsidiaries or any of the Assets is bound.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar
phrase shall mean, with respect to any Person, any material adverse effect on
or material adverse change with respect to (i) the business, operations,
assets, liabilities, condition (financial or otherwise), or results of
operations of such Person and its Subsidiaries, taken as a whole, (ii) the
relations with customers, suppliers, distributors or employees of such Person
and its Subsidiaries, taken as a whole, or (iii) the right or ability of such
Person or its Subsidiaries to consummate any of the transactions contemplated
hereby; provided that a "Material Adverse Effect" or "Material Adverse
Change" shall not be deemed to included (1) changes in GAAP or (2) in the
case of the Company, acts or omissions of the Company taken with the prior
written consent of Parent in contemplation of the Merger.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined
in Section 4001(a)(3) or 3(37) of ERISA, (i) which the Company, its
Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or
is required to contribute to, or, after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or under which
the Company, its Subsidiaries or any ERISA Affiliate may incur any liability
and (ii) which covers any employee or former employee of the Company, its
Subsidiaries or any ERISA Affiliate (with respect to their relationship with
any such entity).
"OPTIONS" shall mean the options to purchase shares of Company
Common Stock issued to employees and non-employee directors of the Company
pursuant to the Stock Option Plans.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (i) which
the Company, its Subsidiaries or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the five years
prior to the Closing Date, maintained, administered, contributed to or was
required to contribute to, or under which the Company, its Subsidiaries or
any ERISA Affiliate may incur any liability (including, without limitation,
any contingent liability) and (ii) which covers any employee or former
employee of the Company, its Subsidiaries or any ERISA Affiliate (with
respect to their relationship with any such entity).
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, or notifications to,
any Governmental Authority, necessary or desirable for the operation of the
business of the Company or its Subsidiaries as currently conducted.
"PERMITTED ENCUMBRANCES" shall mean (a) liens for Taxes or
governmental charges or claims (i) not yet due and payable or (ii) being
contested in good faith, in each case, if a reserve or other appropriate
provision as may be required by GAAP shall have been made therefor, (b)
statutory liens of landlords, liens of carriers, warehouse persons, mechanics
and material persons and other liens imposed by law incurred in the ordinary
course of business for sums (i) not yet due and payable or (ii) being
contested in good faith, in each case, if a reserve or other appropriate
provision as may be required by GAAP shall have been made therefor and (c)
easements, rights-of-way, restrictions and other similar charges or
encumbrances on real property, in each case, which do not interfere with the
ordinary conduct of business of the Company or its Subsidiaries and do not
materially detract from the use or value of the property to which such
encumbrance relates.
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"PERSON" shall mean any natural person, corporation, limited
partnership, general partnership, limited liability company, joint stock
company, joint venture, association, company, trust or other organization, or
any Governmental Authority.
"PERSONNEL" shall mean all directors, officers, employees and agents
of the Company or its Subsidiaries.
"RETURNS" shall mean any and all returns, reports, declarations and
information statements with respect to Taxes required to be filed by or on
behalf of the Company or its Subsidiaries with any Governmental Authority or
Tax authority or agency, whether domestic or foreign, including, without
limitation, consolidated, combined and unitary returns and all amendments
thereto or thereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHAREHOLDERS" shall mean the record holders of Company Common Stock
and Class A Stock.
"STOCK PURCHASE PLAN" shall mean the Medical Graphics Corporation
Employee Stock Purchase Plan of the Company effective May 11, 1993.
"STOCK OPTION PLANS" shall mean, collectively, (i) the Medical
Graphics Corporation 1987 Stock Plan, effective March 12, 1987 (the "1987
Stock Plan"), and (ii) the Medical Graphics Corporation Restated Non-Employee
Director Compensation Plan, effective May 22, 1997 (the "Directors' Stock
Plan").
"SUBSIDIARY" shall mean, with respect to any Person, any corporation
or other business entity, whether or not incorporated, (i) of which at least
50% of the Equity Securities having, by their terms, ordinary voting power to
elect members of the board of directors, or other persons performing similar
functions with respect to such entity, are held, directly or indirectly, by
such Person or any of its Subsidiaries or (ii) the operations of which are
consolidated with such Person, pursuant to GAAP, for financial reporting
purposes.
"TAX(ES)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including, without
limitation, any interest, penalties, additions to tax or additional amounts
that may become payable in respect thereof, imposed by any foreign, federal,
state or local government or taxing authority, which taxes shall include,
without limitation, all income taxes, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, value-added
taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes,
real and personal property taxes, stamp taxes, transfer taxes, workers'
compensation and other obligations of the same or of a similar nature.
"TAXPAYERS" shall mean (i) the Company, (ii) each Subsidiary of the
Company and (iii) each consolidated or affiliated group of which the Company
or any of its Subsidiaries is or has been a part.
"WARRANTS" shall mean warrants to purchase shares of Company Common
Stock under the Warrant Agreements.
"WARRANT AGREEMENTS" shall mean (i) the Warrant dated March 25,
1997, expiring March 31, 2000, to Xxxxxxxxx X. Xxxxxxxx to purchase 195,000
shares of Company Common Stock at a price of $2.67 per share, (ii) the
Warrant dated March 27, 1997, expiring September 30, 2000, to Norwest
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Business Credit, Inc. to purchase 93,750 shares of Company Common Stock at a
price of $2.25 per share (which, after giving effect to antidilution
provisions in the warrant, results in the right to purchase 210,937.50 shares
at a price of $1.00 per share); and (iii) the Warrant dated March 25, 1997,
expiring March 31, 2002, to Xxxx X. Xxxxxxxx to purchase 225,000 shares of
Company Common Stock at a price of $2.25 per share.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (a) which the Company, its Subsidiaries or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or under which the Company, its Subsidiaries or any ERISA
Affiliate may incur any liability and (b) which covers any employee or former
employee of the Company, its Subsidiaries or any ERISA Affiliate (with respect
to their relationship with any such entity).
1.2. OTHER DEFINED TERMS.
In addition to the terms defined in Section 1.1 of this Agreement, the
following terms shall have the meanings defined for such terms in the Sections
set forth below:
TERM SECTION
-------------------------------------------- -------------------------
"Acquisition Proposal" 6.4(a)
"Articles of Merger" Recitals
"CERCLA" 4.18(d)
"Certificates" 3.2(b)
"Closing" 2.3
"Closing Date" 2.3
"Company Common Stock" Recitals
"Constituent Corporations" Recitals
"Disclosure Schedule" Article IV Preamble
"Effective Time" 2.2
"Employment Laws" 4.16
"Financial Statements" 4.5(c)
"Financing" 6.3(b)
"Financing Documents" 6.3(b)
"FDA" 4.6(a)
"Intellectual Property" 4.12
"Key Employee" 4.31
"Key Employee Agreement" 4.31
"Leased Real Property" 4.13(a)
"Machinery and Equipment" 4.11
"Material Contract" 4.9(a)
"Merger" Recitals
"Merger Consideration" 3.1(c)
"MBCA" Recitals
"Paying Agent" 3.2(a)
"Payment Event" 6.4(b)
"Permitted Party" 6.4(b)
"Programs" 4.6(d)
"Proxy Statement" 6.6(a)
"Required Vote" 4.28
"SEC Documents" 4.5(a)
"Special Meeting" 4.29
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TERM SECTION
-------------------------------------------- -------------------------
"Sub Common Stock" 3.1(a)
"Surviving Corporation" Recitals
"Tax Returns" 4.19(a)
"Third Party" 6.4(a)
1.3. INTERPRETATION PROVISIONS.
(a) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement, and
article, section, schedule and exhibit references are to this Agreement
unless otherwise specified. The meaning of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. The term
"or" is disjunctive but not necessarily exclusive. The terms "include" and
"including" are not limiting and mean "including without limitation."
(b) References to agreements and other documents shall
be deemed to include all subsequent amendments and other modifications
thereto.
(c) References to statutes shall include all
regulations promulgated thereunder and references to statutes or regulations
shall be construed as including all statutory and regulatory provisions
consolidating, amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are
for convenience of reference only and shall not affect the construction of
this Agreement.
(e) The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against either
party.
(f) The annexes, schedules and exhibits to this
Agreement are a material part hereof and shall be treated as if fully
incorporated into the body of the Agreement.
ARTICLE II.
THE MERGER
2.1. THE MERGER. Upon the terms and subject to the satisfaction
or waiver, if permissible, of the conditions hereof, and in accordance with
the MBCA, at the Effective Time, Sub shall be merged with and into the
Company. Upon the effectiveness of the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the Surviving
Corporation.
2.2. EFFECTIVE TIME. On the Closing Date, the parties shall
cause the Merger to be consummated by causing the Articles of Merger to be
executed by the Constituent Corporations and filed in accordance with the
relevant provisions of the MBCA. The Merger shall become effective at the
time of filing of the Articles of Merger (the "EFFECTIVE TIME").
2.3 CLOSING. Upon the terms and subject to the conditions of
this Agreement, the consummation of the Merger (the "CLOSING") shall take
place (a) at the offices of Faegre & Xxxxxx, 2200 Norwest Center, 00 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 at 10:00 a.m., local time, on
the business day as soon as practicable following the day on which the last
to be satisfied or waived of the conditions set forth in Article VII (other
than those conditions that by their nature are to be satisfied at the
8
Closing, but subject to the satisfaction or waiver of those conditions) shall
be satisfied or waived in accordance herewith or (b) at such other time, date
or place as the Parent and the Company may agree. The date on which the
Closing occurs is herein referred to as the "Closing Date."
2.4. ARTICLES OF INCORPORATION AND BY-LAWS.
(a) At the Effective Time, and without any further
action on the part of the Company or Sub, the articles of incorporation of
Sub, in the form attached hereto as EXHIBIT A, shall be the articles of
incorporation of the Surviving Corporation following the Merger, until
thereafter further amended as provided therein and under the MBCA, provided
that at the Effective Time, Article I of such articles of incorporation shall
be amended, by virtue of this Agreement and the Merger and without further
action on the part of the Company or Sub, so that the name of the Surviving
Corporation shall be Medical Graphics Corporation.
(b) At the Effective Time, and without any further
action on the part of the Company or Sub, the by-laws of Sub as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation following the Merger until thereafter changed or amended as
provided therein, in the articles of incorporation of the Surviving
Corporation and under the MBCA.
2.5. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation
and shall hold such positions until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal or as
otherwise provided in the articles of incorporation or bylaws of the
Surviving Corporation.
2.6. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal or as otherwise
provided in the articles of incorporation or bylaws of the Surviving
Corporation.
2.7. EFFECT OF MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions
of the MBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time the Surviving Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities, powers, and
franchises, of a public as well as a private nature, of the Constituent
Corporations, and shall become subject to all of the duties, liabilities and
obligations of each of the Constituent Corporations; and all rights,
privileges, immunities, powers and franchises of each Constituent
Corporation, and all property, real, personal and mixed, and all debts to
each such Constituent Corporation, on whatever account, and all choses in
action belonging to each such corporation, shall become vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and, without any further action or deed, all and every other
interest shall become thereafter the property of the Surviving Corporation as
they are of the Constituent Corporations; and the title to any real property
vested by deed or otherwise or any other interest in real estate vested by
any instrument or otherwise in either of such Constituent Corporations shall
not revert or become in any way impaired by reason of the Merger; but all
rights of creditors and Encumbrances upon any property of either Constituent
Corporation shall therefore attach to the Surviving Corporation and shall be
preserved unimpaired, and all debts, liabilities, obligations and duties of
each Constituent Corporation shall attach to the Surviving Corporation and
may be enforceable against it to the same extent as if said debts,
liabilities, obligations and duties had been incurred or contracted by it;
all of the foregoing in accordance with the applicable provisions of the MBCA.
9
ARTICLE III.
EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY
3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares
of Company Common Stock or any shares of capital stock of Sub:
(a) CONVERSION OF COMMON STOCK OF SUB. Each share of
common stock, par value $0.01 per share, of Sub (the "SUB COMMON STOCK")
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common stock, par value $0.01 per share, of the Surviving Corporation, which,
immediately after the Effective Time, shall be all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) CANCELLATION OF STOCK HELD BY COMPANY. Each share
of Company Common Stock and all other shares of capital stock of the Company
that are owned by the Company or by any Subsidiary of the Company shall
automatically be canceled and retired and shall cease to exist and no
consideration shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Except as
otherwise provided herein and subject to Section 3.1(d), each issued and
outstanding share of Company Common Stock shall be converted into the right
to receive $2.15 in cash per share without interest (the "MERGER
CONSIDERATION"), payable to the holder thereof upon surrender of the
certificate formerly representing such share of Company Common Stock in the
manner provided in Section 3.2. All such shares of Company Common Stock, when
so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate
previously representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificates in accordance with Section
3.2.
(d) SHARES OF DISSENTING HOLDERS.
(i) Notwithstanding any provision of this
Agreement to the contrary, each share of Company Common Stock (including each
share of Company Common Stock held by any holder of Class A Stock who has
converted his Class A Stock to Company Common Stock immediately upon approval
of the Merger by the Required Vote) held by a Dissenting Shareholder who has
demanded and perfected his demand for dissenters' rights with respect to such
shares in accordance with Sections 302A.471 and 302A.473 of the MBCA and as
of the Effective Time has neither effectively withdrawn nor lost such rights
shall not be converted into or represent a right to receive any of the Merger
Consideration for such shares pursuant to Section 3.1(c) above, but in lieu
thereof the holder thereof shall be entitled to only such rights as are
granted by the MBCA.
(ii) Notwithstanding the provisions of Section
3.1(d)(i) above, if any Dissenting Shareholder demanding dissenters' rights
with respect to such Dissenting Shareholder's Dissenting Shares under the
MBCA shall effectively withdraw or lose (through failure to perfect or
otherwise) his dissenters' rights, then as of the Effective Time or the
occurrence of such event, whichever later occurs, such Dissenting Shares
shall automatically be converted into and represent only the right to receive
the Merger Consideration as provided in Section 3.1(c) above upon surrender
of the certificate or certificates representing such Dissenting Shares.
(iii) The Company shall give Parent prompt
written notice of any demands by a Dissenting Shareholder for payment, or
notices of intent to demand payment received by the Company under Section
302A.473 of the MBCA and any withdrawal of such notice of intent to demand
payment
10
and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with
the prior written consent of Parent or as otherwise required by law, make any
payment with respect to, or settle, or offer to settle, any such demands.
3.2. PAYMENT; EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT; PAYMENT FUND. Prior to the Effective
Time, Parent shall designate a bank or trust company which shall be
reasonably satisfactory to the Company to act as paying agent in the Merger
(the "PAYING AGENT"), and on or prior to the Closing Date, Parent shall
deposit or cause to be deposited with the Paying Agent for the benefit of the
holders of the Company Common Stock (other than the Company and holders of
Dissenting Shares) cash in an amount necessary for the payment of the Merger
Consideration as provided in Section 3.1 upon surrender of certificates
representing shares of Company Common Stock as part of the Merger. Funds
deposited with the Paying Agent shall be invested by the Paying Agent as
directed by Parent or, after the Effective Time, the Surviving Corporation,
provided that such investments shall only be in obligations of or guaranteed
by the United States of America, or in certificates of deposit, bank
repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $100 million or in money market funds which are invested
solely in such permitted investments. Any interest earned on such funds shall
be for the benefit of the Surviving Corporation and the Parent may cause the
Paying Agent to remit any interest earned from time to time to the Surviving
Corporation. The Paying Agent shall, pursuant to irrevocable instructions
from Parent and the Surviving Corporation, use the funds deposited with the
Paying Agent to pay the holders of the Company Common Stock in accordance
with this Article III, and such funds shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
(the "CERTIFICATES"), whose shares were converted pursuant to Section 3.1
into the right to receive the Merger Consideration, (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 proper delivery of
the Certificates to the Paying Agent and shall be in such form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions to effect the surrender of the Certificates in exchange for
payment of the Merger Consideration. Upon surrender of one or more
Certificates for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, which agents shall be reasonably
satisfactory to the Company, together with such letter of transmittal, duly
executed, the holder of such Certificates shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate, and the Certificates so
surrendered shall forthwith be canceled. Except as required by law, no
interest shall be paid on the Merger Consideration payable upon surrender of
any Certificate. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form
for transfer and that the Person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.2, each Certificate (other than
Certificates representing Dissenting Shares) shall be deemed at any time
after the Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 3.2.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.
All cash paid upon the surrender of Certificates in accordance with the terms
of this Article III shall be deemed to have been
11
paid in full satisfaction of the rights pertaining to the shares of Company
Common Stock theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Paying Agent or the Surviving
Corporation, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article III.
(d) TERMINATION OF PAYMENT FUND. Any portion of the funds
held by the Paying Agent pursuant to this Section 3.2 which remain
undistributed to the holders of Company Common Stock for six months after the
Effective Time shall be delivered to the Surviving Corporation, upon demand,
and any holders of Company Common Stock who have not theretofore complied
with this Article III shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) for payment of
the Merger Consideration to which they are entitled.
(e) NO LIABILITY. None of Parent, the Company, the
Surviving Corporation or the Paying Agent shall be liable to any holder of
shares of Company Common Stock for any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which any
payment in respect thereof would otherwise escheat to or become the property
of any Governmental Authority), the payment in respect of such Certificates
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(f) WITHHOLDING RIGHTS. The Paying Agent or the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock such amounts as the Paying Agent or the Surviving
Corporation is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law, or any court order. To the extent that amounts are so withheld by the
Paying Agent or the Surviving Corporation, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Paying Agent or the Surviving Corporation.
(g) LOST CERTIFICATES. In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the holder claiming such Certificate to have been lost, stolen or
destroyed, the amount to which such holder would have been entitled under
Section 3.1 hereof but for failure to deliver such Certificate to the Paying
Agent shall nevertheless be paid to such holder, provided that the Surviving
Corporation may, in its sole discretion and as a condition precedent to such
payment, require such holder to give the Surviving Corporation a written
indemnity agreement in form and substance satisfactory to the Surviving
Corporation and a bond in such sum as it may reasonably direct as indemnity
against any claim that may be had against the Surviving Corporation with
respect to the Certificate alleged to have been lost, stolen or destroyed.
3.3. TREATMENT OF EMPLOYEE AND DIRECTOR OPTIONS; WARRANTS; CLASS A
STOCK; ACCRUED INTERESTS IN STOCK PURCHASE PLAN.
(a) Prior to the Effective Time, the Board of Directors
of the Company (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions reasonably necessary to
(i) provide for the cancellation, effective at the Effective Time, of all the
outstanding Options and Warrants, (ii) provide that immediately prior to the
Effective Time, each Option
12
and Warrant, whether or not then vested or exercisable, shall no longer be
exercisable but shall entitle each holder thereof (subject to applicable
withholding taxes), in cancellation and settlement therefor, to a cash
payment at the Effective Time equal to (x) the excess, if any, of the Merger
Consideration over the per share exercise price of each Option or Warrant
held by the holder, whether or not then vested or exercisable, multiplied by
(y) the number of shares of Company Common Stock subject to such Option or
Warrant; and (iii) provide that all Stock Option Plans and Warrant Agreements
will terminate as of or prior to the Effective Time.
(b) Prior to the Closing and upon approval of the Merger
by the Required Vote, the Company shall take all actions necessary to cause
the holders of Class A Stock to convert the Class A Stock to Company Common
Stock such that no shares of Class A Stock will be issued and outstanding at
the Effective Time.
(c) As provided herein, the Stock Option Plans, the
Warrant Agreements and any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock
of the Company or any subsidiary shall terminate as of the Effective Time.
The Company will take all action reasonably necessary to ensure that, as of
the Effective Time, none of Parent, the Company, the Surviving Corporation or
any of their respective subsidiaries is or will be bound by any Options,
other options, Warrants, warrants, rights or agreements which would entitle
any person, other than Parent or its affiliates, to own any capital stock of
the Company or the Surviving Corporation or any of their respective
subsidiaries or to receive any payment in respect thereof after the Effective
Time.
(d) On or prior to the Effective Time, the Company will
either (i) issue shares of Company Common Stock in exchange for the amount
contributed by employees to the Stock Purchase Plan and held for the issuance
of shares of Company Common Stock, in which case such shares of Company
Common Stock shall be entitled to the Merger Consideration provided in
Section 3.1(c) or (ii) with the consent of Parent, pay to such employees in
exchange for cancellation of all rights to the issuance of shares of Company
Common Stock under the Stock Purchase Plan, the amount of $1.087 for each
Company Common Share otherwise issuable under the Stock Purchase Plan and
refund to such employees the amount contributed ($1.063 per otherwise
issuable share) by employees under the Stock Purchase Plan and held by the
Company.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Sub and Parent to enter into this Agreement, the
Company hereby makes the following representations and warranties to Sub and
Parent except as otherwise set forth in a written disclosure schedule (the
"DISCLOSURE SCHEDULE") delivered by the Company to Sub and Parent:
4.1. ORGANIZATION AND CAPITALIZATION.
(a) ORGANIZATION. The Company is duly incorporated,
validly existing and in good standing under the laws of the State of
Minnesota and has full corporate power and authority to conduct its business
as it is presently being conducted and to own and lease its Assets. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is necessary
under applicable law except where the failure to be so qualified and in good
standing would not reasonably be expected to have a Material Adverse Effect
on the Company. The Company has, prior to the date hereof, delivered to
Parent true, correct and complete copies of its articles of incorporation and
by-laws (in each case, as amended to date).
13
(b) CAPITALIZATION. The authorized capital stock of the
Company consists of 25,000,000 shares of stock, of which 500,000 shares are
designated as Class A Stock. The issued and outstanding shares of Company
Common Stock as of the date hereof consist solely of 5,650,947 shares of
common stock, $0.05 par value. The issued and outstanding shares of Class A
Stock as of the date hereof consist solely of 444,445 shares of Class A Stock
and are held by FAMCO II, LLC. No shares of Company Common Stock or Class A
Stock that have been repurchased by the Company are subject to Encumbrances
created by the Company with respect to such shares. As of the date hereof,
each share of Class A Stock is convertible into 3.375 shares of Company
Common Stock. As of the date hereof, Options and Warrants to acquire
1,793,649 shares of Company Common Stock pursuant to the Stock Option Plans
and Warrant Agreements are outstanding and unexercised, 876,437 shares of
which are exercisable at a price that is less than the Merger Consideration.
The total payments under Section 3.3(a) will not exceed $830,256. Schedule
4.1(b) includes a complete and correct list of (i) outstanding Options under
such Stock Option Plans (including the name of each Person holding Options,
the number of shares of Company Common Stock issuable upon the exercise
thereof and the applicable exercise price of each such Option). The Company
has no outstanding bonds, debentures, notes or other securities the holders
of which have the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the shareholders of the Company
on any matter. All issued and outstanding shares of Company Common Stock and
Class A Stock (x) are duly authorized, validly issued, fully paid and
nonassessable, and were issued free of any preemptive or other similar rights
and (y) were issued in compliance with all applicable Laws, including federal
and applicable state securities laws. Except as set forth in this Section
4.1(b) and shares of Company Common Stock issuable under the Stock Purchase
Plan, there are no (i) outstanding Equity Securities of the Company or (ii)
commitments or obligations of any kind or character for (A) the issuance of
Equity Securities of the Company or (B) the repurchase, redemption or other
acquisition of any Equity Securities of the Company. Under the Company's
Stock Purchase Plan, the Company's employees have the right to purchase
shares of Company Common Stock at a price of $1.063 per share. As of
September 4, 1999, a total of $14,035.42 had been contributed to the Stock
Purchase Plan and is being held by the Company for future issuance of shares.
Upon the execution of this Agreement, the Company has closed the Stock
Purchase Plan for further contributions at the end of the payroll period
ending October 2, 1999. The Company estimates that the total amount that will
be contributed through October 2, 1999 to the Stock Purchase Plan will be
approximately $19,000. No shares of Company Common Stock or Class A Stock
have been repurchased by the Company since January 1, 1997.
(c) VOTING TRUSTS, PROXIES, ETC. Except as disclosed in
Schedule 4.1(c), there are no shareholder agreements, voting trusts, proxies
or other agreements or understandings with respect to or concerning the
purchase, sale or voting of the Company Common Stock or Class A Stock to
which the Company or, to the knowledge of the Company, any other Person is a
party or by which the Company or, to the knowledge of the Company, any other
Person is bound.
4.2. AUTHORIZATION. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Subject only to the approval of this Agreement and the
transactions contemplated hereby by the Required Vote of the Company's
shareholders, the consummation by the Company of the transactions
contemplated hereby has been duly authorized by all requisite corporate
action. This Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws
in effect which affect the enforcement of creditors' rights generally or (b)
general principles of equity.
14
4.3. SUBSIDIARIES.
(a) OWNERSHIP; CAPITALIZATION. Schedule 4.3(a) sets forth
a list of each Subsidiary of the Company including the jurisdiction of
organization, the number of shares of authorized capital stock, the par value
of such stock, and the number of shares which are issued and outstanding.
Except as indicated on Schedule 4.3(a), all of the issued and outstanding
shares of each Subsidiary's capital stock are owned of record and
beneficially by the Company or another wholly-owned Subsidiary of the
Company, free and clear of any Encumbrances. All of the shares of capital
stock of each Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable, were issued and sold in accordance with
federal and applicable state and foreign securities laws and were not issued
in violation, of any preemptive or other similar rights. Except for the
shares of capital stock of the Subsidiaries owned by the Company or a
wholly-owned Subsidiary of the Company, or as otherwise indicated on Schedule
4.3(a), there are no (i) outstanding Equity Securities of the Company's
Subsidiaries or (ii) commitments or obligations of any kind or character for
(A) the issuance of Equity Securities of the Company's Subsidiaries or (B)
the repurchase, redemption or other acquisition of any Equity Securities of
the Company's Subsidiaries. There are no shareholder agreements, voting
trusts, proxies or other agreements or understandings with respect to or
concerning the purchase, sale or voting of the Equity Securities of the
Company's Subsidiaries. Except for the Equity Securities of the Company's
Subsidiaries described on Schedule 4.3(a), neither the Company nor its
Subsidiaries own Equity Securities in any Person.
(b) ORGANIZATION. Each of the Company's Subsidiaries is
duly incorporated as organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has full corporate
power and authority to conduct its business as it is presently being
conducted and to own and lease its Assets. Each of the Company's Subsidiaries
is duly qualified to do business as a foreign corporation or other entity and
is in good standing in each jurisdiction in which such qualification is
necessary under applicable law except where the failure to be so qualified
and in good standing would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company has delivered to Parent true,
correct and complete copies of each of its Subsidiaries' articles of
incorporation and by-laws or other organizational documents (in each case, as
amended to date).
4.4. NO CONFLICT. Except as set forth in Schedule 4.4, the
execution and delivery of this Agreement by the Company and the consummation
of the transactions contemplated hereby does not and will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of incorporation
or bylaws (or other comparable organizational documents) of the Company or
any of its Subsidiaries;
(b) subject to obtaining the consents, approvals and
actions, making the filings and giving the notices disclosed in Schedule 4.4,
conflict with or result in a violation or breach of any term or provision of
any Law applicable to the Company or any of its Subsidiaries or any of their
respective Assets; or
(c) (i) conflict with or result in a violation or breach
of, (ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) require the Company or any Subsidiary to obtain any
consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of, (iv) result in or give to any
Person any right of termination, cancellation, acceleration or modification
in or with respect to, or (v) result in the creation or imposition of any
Encumbrance upon the Company or any of its Subsidiaries or any of their
respective Assets under, any Material Contract or any material Permits to
which the Company or any of its Subsidiaries is a party or by which any of
their respective Assets is bound, except where such conflict, violation,
default, consent,
15
termination, cancellation, acceleration or modification, or Encumbrance would
not reasonably be expected to have a Material Adverse Effect on the Company.
4.5. SEC DOCUMENTS.
(a) Since January 1, 1997, the Company has timely filed
with the SEC all reports, schedules, forms, statements and other documents
required to be filed (such reports, schedules, forms, statements and other
documents are hereinafter referred to as the "SEC DOCUMENTS").
(b) As of their respective dates, the SEC Documents
complied with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents as
of such dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) The consolidated financial statements of the Company
and its Subsidiaries included in the SEC Documents (the "FINANCIAL
STATEMENTS") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except in the case of unaudited
statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (on the basis stated
therein and subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments).
4.6. COMPLIANCE WITH HEALTH CARE LAWS.
(a) The operations of the Company and its Subsidiaries
are, and at all relevant times have been, in compliance in all material
respects with all laws and regulations of the United States Food and Drug
Administration (the "FDA") and all state and foreign agencies which have
jurisdiction over their products including without limitation the FDA's Good
Manufacturing Practices Regulations. Except as set forth in Schedule 4.6, the
Company is not aware of any actual or threatened enforcement action by the
FDA or state, foreign or independent agencies which have jurisdiction over
its medical products concerning its products, including, without limitation,
any fines, injunctions, civil or criminal penalties, recalls, seizures,
detentions, investigations or suspensions. All products of the Company and
its Subsidiaries are in compliance with all applicable premarketing, facility
registration and product listing requirements, as well as all applicable
manufacturing laws, regulations, standards and procedures of the FDA and
applicable state, foreign or independent authorities, including the
International Standards Organization. Each product manufactured or marketed
by the Company and its Subsidiaries with respect to which a determination is
required has been determined by the FDA to be substantially equivalent to a
similar device marketed prior to May 28, 1976, and is therefore marketed
pursuant to Section 510(k) of the Medical Devices Amendments of 1976. Except
for the CardiO(2) product, each product manufactured or marketed by the Company
or its Subsidiaries for sale in countries where the CE Xxxx is required is
eligible to display the CE Xxxx. All manufacturing and development processes
of the Company and its Subsidiaries have received, and continue to remain
eligible to receive, ISO 9001 certification.
(b) The Company and its Subsidiaries possess such
certificates, authorizations, licenses or permits issued by the appropriate
local, state, federal or foreign regulatory agencies or bodies including,
without limitation, the FDA, as are material to, or legally required for, the
operation of its business. The Company has not received any notice of
proceedings relating to, or otherwise has
16
knowledge that any governmental body or agency is considering, limiting,
suspending, modifying or revoking any such certificate, authorization,
license or permit.
(c) All material reports, documents, claims and notices
required to be filed, maintained, or furnished to any governmental agency by
the Company have been so filed, maintained or furnished. Except as set forth
on Schedule 4.6(c), all such reports, documents, claims and notices were
complete and correct, including having met insurance coverage and medical
necessity requirements, in all material respects on the date filed (or were
corrected in or supplemented by a subsequent filing) such that no liability
exists with respect to such filing.
(d) Neither the Company and its Subsidiaries nor its
officers, directors or managing employees have engaged in any activities
which are prohibited under federal or state criminal or civil laws (including
without limitation the federal Anti-Kickback statute, Xxxxx law and federal
False Claims Act and any state laws prohibiting kickbacks or certain
referrals), or the regulations promulgated pursuant to such laws.
4.7. UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.7,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations (whether absolute or contingent, liquidated or unliquidated, or
due or to become due) of a type normally reflected or reserved for on a
balance sheet prepared in accordance with GAAP or disclosed in the notes
thereto, except for liabilities and obligations (i) reflected or reserved for
on the June 30 Balance Sheet or disclosed in the notes thereto or (ii) that
have arisen since the date of the June 30 Balance Sheet Date in the ordinary
course of the operation of business and consistent with past practice of the
Company and its Subsidiaries, which would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect on the
Company.
4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the June 30
Balance Sheet Date, except as disclosed on Schedule 4.8, there has not been
any:
(a) condition or event that has resulted in, or which the
Company reasonably believes will result in, a Material Adverse Change in
respect of the Company and its Subsidiaries, taken as a whole;
(b) (i) except for normal periodic increases in the
ordinary course of business consistent with past practice, increase in the
compensation payable or to become payable by the Company or any of its
Subsidiaries to any of their respective Personnel, (ii) bonus, incentive
compensation, service award or other like benefit granted, made or accrued,
contingently or otherwise, for or to the credit of any of the Personnel,
except in the ordinary course of business consistent with past practices,
(iii) employee welfare, pension, retirement, profit-sharing or similar
payment or arrangement made or agreed to by the Company or any of its
Subsidiaries for any Personnel except pursuant to the existing plans and
arrangements described in the Disclosure Schedule or (iv) new employment
agreement to which the Company or any of its Subsidiaries is a party;
(c) addition to or modification of the Employee Plans
other than (i) contributions made in accordance with the normal practices of
the Company and its Subsidiaries or (ii) the extension of coverage to other
Personnel who became eligible after June 30 Balance Sheet Date;
(d) sale, assignment or transfer of any material Assets
of the Company or its Subsidiaries other than in the ordinary course of
business;
(e) cancellation of any Indebtedness or waiver of any
rights of substantial value to the Company or any Subsidiary, whether or not
in the ordinary course of business;
17
(f) amendment, cancellation or termination of any
Material Contract, material Permit or other instrument material to the
Company or any of its Subsidiaries;
(g) capital expenditure or the execution of any Lease or
any incurring of liability for such capital expenditure or lease by the
Company or any of its Subsidiaries, involving payments in excess of $50,000;
(h) failure to operate the business of the Company and
its Subsidiaries in the ordinary course in any material respect so as to use
reasonable efforts to preserve the business of the Company and its
Subsidiaries intact, to keep available the services of the Personnel, and to
preserve the goodwill of the Company's suppliers, customers and others having
business relations with the Company or its Subsidiaries;
(i) change in accounting methods or practices by the
Company or any of its Subsidiaries;
(j) revaluation by the Company or any of its Subsidiaries
of any of their respective Assets, including without limitation, writing off
notes or accounts receivable other than in the ordinary course of business in
the reasonable judgment of the Company;
(k) damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the Assets, properties or
business of the Company or any of its Subsidiaries;
(l) Indebtedness incurred by the Company for borrowed
money or any commitment to incur Indebtedness entered into by the Company, or
any loans made or agreed to be made by the Company other than Indebtedness
incurred under the Company's line of credit with Norwest Bank Minnesota, N.A.
in the ordinary course to finance the Company's working capital;
(m) declaration, setting aside for payment or payment of
dividends or distributions in respect of any Equity Securities of the Company
or any redemption, purchase or other acquisition of any of the Company's or
its Subsidiaries' Equity Securities;
(n) issuance or reservation for issuance by the Company
or its Subsidiaries of, or commitment to issue or reserve for issuance of,
any Equity Securities of the Company or any of its Subsidiaries other than
the issuance of Company Common Stock to any Person exercising Options or
Warrants or the issuance of Company Common Stock pursuant to the Stock
Purchase Plan or to the holder of Class A Stock converting his Class A Stock;
or
(o) any agreement by the Company or any of its
Subsidiaries to do any of the foregoing.
4.9. CONTRACTS; NO DEFAULTS.
(a) Schedule 4.9(a) contains a listing of all Contracts
described in (i) through (xiv) below to which the Company or any of its
Subsidiaries is a party (each, a "MATERIAL CONTRACT"). True, correct and
complete copies of the Material Contracts have been delivered to Parent.
(i) Each Contract which involves (A) performance
of services or delivery of goods and/or materials by the Company or any of
its Subsidiaries of an amount or value in excess of $200,000 or (B)
performance of services for or delivery of goods and/or materials to the
Company or any of its Subsidiaries of an amount or value in excess of
$100,000;
18
(ii) Each note, debenture, other evidence of
Indebtedness, guarantee, loan, letter of credit, surety-bond or financing
agreement or instrument or other contract for money borrowed, including any
agreement or commitment for future loans, credit or financing, except for
extended payments to vendors which do not extend beyond March 31, 2000;
(iii) Each Lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property having annual rental
payments in excess of $50,000;
(iv) Each material licensing agreement or other
Contract with respect to any Intellectual Property, including agreements with
current or former employees, consultants or contractors regarding the
appropriation or the nondisclosure of Intellectual Property;
(v) Each Contract to which the Company or any of
its Subsidiaries (or to the knowledge of the Company, any of their respective
employees) is bound that (A) restricts the freedom of the Company or any of
its Subsidiaries (or, if applicable any of their respective employees) to
engage in any line of business or to compete with any other Person, or (B)
assign to any other Person rights to any material invention, improvement, or
discovery;
(vi) Each employment or severance agreement with
any employee or former employee which may not be terminated at will, or by
giving notice of 30 days or less, without cost or penalty, and each
collective bargaining agreement or other Contract to or with any employee or
any labor union or other employee representative of a group of employees
relating to wages, hours, and other conditions of employment;
(vii) Each joint venture Contract, partnership
agreement, limited liability company or other Contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the Company
or any of its Subsidiaries with any other Person;
(viii) Each Contract containing covenants which
restricts the Company's or any of its Subsidiaries' business activity or
limits the freedom of the Company or any of its Subsidiaries to engage in any
line of business or to compete with any Person;
(ix) Each Contract providing for payments to or
by any Person or entity based on sales, purchases or profits, other than
direct payments for goods;
(x) Each power of attorney which is currently
effective and outstanding;
(xi) Each Contract providing for capital
expenditures after the date hereof in an amount in excess of $50,000;
(xii) Each written warranty, guaranty or other
similar undertaking with respect to contractual performance extended by the
Company or any of its Subsidiaries other than in the ordinary course of
business;
(xiii) Any other Contract material to the business
or operations of the Company or its Subsidiaries; and
(xiv) Each amendment, supplement, and modification
(whether written or oral) in respect of any of the foregoing.
19
(b) Except as set forth on Schedule 4.9(b), each of the
Material Contracts (i) is in full force and effect, (ii) represents the
legally valid and binding obligations of the Company or the Subsidiary of the
Company party thereto and are enforceable against the Company or such
Subsidiary in accordance with their terms and (iii) to the knowledge of the
Company, represents the legally valid and binding obligations of the other
parties thereto and are enforceable against such parties in accordance with
their terms. Except as set forth on Schedule 4.9(b), no condition exists or
event has occurred which, with notice or lapse of time or both, would
constitute a default or a basis for force majeure or the claim of excusable
delay or nonperformance under any of the Material Contracts except where such
condition or event would not reasonably be expected to have a Material
Adverse Effect on the Company.
(c) Except as set forth on Schedule 4.9(c) neither the
Company nor any of its Subsidiaries has committed any act or omission which
would result in, and there has been no occurrence which would give rise to,
any material product liability or material liability for breach of warranty
on the part of the Company or any of its Subsidiaries under any of the
Material Contracts. Except as set forth on Schedule 4.9(c), no consent of any
party to any Material Contract is required in connection with the execution
and delivery by the Company under this Agreement or the consummation of the
transactions contemplated hereby.
4.10. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
4.10 or described in the SEC Documents, there are no Contracts, agreements,
arrangements or understandings of any kind between any Affiliate of the
Company (other than any wholly-owned Subsidiary of the Company), on the one
hand, and the Company or any of its Subsidiaries, on the other hand.
4.11. MACHINERY AND EQUIPMENT AND OTHER PROPERTY. Except as set
forth on Schedule 4.11, the Company or one of its Subsidiaries owns and has
good and marketable title to the machinery, equipment, tools, spare parts,
furniture, automobiles and other tangible personal property reflected on the
books of the Company and its Subsidiaries as of the date hereof as owned by
the Company or its Subsidiaries (the "MACHINERY AND EQUIPMENT"), free and
clear of all Encumbrances other than Permitted Encumbrances. The Machinery
and Equipment, taken as a whole, are in good operating condition and repair
(subject to normal wear and tear) and are suitable for the purposes for which
they are presently or have historically been used. Except as otherwise
contemplated by this Agreement, the Company and its Subsidiaries owns, or, in
the case of leases and licenses, has valid and subsisting leasehold interests
or licenses in, all of the material properties and assets of whatever kind
(whether real or personal, tangible or intangible) used in its business, in
each case free and clear of any Encumbrances other than Permitted
Encumbrances. Such properties and assets constitute all properties and assets
necessary to conduct the business of the Company and its Subsidiaries, as
currently conducted.
4.12. INTELLECTUAL PROPERTY. Schedule 4.12 lists all of the patents,
trademarks, service marks, trade dress, logos, trade names, copyrights, mask
works and pending applications (the foregoing, together with all material
know-how, invention disclosures, trade secrets, confidential information,
software, technical information, process technology, plans, drawings and blue
prints being hereinafter collectively referred to as the "INTELLECTUAL
PROPERTY") in which the Company or any of its Subsidiaries has any interest.
The Material Contracts listed on Schedule 4.9 include all license or
sublicense agreements with respect to any Intellectual Property to which the
Company or any of its Subsidiaries is a party and which is material to the
business and operations of the Company or any of its Subsidiaries as
presently being conducted or contemplated. Except as set forth on Schedule
4.12, the Company or one or more of its Subsidiaries owns each item of
Intellectual Property, free and clear of any Encumbrances other than
Permitted Encumbrances, and no other Person has the right to use such
Intellectual Property other than pursuant to the Contracts listed on Schedule
4.9. Except as set forth on Schedule 4.12, the Company and its Subsidiaries'
use of the Intellectual Property is not infringing upon or otherwise
violating the rights of any other Person and, to the knowledge of the
Company, no other Person is infringing or otherwise
20
violating the rights of the Company or any of its Subsidiaries in or to any
material Intellectual Property. The Company and its Subsidiaries have not
been charged, nor to their knowledge is the Company or any of its
Subsidiaries threatened to be charged with infringement of any unexpired
patent, trademark, trade name, service xxxx, copyright or other proprietary
right of any Person. No claim has been asserted by a Person, nor to the
Company's knowledge is a claim threatened to be asserted by a Person,
challenging or questioning the validity, enforceability or effectiveness of
the Intellectual Property or any license or sublicense agreements to which
the Company or any of its Subsidiaries is a party. No Person has a right to
royalty or similar payment with respect to the Intellectual Property. The
Company and its Subsidiaries own or have the right to use pursuant to a valid
license, sublicense, agreement or permission all items of Intellectual
Property used in the operation of the business of the Company and its
Subsidiaries, as has been or is presently conducted. The consummation of the
transactions contemplated hereby will not alter or impair any of the
Intellectual Property. The Company has delivered to Parent true, correct and
complete copies of each agreement, registration, application and other
documents relating to the Intellectual Property.
4.13. REAL PROPERTY.
(a) Schedule 4.13 describes and lists the name of the
record owner of all real property now leased or licensed for use by the
Company or any of its Subsidiaries (the "LEASED REAL PROPERTY"). The Company
or one of its Subsidiaries has a valid leasehold interest in, and enjoys
peaceful and undisturbed possession of, all Leased Real Property, in each
case free and clear of all Encumbrances except for Permitted Encumbrances.
Except as set forth on Schedule 4.13 there are no leases, subleases,
licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral granting to any Person the right
to purchase, use or occupy any of the Leased Real Property. The Leased Real
Property is all of the real property used in the business of the Company and
its Subsidiaries as currently conducted and neither the Company or any
Subsidiary owns or has owned any Real Property.
(b) All Improvements owned, leased, or used by the
Company or its Subsidiaries on the Leased Real Property are in good condition
and repair in all material respects (normal wear and tear excepted), and such
Improvements are free from material structural defects. The Company or its
Subsidiaries has obtained Permits from any Governmental Authority having
jurisdiction over any of the Leased Real Property, and any agreement,
easement or other right from any other Person, necessary to permit the lawful
use and operation of the Improvements and the Leased Real Property or any
driveways, roads and other means of egress and ingress to and from any of the
Leased Real Property and each such Permit, agreement, easement or other right
is in full force and effect, and there is no pending, or to the knowledge of
the Company threatened proceeding which could result in the modification or
cancellation thereof except, in each case, for deviations from the foregoing
which would not reasonably be expected to materially impair the continued use
of such Lease Real Property for the use currently being made thereof. No
Improvement, or the operation or maintenance thereof, violates any
restrictive covenant, or encroaches on any property owned or leased by any
other Person, which would reasonably be expected to materially impair the
continued use of such Leased Real Property by the Company and its
Subsidiaries for the use currently being made thereof.
(c) The Leased Real Property and the Improvements are
sufficiently supplied in all material respects with utilities and other
services as necessary for the operation of such Leased Real Property and
Improvements as currently operated including adequate water, storm and
sanitary sewer, gas, electric, cable and telephone facilities, all of which
run through public rights-of-way or perpetual private easements.
(d) Neither the Company nor any of its Subsidiaries has
received notice of any special assessment relating to any Leased Real
Property or any portion thereof, and no such special
21
assessment is pending or, to the knowledge of the Company, threatened. There
are no pending or, to the knowledge of the Company, threatened condemnation
proceedings with respect to any of the Leased Real Property.
4.14. LITIGATION AND PROCEEDINGS. Except as set forth on Schedule
4.14, there are no lawsuits, actions, suits, claims or other proceedings at
law or in equity or, to the knowledge of the Company, investigations
(including, investigations by any Governmental Authority wherein a claim for
improper charges was made), before or by any Governmental Authority or before
any arbitrator pending or, to the knowledge of the Company, threatened,
against the Company or any of its Subsidiaries. Except as set forth on
Schedule 4.14 there is no unsatisfied judgment, order, injunction or decree
binding upon the Company or any of its Subsidiaries.
4.15. EMPLOYEE BENEFIT PLANS.
(a) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS
AND OTHER INFORMATION. Schedule 4.15 contains a complete list of Employee Plans.
The Company has delivered to Parent a true and complete set of copies of (a) all
Employee Plans and related trust agreements, annuity contracts or other funding
instruments; (b) the latest Internal Revenue Service determination letter
obtained with respect to any such Employee Plan qualified or exempt under
Section 401 or 501 of the Code; (c) Forms 5500 and certified financial
statements for the most recently completed three fiscal years for each Employee
Plan required to file such form, together with the most recent actuarial report,
if any, prepared by the Employee Plan's enrolled actuary; (d) all summary plan
descriptions for each Employee Plan required to prepare, file and distribute
summary plan descriptions for the most recently completed five fiscal years; (e)
all final documents furnished employees, officers and directors of the Company
and its Subsidiaries of all incentive compensation, other plans and fringe
benefits for which a summary plan description is not required during the most
recently completed five fiscal years; (f) current registration statements on
Form S-8 and amendments thereto with respect to any Employee Plan; (g) the forms
of notification given to employees of their rights under Section 4980B of the
Code during the most recently completed five fiscal years; and (h) the report
prepared in connection with any compliance audit undertaken with respect to any
Employee Plan.
(b) REPRESENTATIONS. Except as set forth in Schedule
4.15:
(i) PENSION PLANS
(A) No Pension Plan is subject to the
provisions of Part 3 of Title I, Subtitle B of ERISA, and neither the
Company nor any ERISA Affiliate has any liability to any such Pension
Plan. Neither the Company nor any ERISA Affiliate has any liability for
unpaid contributions with respect to any Pension Plan (other than
matching contributions for April through December 31, 1999 and
subsequent periods to the Medical Graphics Corporation 401(k) Savings
Plan.
(B) Each Pension Plan which is intended
to be qualified under Section 401(a) of the Code and each related trust
agreement, annuity contract or other funding instrument has been
determined by the Internal Revenue Service to be qualified and
tax-exempt under the provisions of Sections 401(a) and 501(a) of the
Code.
(C) Except for law changes the
remediation time period for which has not as of the Closing Date
expired, each Pension Plan and each related trust agreement, annuity
contract or other funding instrument is in material compliance with its
terms and, both as to form and in operation, with the requirements
prescribed by any and all statutes, orders, rules
22
and regulations which are applicable to such plans, including
without limitation ERISA and the Code.
(D) Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an
entity that has engaged in, a transaction which is described in Section
4069 of ERISA. Neither the Company nor any ERISA Affiliate has, at any
time, (1) ceased operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA, (2) withdrawn as a
substantial employer so as to become subject to the provisions of
Section 4063 of ERISA, or (3) ceased making contributions on or before
the Closing Date to any Pension Plan subject to Section 4064(a) of
ERISA to which the Company or any ERISA Affiliate made contributions
during the prior six years.
(ii) MULTIEMPLOYER PLANS. There are no
Multiemployer Plans, and neither the Company nor any ERISA Affiliate has ever
maintained, contributed to, participated or agreed to participate in a
Multiemployer Plan.
(iii) WELFARE PLANS.
(A) Each Welfare Plan which covers or
has covered employees or former employees of the Company, its
Subsidiaries or any ERISA Affiliate (with respect to their relationship
with such entities) has been maintained, and presently is, in material
compliance with its terms and, both as to form and operation, with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Welfare Plan, including
without limitation ERISA and the Code.
(B) None of the Company, any ERISA
Affiliate or any Welfare Plan has any present or future obligation to
make any payment to, or with respect to any present or former employee
of the Company or any ERISA Affiliate following termination of
employment pursuant to, any retiree medical benefit plan, or other
Welfare Plan except as required by Part 6 of Title I, Subtitle B of
ERISA (or a comparable state law), and, except as set forth in the
terms of the Plan or under applicable law, no condition exists which
would prevent the Company from amending or terminating any such benefit
plan or Welfare Plan.
(C) Each Welfare Plan which is a "group
health plan," as defined in Section 607(1) of ERISA, has been operated
in material compliance with the provisions of Part 6 of Title I,
Subtitle B of ERISA and Section 4980B of the Code at all times.
(iv) BENEFIT ARRANGEMENTS. Each Benefit
Arrangement is in material compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Benefit Arrangement, including without limitation the Code.
Except as set forth on Schedule 4.15 and except as provided by law, the
employment of all persons presently employed or retained by the Company and its
Subsidiaries is terminable at will.
(v) FIDUCIARY DUTIES AND PROHIBITED
TRANSACTIONS. Neither the Company nor any of its Subsidiaries or ERISA
Affiliates, nor, to the knowledge of the Company, any fiduciary of any Welfare
Plan or Pension Plan has any liability with respect to any transaction in
violation of Sections 404 or 406 of ERISA or any "prohibited transaction," as
defined in Section 4975(c)(1) of the Code, for which no exemption exists under
Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code. Neither the
Company nor any of its Subsidiaries or ERISA Affiliates has knowingly
participated in a violation of Part 4 of Title 1, Subtitle B of ERISA by any
plan fiduciary of any Welfare Plan or Pension Plan or has any unpaid civil
penalty under Section 502(l) of ERISA.
23
(vi) LITIGATION. There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitrator's action, governmental audit or investigation relating to
or seeking benefits under any Employee Plan that is pending, threatened or
anticipated against the Company or any ERISA Affiliate other than routine claims
for benefits. There is no filing pending under any compliance program maintained
by the Internal Revenue Service with respect to any Pension Plan (E.G., VCR
Program).
(vii) UNPAID CONTRIBUTIONS, UBIT. Neither the
Company nor any ERISA Affiliate has any liability for unpaid contributions with
respect to any Pension Plan, Multiemployer Plan or Welfare Plan. The Company or
an ERISA Affiliate has made all required contributions under each Employee Plan
for all prior periods or proper accruals have been made and are reflected on the
appropriate balance sheet and books and records of the Company. No Employee Plan
is subject to any tax under Section 511 of the Code.
(viii) PARACHUTE PAYMENTS. Except for those listed
in Schedule 4.15., there is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, provides for the payment by the Company or any if
its Subsidiaries of any amount (i) that is not deductible under Section
162(a)(1) or 404 of the Code or (ii) that is an "excess parachute payment"
pursuant to Section 280G of the Code.
(ix) NO AMENDMENTS. Except for changes required
by changes in law, the remediation time period for which has not as of the
Closing Date expired, neither the Company nor any ERISA Affiliate has any
announced plan or legally binding commitment to create any additional Employee
Plans which are intended to cover employees or former employees of the Company
or any of its Subsidiaries or to amend or modify any existing Employee Plan
which covers or has covered employees or former employees of the Company or any
of its Subsidiaries.
(x) NO OTHER MATERIAL LIABILITY. No event has
occurred in connection with which the Company or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any material
liability (A) under any statute, regulation or governmental order relating to
any Employee Plans or (B) pursuant to any obligation of the Company or any ERISA
Affiliate to indemnify any person against liability incurred under any such
statute, regulation or order as they relate to the Employee Plans.
(xi) NO ACCELERATION OR CREATION OF RIGHTS.
Except for those listed in Schedule 4.15., neither the execution and delivery of
this Agreement by the Company and its Subsidiaries nor the consummation of the
transactions contemplated hereby will result in the acceleration or creation of
any rights of any person to benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting or exercisability of any stock
options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement).
4.16. LABOR RELATIONS. Except as set forth on Schedule 4.16, neither
the Company nor any of its Subsidiaries has entered into any severance or
similar arrangement in respect of any present employee of the Company or any of
its Subsidiaries that will result in any obligation (absolute or contingent) of
Parent, Sub, the Company or any of the Company's Subsidiaries to make any
payment to any present employee of the Company or any of its Subsidiaries
following termination of employment or upon a change of control of the Company.
Except as set forth on Schedule 4.16, neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practice and there are no
complaints against the Company or any of its Subsidiaries pending before the
National Labor Relations Board or any similar state or local labor agency by or
on behalf of any employee of the Company or any of its Subsidiaries. Except as
disclosed on Schedule 4.16, there are no representation questions, arbitration
proceedings, labor strikes,
24
slow downs or stoppages, grievances or other labor disputes pending or, to
the knowledge of the Company, threatened with respect to the employees of the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has experienced any attempt by organized labor to cause the
Company or any of its Subsidiaries to comply with or conform to demands of
organized labor relating to its employees. Except as disclosed on Schedule
4.16 the Company and its Subsidiaries have complied in all material respects
with all laws, rules and regulations relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health and plant closings (hereinafter collectively
referred to as the "EMPLOYMENT LAWS"). Neither the Company nor any of its
Subsidiaries is liable for the payment of material fines, penalties or other
material liabilities, however designated, for failure to comply with any of
the foregoing Employment Laws.
4.17. LEGAL COMPLIANCE. Except as set forth on Schedule 4.17, (i)
neither the Company nor any of its Subsidiaries is, or at any time during the
past three years has been, in material violation of or in material default
under any Law applicable to the Company or any of its Subsidiaries or any of
their respective Assets, (ii) no action, proceeding, charge, complaint,
claim, demand, notice or, to the best knowledge of the Company,
investigation, has been filed or commenced against the Company or any
Subsidiary alleging any such violation or default, nor to the knowledge of
the Company are any such actions threatened, and (iii) neither the Company
nor any of its Subsidiaries has, during the past three years, to its
knowledge conducted any internal investigation with respect to any actual,
potential or alleged material violation of any Law by the Company, its
Subsidiaries or any of their employees, officers, directors or agents.
4.18. ENVIRONMENTAL MATTERS. Except as otherwise disclosed in
Schedule 4.18:
(a) (i) The Company and its Subsidiaries are, and at all
times have been, in compliance with all Environmental Laws, (ii) the Company
and its Subsidiaries hold, and at all times have held, all Permits required
under Environmental Laws for the operation of their business, and (iii) to
the Company's knowledge, no modification or change to the operations of the
business will be required upon renewal of any such Permits.
(b) (i) There are no Environmental Claims pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, (ii) there are no writs, injunctions, decrees, orders or
judgments outstanding, or, to the knowledge of the Company, threatened
relating to compliance with or liability under any Environmental Law, and
(iii) neither the Company nor any of its Subsidiaries has any liability under
any Environmental Law.
(c) There has been no spill, discharge, or release of
Hazardous Substances on or from, and there are no other Environmental
Conditions relating to, any current or, to the knowledge of the Company,
former property owned, leased or used by the Company or any of its
Subsidiaries that could reasonably be expected to result in (i) any
investigation or remedial action by any Governmental Authority pursuant to
any Environmental Law or (ii) any other Environmental Claim.
(d) No current or former property owned, leased or used
by the Company or its Subsidiaries or to which the Company or its
Subsidiaries transported or arranged for the transportation of any Hazardous
Substances is listed or proposed for listing on the National Priorities List
promulgated pursuant to the Comprehensive Environmental Response Cleanup and
Liability Act ("CERCLA"), on CERCLIS (as defined in CERCLA) or on any similar
foreign, federal or state list of sites requiring investigation or
remediation.
25
(e) There are no structures, improvements, equipment,
activities, fixtures or facilities on any property owned, leased or used by the
Company that are constructed with, use or otherwise contain radioactive
materials, asbestos-containing materials, lead, urea formaldehyde or that are
contaminated by polychlorinated biphenyls, (ii) there are no underground storage
tanks, or underground piping associated with such tanks, that do not have a full
secondary containment system in place, and (iii) there are no abandoned
underground storage tanks that have not been either abandoned in place or
removed pursuant to a permit or approval issued by a Governmental Authority.
(f) There are no liens, restrictive covenants or other
land use restrictions under Environmental Laws on any of the properties
owned, leased or used by the Company or its Subsidiaries, and no government
actions have been taken or, to the Company's knowledge, are threatened that
could subject any of such properties to such liens, restrictive covenants or
other land use restrictions, and neither the Company nor its Subsidiaries are
required to place any notice or restriction relating to Hazardous Substances
in any deed to such property.
(g) Neither the Company nor any of its Subsidiaries has
released any Person or waived any rights or defenses with respect to any
Environmental Claim or Environmental Conditions.
(h) There is no Environmental Report in the possession or
control of the Company relating to the current or prior business of the
Company or its Subsidiaries that has not been delivered to the Parent.
4.19. TAXES. Except as otherwise disclosed in Schedule 4.19:
(a) All federal, state, local, and foreign tax returns of
the Company and its Subsidiaries and of each consolidated or affiliated group
which any of the Company or any of its Subsidiaries is or has been a part
("TAX RETURNS"), including those Tax Returns relating to Taxes due from
and/or withheld by or required to be withheld by any of the Company and its
Subsidiaries and of each consolidated or affiliated group which any of the
Company or any of its Subsidiaries have been a part, have been duly and
timely filed and are correct and complete.
(b) All Taxes or estimates thereof that are due from a
Taxpayer, or are claimed or asserted by any taxing authority to be due, have
been timely and appropriately paid so as to avoid penalties for underpayment.
(c) None of the Tax Returns has been audited or is being
audited by any taxing authority.
(d) No assessment, audit or other proceeding by any
taxing authority, court, or other Governmental Authority is proposed, pending,
or, to the knowledge of the Company, threatened with respect to the Tax Returns
or Taxes owed or alleged to be owed by a Taxpayer.
(e) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitations applicable to any
claim for or the period for the collection or assessment of Taxes due from a
Taxpayer for any taxable period.
(f) All positions taken on federal Tax Returns that could
give rise to a penalty for substantial understatement pursuant to Section
6662(d) of the Code have been disclosed on such Tax Returns.
26
(g) Neither the Company nor any of its Subsidiaries is a
foreign person within the meaning of Section 1445(f)(3) of the Code.
(h) No consent to the application of Section 341(f)(2) of
the Code (or any predecessor thereof) has been made or filed by or with respect
to any of the Company or its Subsidiaries or any of their Assets. None of the
Assets secures any Indebtedness, the interest on which is tax-exempt under
Section 103(a) of the Code or is an asset or property that Sub, Parent, the
Surviving Corporation or any of their Affiliates is or will be required to treat
as being (i) owned by any other Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954 as amended, and in effect
immediately before the enactment of the Tax Reform Act of 1986, or (ii)
tax-exempt use property within the meaning of Section 168(h)(1) of the Code.
(i) No closing agreement pursuant to Section 7121 of the
Code (or any predecessor provision) or any similar provision of any state,
local, or foreign law has been entered into by or with respect to the Company or
any of its Subsidiaries or any of their Assets.
(j) Neither the Company nor any of its Subsidiaries has
agreed to or is required to make any adjustment pursuant to Section 481(a) of
the Code (or any predecessor provision) by reason of any change in any
accounting method of the Company or its Subsidiaries, neither the Company nor
any of its Subsidiaries has any application pending with any taxing authority
requesting permission for any changes in any accounting method of the Company or
any of its Subsidiaries, and the Internal Revenue Service has not proposed any
such adjustment or change in accounting method therefor.
(k) The Company has previously made available to Parent
true, correct and complete copies of each of the United States federal, state,
local and foreign income Tax Returns for its most recent taxable year, filed by
the Company and the Subsidiaries or (insofar as such returns relate to any of
the Company or the Subsidiaries) filed by any affiliated or consolidated group
of which the Company or any such Subsidiary was then a member.
(l) None of the Company or the Subsidiaries has been or
is in violation (or with notice or lapse of time or both, would be in violation)
of any applicable law relating to the payment of withholding of Taxes. The
Company and the Subsidiaries have duly and timely withheld from salaries, wages
and other compensation and paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws.
(m) None of the Company or the Subsidiaries is a party
to, is bound by, or has any obligation under any Tax sharing agreement or
similar agreement and no such agreement shall be entered into or amended by the
Company or the Subsidiaries at or prior to the Closing.
(n) No "excess loss account" or "deferred intercompany
gain" (as such terms are described in Treasury Regulation Section 1.1502) exist
for, between or with respect to the Company and its Subsidiaries.
(o) Neither the Company nor any of its Subsidiaries is
partner in any partnership.
(p) None of the Company or any of its Subsidiaries has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(q) None of the Company nor any of its Subsidiaries (A)
has been a member of any affiliated group filing a consolidated federal income
Tax Return (other than a group the common parent of
27
which is the Company) and (B) has any liability for the Taxes of any person
as defined in Section 7701(a)(1) of the Code (other than the Company and the
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(r) No claim has ever been made by any Governmental
Authority in a jurisdiction where the Company or any of its Subsidiaries do not
file Tax Returns that any of the Company or any of its Subsidiaries are, or may
be, subject to taxation by that jurisdiction.
4.20. GOVERNMENTAL AUTHORITIES; CONSENTS. No consent, approval or
authorization of, or designation, declaration, notice or filing with, any
Governmental Authority is required on the part of the Company with respect to
the Company's execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) applicable requirements of the
HSR Act, if any, (ii) the filing of the Articles of Merger in the appropriate
offices in the State of Minnesota, (iii) the approval of this Agreement by the
shareholders of the Company in accordance with the MBCA and the Company's
articles of incorporation, and (iv) as otherwise disclosed in Schedule 4.20.
4.21. LICENSES, PERMITS AND AUTHORIZATIONS. Schedule 4.21 contains a
list of all material Permits of or with any Governmental Authority which are
held by the Company or any of its Subsidiaries. All such material Permits are in
full force and effect and there are no proceedings pending, or to the best
knowledge of the Company, threatened that seek the revocation, cancellation,
suspension or adverse modification thereof. Such material Permits constitute all
of the material Permits necessary to permit the Company and its Subsidiaries to
own, operate, use and maintain their Assets in the manner in which they are now
owned, operated and maintained and to conduct the business of the Company and
its Subsidiaries as currently conducted. All required filings with respect to
such material Permits have been timely made and all required applications for
renewal thereof have been timely filed.
4.22. INSURANCE.
(a) Schedule 4.22 contains an accurate and complete
description of all policies of property, fire and casualty, product liability,
workers' compensation, and other forms of insurance held by the Company or any
of its Subsidiaries. True, correct and complete copies of such insurance
policies have been made available to Parent.
(b) All policies listed on Schedule 4.22 (i) are valid,
outstanding, and enforceable policies, and (ii) will not terminate or lapse by
reason of the transactions contemplated by this Agreement.
(c) Neither the Company nor any of its Subsidiaries has
received (i) any notice of cancellation of any policy described in paragraph (a)
hereof or refusal of coverage thereunder, (ii) any notice that any issuer of
such policy has filed for protection under applicable bankruptcy laws or is
otherwise in the process of liquidating or has been liquidated, or (iii) any
other notice that such policies are no longer in full force or effect or that
the issuer of any such policy is no longer willing or able to perform its
obligations thereunder.
4.23. CUSTOMERS AND SUPPLIERS. Schedule 4.23 sets forth a complete
and accurate list of the names of (i) the ten largest customers of the Company
and its Subsidiaries, showing the approximate total sales in dollars by the
Company and its Subsidiaries to each such customer during the 1998 fiscal year
and (ii) the ten largest suppliers of the Company and its Subsidiaries, showing
the approximate total purchases in dollars by the Company and its Subsidiaries
to each such customer during the 1998 fiscal year. Neither the Company nor any
Subsidiary has received any communication from any customer or supplier listed
on Schedule 4.23 notifying the Company or any Subsidiary of any intention to
terminate or
28
materially reduce purchases from or supplies to the Company and its
Subsidiaries or the intention to terminate or fail to renew their current
Contracts with the Company or its Subsidiaries or fail to exercise any purchase
option thereunder.
4.24. YEAR 2000 COMPATIBILITY. Except as set forth on Schedule 4.24,
the Company's business systems (including the Machinery and Equipment used by
the Company and its Subsidiaries, and the products sold by the Company in the
conduct of its business as currently conducted, and the provisions sold by the
Company, whether owned by the Company or a Subsidiary of the Company or licensed
from others) have been inventoried, assessed and tested for failure or
miscalculation as a result of the change from the year 1999 to the year 2000.
Except as set forth on Schedule 4.24, to the best of the Company's knowledge,
all such business systems, will perform as designed without regard to any
references to or computations based on calendar dates or periods of elapsed
time, including but not limited to, any thereof with respect to any date or
dates in 1999 or 2000.
4.25. BROKERS' FEES. Except as set forth on Schedule 4.25, no
broker, finder, investment banker or other Person is entitled to any brokerage
fee, finders' fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by the Company or
any of its Subsidiaries or Affiliates.
4.26. BOARD RECOMMENDATION. A special committee of the Board of
Directors of the Company satisfying the requirements of Section 302A.673 of the
MBCA, at a meeting duly called and held, has by unanimous vote approved this
Agreement, the Merger and the other transactions contemplated hereby. The Board
of Directors of the Company, at a meeting duly called and held, has by unanimous
vote approved this Agreement, the Merger and the other transactions contemplated
hereby and declared their advisability and, subject to Section 6.4 hereof, has
determined to recommend to the Company's shareholders that they vote to approve
this Agreement and the Merger. The Board of Directors of the Company has taken
all such action required to be taken by the Company to provide that this
Agreement and the transactions contemplated hereby and thereby shall be exempt
from the requirements of any "moratorium," "control share," "fair price," or
other anti-takeover laws or regulations of the State of Minnesota.
4.27. REQUIRED COMPANY VOTE. The affirmative vote of a majority of
all shares of the Company entitled to vote and the affirmative vote of the
holders of at least one half of the Class A Stock, voting together as a single
class (collectively, the "REQUIRED VOTE") are the only votes of the holders of
any class or series of the Company's securities necessary to approve this
Agreement, the Merger and the other transactions contemplated hereby.
4.28. PROXY STATEMENT. The Proxy Statement to be mailed to the
shareholders of the Company in connection with the special meeting of the
shareholders of the Company (the "SPECIAL MEETING") and any amendment thereof or
supplement thereto, when, in the case of the Proxy Statement, mailed and at the
time of the Special Meeting shall not contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not false or misleading, and shall comply with all
requirements of the Exchange Act, provided that this Section 4.28 shall not
apply to any written information provided to the Company by the Parent or Sub
expressly for use in the Proxy Statement.
4.29. FULL DISCLOSURE. No representation or warranty made by the
Company in this Agreement, nor any document, exhibit, statement, certificate or
schedule furnished by the Company to Sub and Parent in connection with the
transactions contemplated hereby, contains any untrue statement of material fact
or omits to state any material fact necessary in order to make the statement
contained herein not misleading.
29
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
As an inducement to the Company to enter into this Agreement, Sub and
Parent hereby make the following representations and warranties to the Company:
5.1. ORGANIZATION. The Parent is duly incorporated, validly
existing and in good standing under the laws of the State of Minnesota. The Sub
is duly incorporated, validly existing and in good standing under the laws of
the State of Minnesota.
5.2. AUTHORIZATION. Parent has all necessary corporate power and
authority to, and has taken all action necessary on its part to, execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Sub has all necessary corporate power and authority to, and has taken all
corporate action necessary on its part to, execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Sub and Parent and is a legal, valid and binding
obligation of Sub and Parent, enforceable against each of them in accordance
with its terms, except as the enforceability thereof may be limited by (a)
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of creditors'
rights generally or (b) general principles of equity.
5.3. NO CONFLICT. Except as set forth in Schedule 5.3, the
execution and delivery of this Agreement by Parent and Sub and the consummation
of the transactions contemplated hereby does not and will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of incorporation or
bylaws of Parent or Sub,
(b) conflict with or result in a violation or breach of
any term or provision of any Law applicable to Parent or Sub or any of their
respective Assets; or
(c) (i) conflict with or result in a violation or breach
of, (ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Parent or Sub to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, (iv) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, or (v) result
in the creation or imposition of any Encumbrance upon the Parent or Sub or any
of their respective assets under, any Contract to which Parent or Sub is a party
or by which any of their respective Assets is bound, except to the extent any of
the foregoing would not materially and adversely effect Parent's or Sub's
ability to consummate the transactions contemplated hereby.
5.4. LITIGATION AND PROCEEDINGS. At the date hereof, except as set
forth in Schedule 5.4, there are no lawsuits, actions, suits, claims or other
proceedings at law or in equity, or, to the knowledge of Parent, investigations,
before or by any Governmental Authority or before any arbitrator pending or, to
the knowledge of Parent, threatened, against Sub or Parent which, if determined
adversely, would reasonably be expected to have a material adverse effect on the
ability of either Sub or Parent to enter into and perform its respective
obligations under this Agreement. There is no unsatisfied judgment or any open
injunction binding upon Sub or Parent which would reasonably be expected to have
a Material Adverse Effect on the ability of Sub or Parent to enter into and
perform its obligations under this Agreement.
5.5. GOVERNMENTAL AUTHORITIES; CONSENTS. No consent, approval or
authorization of, or designation, declaration or filing with, any Governmental
Authority or other Person is required on the part
30
of Sub or Parent with respect to the execution or delivery of this Agreement
by Sub or Parent or the consummation of the transactions contemplated hereby,
except for (i) applicable requirements of the HSR Act and (ii) the filing of
the Articles of Merger in the appropriate offices in the State of Minnesota.
5.6. BROKERS' FEES. No broker, finder, investment banker or other
Person is entitled to any brokerage fee, finders' fee or other commission for
which any Shareholder may become liable in connection with the transactions
contemplated by this Agreement based upon arrangements made by Sub, Parent, or
any of their Affiliates.
5.7. PROXY STATEMENT. The information concerning Sub and Parent,
their officers, directors, employees and shareholders and furnished in writing
to the Company by Sub and Parent specifically for use in the Proxy Statement
will not, when mailed to the shareholders of the Company or at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
5.8. FULL DISCLOSURE. No representation or warranty made by Sub or
Parent in this Agreement, nor any document, exhibit, statement, certificate or
schedule furnished by Sub or Parent to the Company in connection with the
transactions contemplated hereby, contains any untrue statement of material fact
or omits to state any material fact necessary in order to make the statement
contained therein not misleading.
ARTICLE VI.
COVENANTS OF THE COMPANY, PARENT AND SUB
The Company, Sub and Parent covenant and agree with each other that
from the date hereof through the Closing:
6.1. CONDUCT OF BUSINESS PRIOR TO CLOSING. Prior to the Effective
Time, unless Parent has agreed otherwise in writing, the Company:
(a) shall, and shall cause each of its Subsidiaries to,
conduct its operations and business according to their usual, regular and
ordinary course consistent with past practice;
(b) shall use commercially reasonable efforts, and shall
cause each of its Subsidiaries to use commercially reasonable efforts, to
preserve intact their business organizations and goodwill, keep available the
services of their respective officers and employees and maintain satisfactory
relationships with those persons having business relationships with them;
(c) shall not, and shall cause its Subsidiaries not to,
amend their respective articles of incorporation or by-laws or comparable
governing instruments;
(d) shall promptly notify Parent of (i) any Material
Adverse Change with respect to the Company, (ii) any material litigation or
material governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or (iii) the breach of any
representation or warranty contained herein;
(e) shall promptly deliver to Parent correct and complete
copies of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;
(f) shall not, and shall not permit any of its
Subsidiaries to, authorize, propose or announce an intention to authorize or
propose, or enter into an agreement with respect to, any merger,
31
consolidation or business combination (other than the Merger), release or
relinquish any material contract rights, or any acquisition or disposition of
Assets or securities other than the acquisition or disposition of Assets in
the ordinary course of business consistent with past practice;
(g) shall not, and shall not permit any of its
Subsidiaries to, (i) grant, confer or award any options, warrants, conversion
rights or other rights or Equity Securities not existing on the date hereof, to
acquire any shares of its capital stock or other securities of the Company or
its Subsidiaries or (ii) accelerate, amend or change the period of
exercisability of options granted under any employee stock plan or authorize
cash payments in exchange for any options granted under any of such plans;
(h) shall not, and shall not permit any of its
Subsidiaries to, amend the terms of the Benefit Plans, including, without
limitation, any employment, severance or similar agreements or arrangements in
existence on the date hereof, or adopt any new employee benefit plans, programs
or arrangements or any employment, severance or similar agreements or
arrangements;
(i) shall not, and shall not permit any of its
Subsidiaries to, (i) increase or agree to increase the compensation payable or
to become payable to its officers or, other than increases in accordance with
past practice which are not material, to its employees, (ii) grant any severance
or termination pay to any employee or (iii) enter into any collective bargaining
agreement;
(j) shall not, and shall not permit any of its
Subsidiaries to, (i) incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become responsible or
liable for the obligations of any other individual, corporation or other entity
or (ii) make any loans or advances to any other person, except, in the case of
clause (i), for borrowings under existing credit facilities (excluding
arrangements presently in place under vendor payment agreements) in the ordinary
course of business which do not exceed in the aggregate the principal amount
calculated in accordance with Schedule 6.1(j) hereto and except, in the case of
clause (ii), for advances consistent with past practice which are not material;
(k) shall not, and shall not permit any of its
Subsidiaries to, (i) materially change any practice with respect to Taxes, (ii)
make, change or revoke any material Tax election, or (iii) settle or compromise
any material dispute involving a Tax liability;
(l) shall not, and shall not permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or other
Equity Securities (other than the declaration or payment of any dividend by any
wholly-owned Subsidiary of the Company to the Company or another wholly-owned
Subsidiary of the Company) or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or other Equity Securities or
capital stock or other Equity Securities of any of its Subsidiaries, or make any
commitment for any such action or (iii) split, combine or reclassify any of its
capital stock or other Equity Securities or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock or other Equity Securities;
(m) shall not, and shall not permit any of its
Subsidiaries to, issue, deliver, sell, pledge or otherwise encumber any Equity
Securities of the Company or any of its Subsidiaries (other than the issuance of
shares of Company Common Stock upon the exercise of Options outstanding on the
date hereof or upon the conversion of Class A Stock, in each case in accordance
with their present terms);
(n) shall not, and shall not permit any of its
Subsidiaries to, make or agree to make any capital expenditure in excess of
$50,000 in the aggregate;
32
(o) shall not, and shall not permit any of its
Subsidiaries to, change any accounting principles or practices;
(p) shall not, and shall not permit any of its
Subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in the most
recent consolidated financial statements (or the notes thereto) of the
Company included in the Company Reports or incurred thereafter in the
ordinary course of business consistent with past practice, or waive any
material benefits of, or agree to modify in any material respect any
confidentiality, standstill, non-solicitation or similar agreement to which
the Company or any Subsidiary is a party;
(q) shall not revalue in any material respect any of its
material Assets, including, without limitation, writing down the value of any
inventory or writing off of any notes or accounts receivable other than as
required by GAAP; and
(r) shall not, and shall not permit any of its
Subsidiaries to take, or agree (in writing or otherwise) or resolve to take, any
of the foregoing actions.
6.2. INVESTIGATION BY PARENT; CONFIDENTIALITY. The Company shall
allow Parent, its counsel, accountants, business consultants, and other
representatives and the financial institutions (and their counsel and
representatives) providing or proposed to provide financing in connection with
this Agreement and the transactions contemplated hereby, during regular business
hours upon reasonable notice, to make such reasonable inspection of the Assets,
facilities, business and operations of the Company and its Subsidiaries,
including, without limitation, the performance of environmental site
assessments, and to inspect and make copies of Contracts, books and records and
all other documents and information reasonably requested by Parent and related
to the operations and business of the Company and its Subsidiaries including,
without limitation, historical financial information concerning the business of
the Company and its Subsidiaries and to meet with designated personnel employees
and officers of the Company or its Subsidiaries and/or their representatives.
The Company and its Subsidiaries shall furnish to Parent promptly upon request
(a) all additional documents and information with respect to the affairs of the
Company and its Subsidiaries relating to their businesses and (b) access to the
Personnel and to the Company's and its Subsidiaries' accountants and counsel as
Parent, or its counsel or accountants, may from time to time reasonably request
and the Company and its Subsidiaries shall instruct their employees, officers,
accountants and counsel to cooperate with Parent, and to provide such documents
and information as Parent and its representatives may request. All information
furnished to or obtained by Parent pursuant to this Section 6.2 shall be kept
confidential in accordance with the Confidentiality Agreement.
6.3. CONSENTS AND EFFORTS.
Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to (A) promptly make its respective
filings, if any, under the HSR Act with respect to the Merger (and to cause its
Affiliates to cooperate in any such filings) and (B) use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement. Parent and the
Company will use their reasonable best efforts and cooperate with one another
(i) in promptly determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or
33
any put right under any agreement) under any applicable law or regulation or
from any Governmental Authorities or other persons, including parties to loan
agreements or other debt instruments, in connection with the transactions
contemplated by this Agreement, including the Merger, and (ii) in promptly
making any such filings, in furnishing information required in connection
therewith and in timely seeking to obtain any such consents, approvals,
permits or authorizations.
6.4. NO SOLICITATION.
(a) The Company shall immediately cease and cause its
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal (as hereinafter defined). Neither the
Company nor any of its Subsidiaries shall (whether directly or indirectly
through advisors, agents or other intermediaries), nor shall the Company or any
of its Subsidiaries authorize or permit any of its or their officers, directors,
agents, representatives, advisors or Subsidiaries to, (i) solicit, initiate or
take any action knowingly to facilitate or encourage (including by way of
furnishing information and assistance) the submission of inquiries, proposals or
offers from any Person or group, other than Parent and its representatives and
Affiliates, that constitute or relate to an Acquisition Proposal or may
reasonably be expected to lead to an Acquisition Proposal, (ii) agree to or
endorse any Acquisition Proposal, (iii) enter into or participate in any
discussions or negotiations with, or in any way continue any discussions or
negotiations commenced before the date of this Agreement with, a Third Party (as
defined below) regarding any Acquisition Proposal, or otherwise cooperate in any
way with, or knowingly assist or participate in, facilitate or encourage, any
effort or attempt by any other Person or group (other than Parent and its
representatives and Affiliates) to make any Acquisition Proposal, or (iv) grant
any waiver or release under any standstill or similar agreement with respect to
any Equity Securities of the Company or any of its Subsidiaries; provided,
however, that the foregoing shall not prohibit the Company (either, directly or
indirectly, through advisors, agents or other intermediaries) from at any time
prior to receipt of the Required Vote with respect to the Merger in response to
an Acquisition Proposal made without such solicitation, initiation or
encouragement, (A) furnishing information pursuant to an appropriate
confidentiality letter (which letter shall not be less favorable to the Company
in any material respect than the Confidentiality Agreement, and a copy of which
shall be provided for informational purposes to Parent) concerning the Company
and its businesses, properties or Assets to any person, corporation, entity or
"group," as defined in Section 13(d) of the Exchange Act, other than Parent or
any of its Affiliates (a "THIRD PARTY"), who has made an Acquisition Proposal,
(B) engaging in discussions or negotiations with such a Third Party who has made
a bona fide Acquisition Proposal or (C) withdrawing or modifying its
recommendation to the Company's shareholders with respect to the Merger or
recommending an Acquisition Proposal to the Company's shareholders, but in each
case referred to in the foregoing clauses (A) through (C), only to the extent
that (x) the Board of Directors of the Company shall have concluded in good
faith on the basis of written advice from outside counsel that such action is
required to prevent the Board of Directors of the Company from breaching its
fiduciary duties to the shareholders of the Company under applicable law and (y)
the Board of Directors of the Company shall have concluded in good faith that
such Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the person or entity making the proposal and would, if consummated, result
in a more favorable transaction than the transaction contemplated by this
Agreement; provided, further, that the Board of Directors of the Company shall
not take any of the foregoing actions until after giving reasonable notice to
Parent with respect to its intent to take such action and informing Parent of
the terms and conditions of such proposal and the identity of the Person making
the applicable Acquisition Proposal.
(b) For the purpose of this Agreement, "ACQUISITION
PROPOSAL" means any bona fide inquiry, proposal or offer from any Person (other
than Parent or any of its Affiliates) relating to any direct or indirect:
(i) acquisition or purchase of 25% or more of the Assets or 25% or more of any
class of
34
Equity Securities of the Company and its Subsidiaries, (ii) tender offer
(including a self tender offer) or exchange offer that if consummated would
result in any Person or group beneficially owning 25% or more of any class of
Equity Securities of the Company or any of its Subsidiaries, (iii) merger,
consolidation, statutory share exchange, recapitalization, sale of all or any
substantial portion of the assets, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute 25% or more of the assets of the
Company and its Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement, or (iv) other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would reasonably be expected to materially
dilute the benefits to Parent of the transactions contemplated hereby.
(c) If a Payment Event (as hereinafter defined) occurs,
the Company shall pay to Sub, within five business days following such event, a
termination fee of $600,000 in cash. "PAYMENT EVENT" means any of the following
events:
(i) the termination of this Agreement
pursuant to Section 8.1(a)(v);
(ii) the termination of this Agreement
pursuant to Section 8.1(a)(vi);
(iii) if this Agreement shall have been
terminated for any reason (other than (A) pursuant to Section
8.1(a)(i), (B) pursuant to Section 8.1(a)(ii) or Section 8.1(a)(iii)
due to a failure of any of the conditions set forth in Section 7.2(a)
or Section 7.2(b) to be satisfied, (C) pursuant to Section 8.1(a)(iv)
other than because of a judgment, injunction, order or decree
attributable to any act or omission of the Company or its Affiliates or
(D) pursuant to Section 8.1(a)(viii)) and (1) any Third Party other
than Parent or any of its Affiliates or any Person that currently owns
25% or more of the outstanding shares of Common Stock (a "PERMITTED
PARTY") shall have become the beneficial owner of 25% or more of the
outstanding shares of Company Common Stock or (2) on or prior to the
date that is within 18 months of the termination of this Agreement, the
Company either consummates with a Third Party a transaction the
proposal of which would otherwise qualify as an Acquisition Proposal
under Section 6.4(b) or enters into a definitive agreement with a Third
Party with respect to a transaction the proposal of which would
otherwise qualify as an Acquisition Proposal under Section 6.4(b).
(d) Upon the occurrence of a Payment Event or upon a
termination of this Agreement (i) pursuant to Section 8.1(a)(ii) or Section
8.1(a)(iii) due to a failure of any of the conditions set forth in Section
7.1(a) or Section 7.3(e) to be satisfied, (ii) pursuant to Section 8.1(a)(vii),
or (iii) pursuant to 8.1(a)(ii) or Section 8.1(a)(iii) due to a failure of the
condition set forth in Section 7.3(a)(i) or Section 7.3(a)(ii) to be satisfied,
the Company shall reimburse Parent and its Affiliates not later than five
business days after submission of reasonable documentation thereof for all of
their documented out-of-pocket fees and expenses (including, without limitation,
the reasonable fees and expenses for their counsel and investment banking fees),
actually incurred by any of them or on their behalf in connection with this
Agreement and the transactions contemplated hereby and the arrangement of,
obtaining the commitment to provide or obtaining the financing for transactions
contemplated by this Agreement (including any fees payable to the entities
providing for such financing and their respective counsel); provided that the
aggregate amount payable pursuant to this Section 6.4(d) shall not exceed
$300,000.
(e) The Company acknowledges that the agreements
contained in this Section 6.4 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Sub and
Parent would not enter into this Agreement; accordingly, if the Company fails to
promptly pay any amount due pursuant to this Section 6.4, and, in order to
obtain such payment, the other party
35
commences a suit which results in a judgment against the Company for the fee
or fees and expenses set forth in this Section 6.4, the Company shall also
pay to Sub and Parent their costs and expenses incurred in connection with
such litigation, including reasonable attorneys' fees.
(f) The Company and its Subsidiaries shall (i)
immediately notify Parent (orally and in writing) if any offer is made, any
discussions or negotiations are sought to be initiated, any inquiry, proposal or
contact is made or any information is requested with respect to any Acquisition
Proposal, (ii) promptly notify Parent of the terms of any proposal which it may
receive in respect of any such Acquisition Proposal, including, without
limitation, the identity of the prospective purchaser or soliciting party, (iii)
promptly provide Parent with a copy of any such offer, if written, or a written
summary (in reasonable detail) of such offer, if not in writing, and (iv) keep
Parent informed of the status of such offer and the offeror's efforts and
activities with respect thereto.
(g) If this Agreement is terminated by the Company
pursuant to Section 8.1(a)(viii), Parent shall reimburse the Company not later
than five business days after submission of reasonable documentation thereof for
all of the Company's documented out-of-pocket fees and expenses (including,
without limitation, the reasonable fees and expenses for its counsel), actually
incurred by the Company or on its behalf in connection with this Agreement and
the transactions contemplated hereby; provided that the aggregate amount payable
pursuant to this Section 6.4(g) shall not exceed $150,000.
(h) This Section 6.4 shall survive any termination of
this Agreement, however caused.
6.5. MEETING OF SHAREHOLDERS. The Company shall take all action
necessary in accordance with applicable law and its articles of incorporation
and by-laws, including the timely mailing of the Proxy Statement, to convene the
Special Meeting of its shareholders as promptly as practicable, and in any event
on or before February 29, 2000, to consider and vote upon the approval of this
Agreement and the transactions contemplated hereby. The Board of Directors of
the Company shall (subject only to the right of the Board of Directors to
withdraw or modify its recommendation with respect to the Merger in accordance
with Section 6.4(a)) recommend such approval, shall not withdraw or modify such
recommendation and shall take all lawful action to solicit such approval. This
Agreement shall be submitted to a vote of shareholders of the Company at the
Special Meeting regardless of whether the Board of Directors hereafter
determines that the Agreement is no longer advisable and withdraws its
recommendation of the Agreement or the Merger unless this Agreement shall have
been previously terminated pursuant to Article VIII.
6.6. PROXY STATEMENT.
(a) Sub, Parent and the Company shall cooperate and
prepare, and the Company shall file with the SEC as soon as practicable, a proxy
statement with respect to the Special Meeting of the shareholders of the Company
in connection with the Merger (the "PROXY STATEMENT"), respond to comments of
the staff of the SEC, clear the Proxy Statement with the staff of the SEC and
promptly thereafter mail the Proxy Statement to all holders of record of Company
Common Stock and Class A Stock. The Company shall comply in all respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
thereunder applicable to the Proxy Statement and the solicitation of proxies for
the Special Meeting (including any requirement to amend or supplement the Proxy
Statement) and make such other filings with the SEC in connection with the
transactions contemplated hereby, and each party shall furnish to the other such
information relating to it and its Affiliates and the transactions contemplated
by this Agreement and such further and supplemental information as may be
reasonably requested by the other party. The Proxy Statement shall include the
recommendation of the Company's Board of Directors in favor of the Merger
(subject to the right of the Board of Directors to withdraw or
36
modify its recommendation with respect to the Merger as provided in Section
6.4(a)). The Company shall use all reasonable efforts, and Sub and Parent
will cooperate with the Company, to have all necessary state securities law
or "Blue Sky" permits or approvals required to carry out the transactions
contemplated by this Agreement and will pay all expenses incident thereto.
(b) No amendment or supplement to the Proxy Statement
shall be made by Sub, Parent, or the Company without the approval of all other
parties. The Company shall advise Sub and Parent of any request by the SEC for
amendment of the Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
6.7. DIRECTOR AND OFFICER LIABILITY.
(a) For a period of six years after the Effective Time,
the Surviving Corporation shall indemnify and hold harmless the present and
former officers and directors of the Company in respect of acts or omissions
occurring prior to the Effective Time to the extent provided under the Company's
articles of incorporation and by-laws in effect on the date hereof; provided
that such indemnification shall be subject to any limitation imposed from time
to time under applicable law. The by-laws of the Surviving Corporation shall
contain provisions substantially similar in terms of the rights granted to the
provisions with respect to indemnification and insurance set forth in the
Company's articles of incorporation, which provisions shall not be amended in
any manner that would adversely affect the rights under those by-laws of the
Company's employees, agents, directors or officers for acts or omissions on or
prior to the Effective Time, except if such amendment is required by law. For a
period of six years after the Effective Time, Parent will cause the Surviving
Corporation to maintain officers' and directors' liability insurance in respect
of acts or omissions occurring prior to the Effective Time covering each such
person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof, provided that in
satisfying its obligation under this Section 6.7, Parent shall not be obligated
to cause the Surviving Corporation to pay premiums in excess of 125% of the
amount per annum the Company paid in its last full fiscal year, which amount has
been disclosed to Parent.
(b) In the event the Company or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of the Company shall assume its obligations set
forth in this Section 6.7.
6.8. NOTICES OF CERTAIN EVENTS. The Company shall promptly notify
Sub and Parent of:
(a) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement; and
(c) any Actions commenced or, to the best of its
knowledge threatened against, relating to or involving, or otherwise affecting
the Company or any Subsidiary which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 4.8 or which
relate to the consummation of the transactions contemplated by this Agreement.
6.9. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the
37
Company or Sub, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of the Company or Sub, any other actions and
things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
6.10. FINANCIAL STATEMENTS, ETC. Within 30 days after the end of
each calendar month, the Company and its Subsidiaries shall provide Parent with
financial statements, including a consolidated balance sheet and income
statement, relating to such calendar month. Such interim financial statements
shall (a) be in accordance with the books and records of the Company and its
Subsidiaries, (b) be prepared in accordance with GAAP consistently applied
throughout the periods covered thereby (except for the absence of footnotes and
normal year end adjustments) and present fairly and accurately in accordance
with GAAP the Assets, liabilities (including, without limitation, all reserves)
and financial condition of the Company and its Subsidiaries as of the respective
dates thereof and the results of operations for the periods covered thereby.
6.11. YEAR 2000 REMEDIATION. Prior to the Effective Time, the
Company shall complete (i) the inventory and assessment of its business systems
that are susceptible to failure or miscalculation as a result of the change from
the year 1999 to the year 2000 ("Y2K ISSUES"); (ii) the remediation and
replacement of all material information technology business systems affected by
Y2K issues and (iii) the testing of all material information technology business
systems affected by Y2K issues.
ARTICLE VII.
CONDITIONS TO THE MERGER
7.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Sub and Parent to effect the Merger and to consummate the
transactions contemplated hereby on the Closing Date are subject to the
satisfaction, on the Closing Date, of each of the following conditions:
(a) This Agreement shall have been approved and adopted
by the holders of the Company Common Stock in accordance with the MBCA by the
Required Vote;
(b) Any applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated; and
(c) No provision of any applicable Law or regulation and
no judgment, order, decree or injunction shall prohibit or enjoin the
consummation of the Merger;
7.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the transactions contemplated hereby on the Closing
Date are subject, in the sole discretion of the Company, to the satisfaction, on
the Closing Date, of the following conditions, which may be waived by the
Company in accordance with Section 8.4:
(a) All representations and warranties of Sub and Parent
contained in this Agreement shall be true and correct in all material respects
at and as of the date hereof and the Closing Date, as if such representations
and warranties were made at and as of the date hereof and the Closing Date
(except to the extent that any such representations and warranties were made as
of a specified date, which representations and warranties shall continue on the
Closing Date to be true as of such specified date).
38
(b) Sub and Parent shall have each performed in all
material respects all obligations arising under the agreements and covenants
required hereby to be performed by it prior to or on the Closing Date.
(c) The Company shall have received, at or prior to the
Closing, a certificate executed by an officer or member of Parent certifying
that, as of the Closing Date, the conditions set forth in Sections 7.2(a) and
(b) have been satisfied.
7.3. CONDITIONS TO THE OBLIGATIONS OF SUB AND PARENT. The
obligations of Sub and Parent to consummate the transactions contemplated hereby
on the Closing Date are subject, in the sole discretion of Sub and Parent, to
the satisfaction, on the Closing Date, of each of the following conditions, any
of which may be waived by Sub and Parent in accordance with Section 8.4:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) All representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects at and as of the date hereof and the Closing Date as if such
representations and warranties were made at and as of the date hereof and the
Closing Date.
(ii) The Company shall have performed in all
material respects all of the agreements and covenants required hereby to be
performed by it prior to or on the Closing Date.
(iii) Sub and Parent shall have received, at or
prior to the Closing, a certificate executed by the President and the Chief
Financial Officer of the Company certifying that, as of the Closing Date, the
conditions set forth in Sections 7.3(a), (b), (c), (d), (e), (f) and (g) have
been satisfied.
(b) NO PROCEEDINGS OR LITIGATION. No Actions by any
Governmental Authority or any other Person shall have been granted a temporary
restraining order for the purpose of enjoining or preventing, or which question
the validity or legality of, the transactions contemplated hereby and which
would reasonably be expected to materially damage Sub or Parent or materially
adversely affect the value of the Company Common Stock, the Class A Stock or the
Assets, or the business or operations of the Company and its Subsidiaries or
Parent's ability to own and operate the Assets, business or operations of the
Company and its Subsidiaries, if the transactions contemplated hereby are
consummated.
(c) CONSENTS. All consents, approvals and licenses of any
Governmental Authority or any third party (including, without limitation, any
consent listed on Schedule 4.9 of the Disclosure Schedule) required in
connection with the execution, delivery and performance of this Agreement and
for the Surviving Corporation to conduct the business of the Company in
substantially the manner now conducted, shall have been obtained.
(d) MATERIAL CHANGES. Since June 30, 1999, (i) there
shall have been no Material Adverse Change with respect to the Company and (ii)
there shall have been no events or conditions which would be reasonably expected
to cause a Material Adverse Change with respect to the Company.
(e) DISSENTERS' RIGHTS. Dissenting Shares shall
constitute not more than ten percent of the shares of the Company Common Stock
outstanding immediately prior to the Effective Time (including shares of Company
Common Stock held by holders of Class A Stock who have converted their shares of
Class A Stock).
39
(f) CONVERSION OF CLASS A STOCK. Prior to the Closing
each holder of Class A Stock shall duly and validly converted his shares of
Class A Stock to shares of Company Common Stock in accordance with their present
terms and immediately prior to the Effective Time, the Company shall not have
issued or outstanding any Equity Securities other than Company Common Stock or
options, warrants, conversion rights or other rights to Equity Securities other
than Options and Warrants existing on the date hereof.
(g) KEY EMPLOYEE. Xxxxxxx X. Xxxxxx (the "KEY EMPLOYEE")
shall not have terminated his employment with the Company, announced his
intention to terminate his employment with the Company, breached his existing
employment agreement with the Company or otherwise given Parent reasonable
grounds to believe that he will not be available to continue to provide services
to the Company. The Key Employee shall have executed and delivered a valid and
binding, legally enforceable agreement with the Company canceling his existing
employment agreement with the Company, effective at the Effective Time, and
replacing that employment agreement with the form of employment agreement
attached to that certain letter agreement between the Key Employee and Parent of
even date herewith (the "KEY EMPLOYEE AGREEMENT").
(h) BOARD SEATS. Up to three directors of the Company
acceptable to Parent shall have agreed to serve on the Board of Directors of
Parent after the Effective Time.
(i) CERTAIN FEES. The Company shall have delivered to
Parent evidence reasonably satisfactory to Parent that the Company's fees and
expenses associated with the transactions contemplated by this Agreement,
including, without limitation, legal, accounting, printing and broker's or
finder's fees, will not be in excess of $350,000.
ARTICLE VIII.
MISCELLANEOUS
8.1. TERMINATION.
(a) TERMINATION. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned prior to the Effective Time by
providing written notice to each of the other parties hereto as follows
(notwithstanding any approval of the Merger by the shareholders of the Company):
(i) by mutual written consent of Parent and the
Company at any time;
(ii) by Sub, Parent, or the Company, if the
Closing shall not have occurred on or before February 29, 2000; provided that
the party seeking to exercise such right is not then in breach in any material
respect of any of its obligations under this Agreement;
(iii) by Sub, Parent, or the Company, if any of
the conditions to such party's obligation to consummate the transactions
contemplated in this Agreement shall have become impossible to satisfy;
(iv) by the Company, Parent, or Sub, if there
shall be any Law that makes consummation of the Merger illegal or otherwise
prohibited or if any permanent judgment, injunction, order or decree enjoining a
party from consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and non-appealable;
40
(v) by Parent, if the Board of Directors of the
Company shall have (A) withdrawn or modified or amended, in a manner adverse to
Sub or Parent, its approval or recommendation of this Agreement and the Merger
or its recommendation that shareholders of the Company adopt and approve this
Agreement and the Merger, (B) approved, recommended or endorsed an Acquisition
Proposal or shall have failed to reconfirm its recommendation of this Agreement
and the Merger within five business days of Sub's or Parent's request that it do
so, (C) failed to convene the Special Meeting in breach of the provisions of
this Agreement or failed as promptly as practicable to mail the Proxy Statement
to its shareholders or failed to include in such statement the recommendation
referred to above, (D) in response to the commencement of any tender offer of
exchange offer for 25% or more of the outstanding shares of Company Common
Stock, not recommended rejection of such tender offer or exchange offer within
ten business after commencement of the offer; or (E) publicly announced its
intention to do any of the foregoing;
(vi) by the Company, if, prior to the Effective
Time, in good faith, based upon written advice from outside counsel that such
action is necessary in order to prevent the Board of Directors from breaching
its fiduciary duty, the Board of Directors of the Company shall have withdrawn
or modified or amended, in a manner adverse to Sub or Parent its approval or
recommendation of this Agreement and the Merger or its recommendation that
shareholders of the Company adopt and approve this Agreement and the Merger in
order to permit the Company to execute a definitive agreement providing for the
acquisition of the Company or in order to approve a tender or exchange offer for
any or all of the Company Common Stock, in either case that is determined by the
Board of Directors of the Company to be on financial terms more favorable to the
Company's shareholders than the Merger; provided that the Company shall be in
compliance with Section 6.4;
(vii) by the Company, Parent, or Sub, if, at the
Special Meeting or any adjournment thereof at which this Agreement and the
Merger is voted upon, the Required Vote shall not have been obtained; or
(viii) by the Company, if as a result of the
matters disclosed in Schedule 5.4, there is a temporary injunction in state
court or a preliminary injunction in federal court prohibiting or enjoining the
consummation of the Merger and such injunction is in full force and effect on
the following dates: (A) the day before the date that a duly noticed meeting of
the shareholders of the Company to vote on the Merger is scheduled to be held
or, if requested by Parent, the day before the date of a rescheduled meeting of
the shareholders of the Company; it being agreed that Parent shall have the
one-time right to require the Company to adjourn or postpone its shareholders'
meeting and to reschedule it to a date which is not less than 30 days after the
originally scheduled shareholders' meeting date if an injunction is in effect on
the day before the date the meeting was originally scheduled to be held or (B)
if the Company holds its shareholders meeting notwithstanding that an injunction
is in effect on the day before the date the meeting was originally scheduled, if
the Closing is not effected within 30 days after receipt of the Required Vote.
(b) EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 8.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto or such party's
officers, directors, employees or representatives, except (i) that the
agreements contained in Sections 6.4 and 8.7 and this Section 8.1 hereof shall
survive the termination hereof and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement.
(c) PROCEDURE UPON TERMINATION. In the event of
termination of this Agreement pursuant to Section 8.1:
41
(i) Each party shall redeliver all documents,
work papers and other material of any other party and any and ail copies thereof
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same; and
(ii) No confidential information received by any
party with respect to the business of any other party or its Affiliates shall be
disclosed to any third party, unless required by Law.
8.2. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned, in whole or in part, by operation of law
or otherwise by any party without the prior written consent of all other parties
to this Agreement, except that Parent and/or Sub may collaterally assign its
rights under this Agreement to parties providing financing in connection with
the transactions contemplated hereby without the prior written consent of the
Company. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and, with respect to the provisions of Section 6.7 hereof, shall inure
to the benefit of the persons or entities benefiting from the provisions thereof
who are intended to be third-party beneficiaries thereof, and no other person
shall have any right, benefit or obligation hereunder. Each party acknowledges
that no provision hereof shall limit the ability of Parent or Sub to, between
the date hereof and the Effective Time, issue or sell shares of the capital
stock of Sub to one or more Persons not a party to , this Agreement.
8.3. NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received, if
personally delivered; when transmitted, if transmitted by telecopy, upon receipt
of telephonic or electronic confirmation; the day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight delivery service
(e.g., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to:
IF TO THE COMPANY, ADDRESSED TO:
Medical Graphics Corporation
000 Xxx Xxxxx Xxxxxxx
Xx. Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxxxx & Xxxxxx P.L.L.P.
0000 XXX Xxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, XX
Telecopy: (000) 000-0000
IF TO PARENT OR SUB, ADDRESSED TO:
Angeion Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Xx.
Telecopy: (000) 000-0000
42
With a copy to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
8.4. ENTIRE AGREEMENT; WAIVERS. This Agreement, together with all
exhibits and schedules hereto (including, without limitation, the Disclosure
Schedule), and the other agreements referred to herein, constitute the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements. understandings, negotiations and discussions,
whether oral or written, of the parties. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
8.5. MULTIPLE COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.6. INVALIDITY. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
8.7. FEES AND EXPENSES. Except as provided in Section 6.4 hereof,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.
8.8. CUMULATIVE REMEDIES. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
8.9. GOVERNING LAW. This Agreement shall be construed under the
laws of the State of Minnesota regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws.
8.10. AMENDMENT. This Agreement may be amended by the parties hereto
at any time before or after approval of matters presented in connection with the
Merger by the shareholders of the Company, but after any such shareholder
approval, no amendment shall be made which by law requires the further approval
of shareholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.11. PUBLIC ANNOUNCEMENTS. None of the parties will issue any press
release or public statement with respect to the transactions contemplated by
this Agreement, including the Merger, without the other party's prior consent
(such consent not to be unreasonably withheld), except as may be required by
applicable law, court process or the quotation requirements of NASDAQ. In
addition to the foregoing,
43
the parties will consult with each other before issuing, and provide each
other the opportunity to review and comment upon, any such press release or
other public statements with respect to such transactions. The parties agree
that the initial press release or releases to be issued with respect to the
transactions contemplated by this Agreement shall be mutually agreed upon
prior to the issuance thereof.
8.12. ENFORCEMENT OF AGREEMENT. The Company, Parent and Sub agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Company, Parent and Sub
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity. If any action is brought by Company to enforce this Agreement, the
Parent or Sub agree to waive the defense that Company has an adequate remedy at
law and to otherwise make no objection to the propriety of specific performance
as a remedy. If any action is brought by Parent or Sub to enforce this
Agreement, the Company agrees to waive the defense that Parent or Sub has an
adequate remedy at law and to otherwise make no objection to the propriety of
specific performance as a remedy.
8.13. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES. The
representations and warranties in this Agreement shall terminate at the
Effective Time.
8.14. NO THIRD PARTY BENEFICIARIES. Except as provided in Section
6.7, this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended or shall
confer upon any other person, any legal or equitable right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement. The agreements and
obligations of each party hereto shall be enforceable only against such party
and no recourse may be had to or against any shareholder, member or Affiliate of
such party with respect to the obligations of such party under this Agreement.
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, all as of the day and year first above written.
MEDICAL GRAPHICS CORPORATION
By:
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
ANGEION CORPORATION
By:
--------------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: President and Chief Executive Officer
ANG ACQUISITION CORP.
By:
--------------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: President
45
