Exhibit 2.1
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement")
is made and entered into as of February 3, 2005 (the "Signing Date"), by and
among FRANKLIN CAPITAL CORPORATION, a Delaware corporation ("Franklin"),
SURGICOUNT ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Franklin (the "Merger Subsidiary"), SURGICOUNT MEDICAL, INC., a
California corporation ("SurgiCount"), Xxxxx Xxxxxxx ("Xxxxxxx") and Xx. Xxxxxxx
Xxxxxxx ("Xx. Xxxxxxx" and, together with Xxxxxxx, the "Shareholders"). Certain
capitalized terms used in this Agreement are defined in Exhibit A attached
hereto and incorporated herein by reference.
RECITALS
WHEREAS, the Shareholders collectively hold one hundred percent (100%)
of the outstanding capital stock of SurgiCount as of the Signing Date and will
hold one hundred percent (100%) of the outstanding capital stock of SurgiCount
as of immediately prior to the Effective Time (as defined below);
WHEREAS, Franklin shall acquire SurgiCount by means of a
reverse-triangular merger (the "Merger") in accordance with the California
General Corporation Law (the "CGCL"), the Delaware General Corporation Law (the
"DGCL") and the terms of this Agreement whereby the Merger Subsidiary will merge
with and into SurgiCount, with SurgiCount continuing as the surviving
corporation in the Merger (the "Surviving Corporation") and a wholly owned
subsidiary of Franklin;
WHEREAS, it is intended that the Merger qualify as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, this Agreement has been approved by: (i) the respective boards
of directors of Franklin, the Merger Subsidiary and SurgiCount; (ii) Franklin,
as the sole stockholder of the Merger Subsidiary; and (iii) the Shareholders as
holders of one hundred percent (100%) of the outstanding capital stock of
SurgiCount; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement: (i) Xxxxxxx is entering into a consulting agreement with the
Surviving Corporation in the form attached hereto as Exhibit B and incorporated
herein by reference (the "Xxxxxxx Consulting Agreement"); (ii) Xx. Xxxxxxx is
entering into a consulting agreement with the Surviving Corporation in the form
attached hereto as Exhibit C and incorporated herein by reference (the "Xx.
Xxxxxxx Consulting Agreement"); (iii) each of Xxxxxxx and Xx. Xxxxxxx is
entering into a noncompetition agreement with the Surviving Corporation in the
form attached hereto as Exhibit D and incorporated herein by reference (the
"Noncompetition Agreement"); (iii) Franklin, the Shareholders and LaSalle Bank
National Association as escrow agent (the "Escrow Agent") are entering into an
escrow agreement in the form attached hereto as Exhibit E and incorporated
herein by reference (the "Escrow Agreement"); and (iv) Franklin and the
Shareholders are entering into a registration rights agreement in the form
attached hereto as Exhibit F and incorporated herein by reference (the
"Registration Rights Agreement").
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NOW, THEREFORE, in consideration of the foregoing and the respective
covenants, agreements and representations and warranties set forth herein, the
parties to this Agreement, intending to be legally bound, hereby agree as
follows:
AGREEMENT
1. DESCRIPTION OF MERGER.
1.1 Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, the Merger Subsidiary shall be merged
with and into SurgiCount, and the separate existence of the Merger Subsidiary
shall cease. Following the Effective Time, SurgiCount will continue as the
Surviving Corporation. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the CGCL and DGCL.
1.2 Closing; Effective Time. The consummation of the Merger (the
"Closing") shall take place at the offices of Paul, Hastings, Xxxxxxxx & Xxxxxx
LLP, 0000 Xxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. Pacific
Time on a date to be designated by Franklin (the "Closing Date") that shall not
be more than two (2) Business Days after the date on which the last of the
conditions set forth in Section 6 and Section 7 (other than conditions which by
their terms must be satisfied as of the Closing Date) has been satisfied.
Contemporaneously with the Closing, a properly executed agreement of merger
conforming to the requirements of the CGCL (the "Agreement of Merger") shall be
filed with the office of the Secretary of State of the State of California, and
a properly executed certificate of merger conforming to the requirements of the
DGCL (the "Certificate of Merger") shall be filed with the office of the
Secretary of State of the State of Delaware. The Merger shall become effective
upon the date and time of the filing of the Agreement of Merger with the office
of the Secretary of State of the State of California or upon such other date and
time as Franklin and the Shareholders may mutually agree and set forth in the
Agreement of Merger (the "Effective Time").
1.3 Corporate Structure of the Surviving Corporation. Unless otherwise
determined by Franklin prior to the Effective Time and communicated in writing
to SurgiCount and each Shareholder: (i) the articles of incorporation of
SurgiCount immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation upon and after the Effective Time;
(ii) the bylaws of SurgiCount immediately prior to the Effective Time shall be
the bylaws of the Surviving Corporation upon and after the Effective Time; and
(iii) the directors and officers of the Merger Subsidiary immediately prior to
the Effective Time shall be appointed as and shall be the directors and officers
of the Surviving Corporation upon and immediately after the Effective Time.
1.4 Per Share Merger Consideration. Subject to Section 1.5 and Section
10.2, at the Effective Time and without any further action on the part of
Franklin, the Merger Subsidiary, SurgiCount or the Shareholders, each share of
SurgiCount Common Stock outstanding as of immediately prior to the Effective
Time shall be converted into the right to receive:
(a) As soon as practicable following the Effective Time, an amount
of cash (the "Per Share Cash Consideration"), by wire transfer to an account or
accounts designated in writing by such Shareholders to Franklin at least two (2)
Business Days prior to the date of the
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Effective Time, equal to (i) $340,000, less (a) pursuant to the provisions of
Section 10.3, the aggregate amount of all fees, costs and expenses incurred by
or on behalf of SurgiCount or the Shareholders in connection with the
transactions contemplated by the Transaction Documents that are not paid by
SurgiCount or the Shareholders as of the Effective Time and (b) the aggregate
amount of the Cash Consideration Advance (as defined in the Amended Letter
Agreement (as defined below)) paid to SurgiCount pursuant to that certain
Amendment to Letter Agreement, dated as of January 13, 2005, by and between
Franklin and SurgiCount (the "Amended Letter Agreement"), divided by (ii) the
aggregate number of shares of SurgiCount Common Stock outstanding as of
immediately prior to the Effective Time.
(b) As soon as practicable following the Effective Time, that
number of shares of Franklin Common Stock (the "Per Share Closing Stock
Consideration") equal to (i) (a) $3,000,000, divided by (b) the average
As-Adjusted VWAP for the sixty (60) Trading Days prior to (but not including)
the Signing Date (the "60-Day VWAP"), divided by (ii) the aggregate number of
shares of SurgiCount Common Stock outstanding as of immediately prior to the
Effective Time; provided, however, that in the event that (x) the 60-Day VWAP is
equal to or greater than $15.00 (As-Adjusted), the 60-Day VWAP shall be equal to
$15.00 (As-Adjusted) or (y) the 60-Day VWAP is equal to or less than $10.00
(As-Adjusted), the 60-Day VWAP shall be equal to $10.00 (As-Adjusted).
(c) From time to time following the Effective Time, subject to the
terms and conditions set forth in Section 5.5, that number of Earn-Out Shares
(as defined below) (the "Per Share Earn-Out Stock Consideration" and, together
with the Per Share Cash Consideration and the Per Share Closing Stock
Consideration, the "Per Share Merger Consideration") equal to (i) the aggregate
number of Earn-Out Shares, if any, to be issued pursuant to Section 5.5, divided
by (ii) the aggregate number of shares of SurgiCount Common Stock outstanding as
of immediately prior to the Effective Time.
1.5 Escrow. At the Effective Time, Franklin shall withhold from the
aggregate Per Share Closing Stock Consideration otherwise payable to the
Shareholders pursuant to Section 1.4(b) an aggregate number of shares of
Franklin Common Stock (rounded up to the nearest whole share) equal to five
percent (5%) of the aggregate number of shares of Franklin Common Stock to be
issued as Per Share Closing Stock Consideration pursuant Section 1.4(b) (the
"Escrow Stock") and shall deliver the Escrow Stock to the Escrow Agent to be
held as collateral to secure the rights of the Indemnitees under Section 9
hereof. The Escrow Stock shall be held pursuant to the terms of the Escrow
Agreement for a period of six (6) months following the Closing Date (the "Escrow
Period"); provided, however, that in the event any Indemnitee has made a claim
under Section 9 prior to the end of the Escrow Period, then such Escrow Period
shall continue, and the Escrow Agent shall continue to hold such Escrow Stock
pursuant to the terms of the Escrow Agreement, until such claim is fully and
finally resolved.
1.6 Conversion of Shares at Effective Time. At the Effective Time, by
virtue of the Merger and without any further action on the part of Franklin, the
Merger Subsidiary, SurgiCount or either Shareholder: (i) all shares of
SurgiCount Common Stock then held by SurgiCount (or held in SurgiCount's
treasury) shall be canceled and retired and shall cease to exist, and no portion
of the Per Share Merger Consideration or other consideration shall be delivered
in exchange therefor; (ii) all shares of SurgiCount Common Stock then held by
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Franklin or the Merger Subsidiary shall be canceled and retired and shall cease
to exist, and no portion of the Per Share Merger Consideration or other
consideration shall be delivered in exchange therefor; (iii) each share of
common stock of the Merger Subsidiary outstanding immediately prior to the
Effective Time shall be converted into one share of common stock of the
Surviving Corporation; and (iv) subject to Sections 1.5 and 1.8, each share of
SurgiCount Common Stock shall be converted into the right to receive the Per
Share Merger Consideration.
1.7 Closing of SurgiCount's Transfer Books. At the Effective Time, each
of the Shareholders shall cease to have any rights as a shareholder of
SurgiCount, and the stock transfer books of SurgiCount shall be closed with
respect to all shares of SurgiCount capital stock outstanding immediately prior
to the Effective Time. No further transfer of any such shares of capital stock
of SurgiCount shall be made on such stock transfer books after the Effective
Time. If, after the Effective Time, a valid certificate previously representing
any shares of SurgiCount capital stock (each, a "SurgiCount Stock Certificate")
is presented to Franklin, such SurgiCount Stock Certificate shall be cancelled
and exchanged as provided in Section 1.8.
1.8 Exchange of Certificates; Delivery of Per Share Merger Consideration.
(a) As soon as practicable after the Effective Time, Franklin will
send to each of the Shareholders a letter of transmittal in customary form and
containing such provisions as Franklin may reasonably specify and instructions
for use in effecting the surrender of all SurgiCount Stock Certificates in
exchange for the Per Share Merger Consideration. Upon surrender of a SurgiCount
Stock Certificate to Franklin for cancellation and exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by Xxxxxxxx, Xxxxxxxx shall: (i) deliver to each Shareholder
a certificate representing such Shareholder's Pro Rata Percentage of the
aggregate Per Share Closing Stock Consideration (as determined in accordance
with Section 1.4(b)), less such Shareholder's Pro Rata Percentage of the Escrow
Stock; (ii) deliver to the Escrow Agent a certificate representing such
Shareholder's Pro Rata Percentage of the Escrow Stock to be held in accordance
with the terms of the Escrow Agreement; and (iii) deliver to each Shareholder
cash in the amount of such Shareholder's Pro Rata Percentage of the aggregate
Per Share Cash Consideration (as determined in accordance with Section 1.4(a)).
In lieu of any fractional shares of Franklin Common Stock which either
Shareholder would otherwise be entitled to receive, such Shareholder shall be
paid cash in an amount equal to the product of (i) the number of fractional
shares of Franklin Common Stock which such Shareholder would otherwise be
entitled to receive, multiplied by (ii) the Closing Price on the Closing Date
(or, if such Closing Date is not a Trading Day, then the Closing Price on the
first Trading Day immediately preceding the Closing Date). All SurgiCount Stock
Certificates surrendered to Franklin shall be canceled after such delivery.
Until surrendered as contemplated by this Section 1.8, each SurgiCount Stock
Certificate shall be deemed, from and after the Effective Time, to represent
only the right to receive the Per Share Merger Consideration in accordance with
this Agreement.
(b) Franklin and the Surviving Corporation shall be entitled to
deduct and withhold from the aggregate Per Share Merger Consideration payable or
otherwise deliverable to either Shareholder pursuant to this Agreement such
amounts as Franklin or the Surviving Corporation are required to deduct or
withhold therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
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amounts shall be treated for all purposes under this Agreement as having been
paid to the Shareholder to whom such amounts would otherwise have been paid.
1.9 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code, and the parties shall report the transactions contemplated by this
Agreement consistent with such intent and shall take no position in any Tax
filing or Legal Proceeding inconsistent therewith. The parties to this Agreement
hereby adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
None of Franklin, SurgiCount or either of the Shareholders, has taken or failed
to take, and between and including the Signing Date and the Closing Date, if it
occurs, and after the Closing Date, if it occurs, none of Franklin, SurgiCount
or either of the Shareholders shall take or fail to take, any action which
reasonably could be expected to cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
1.10 Further Action. If, at any time after the Effective Time, any
further action is determined by Franklin to be necessary or desirable to carry
out the transactions contemplated by the Transaction Documents or to xxxx
Xxxxxxxx or the Surviving Corporation with full right, title and possession of
and to all rights and property of SurgiCount, the officers and directors of
Franklin and the Surviving Corporation shall be fully authorized (in the name of
SurgiCount, each Shareholder or otherwise) to take such action.
2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Except as set forth
on the SurgiCount Disclosure Schedule, each of the Shareholders, jointly and
severally, represents and warrants, as of the Signing Date and as of the Closing
Date, to and for the benefit of the Indemnitees, as follows:
2.1 Due Organization; No Subsidiaries; Etc. SurgiCount is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has all necessary power and authority: (i) to conduct
its business in the manner in which its business is currently being conducted;
(ii) to own and use its assets in the manner in which its assets are currently
owned and used; and (iii) to perform its obligations under all SurgiCount
Contracts. SurgiCount has not conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the name "SurgiCount Medical, Inc." SurgiCount is
not and has not been required to be qualified, authorized, registered or
licensed to do business as a foreign corporation in any jurisdiction. SurgiCount
has no Subsidiaries, does not own any controlling interest in any Entity and has
never owned, beneficially or otherwise, any shares or other securities of, or
any direct or indirect equity or other financial interest in, any Entity.
SurgiCount has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. Neither SurgiCount nor any of the
Shareholders has ever approved, or commenced any proceeding or made any election
contemplating, the dissolution or liquidation of SurgiCount's business or
affairs.
2.2 Articles of Incorporation and Bylaws; Records. SurgiCount has
delivered to Franklin accurate and complete copies of: (i) the articles of
incorporation and bylaws, including all amendments thereto, of SurgiCount; (ii)
the stock records of SurgiCount; and (iii) the minutes and other records of the
meetings and other proceedings (including any actions taken by written
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consent or otherwise without a meeting) of the shareholders of SurgiCount, the
board of directors of SurgiCount and all committees of the board of directors of
SurgiCount (the items described in the foregoing clauses "(i)", "(ii)" and
"(iii)" of this Section 2.2 being collectively referred to herein as the
"SurgiCount Documents"). There have been no formal meetings or other proceedings
of the shareholders of SurgiCount, the board of directors of SurgiCount or any
committee of the board of directors of SurgiCount that are not fully reflected
in SurgiCount Documents. There has not been any violation of any of the
SurgiCount Documents, and at no time has SurgiCount taken any action that is
inconsistent in any material respect with the SurgiCount Documents. The books of
account, stock records, minute books and other records of SurgiCount are
accurate, up-to-date and complete in all material respects, and have been
maintained in accordance with Legal Requirements and prudent business practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of SurgiCount consists solely of
10,000,000 shares of SurgiCount Common Stock, of which 10,000,000 shares have
been issued and are outstanding. All of the outstanding shares of SurgiCount
Common Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; (ii) have been issued in compliance with (x) all
applicable federal and state securities laws and other applicable Legal
Requirements; and (y) all requirements set forth in the SurgiCount Documents and
SurgiCount Contracts; and (iii) are held by the Shareholders. No shares of
SurgiCount Common Stock are subject to a repurchase option in favor of
SurgiCount, and SurgiCount has never repurchased, redeemed or otherwise
reacquired any shares of SurgiCount capital stock or other securities of
SurgiCount.
(b) There are no: (i) outstanding subscriptions, options, calls,
warrants or rights (whether or not currently exercisable) to acquire any shares
of SurgiCount capital stock or other securities of SurgiCount; (ii) outstanding
securities, instruments or obligations that are or may become convertible into
or exchangeable for any shares of SurgiCount capital stock or other securities
of SurgiCount; (iii) Contracts (other than this Agreement) under which
SurgiCount or either Shareholder is or may become obligated to sell, transfer,
exchange or issue any shares of SurgiCount capital stock or any other securities
of SurgiCount; or (iv) conditions or circumstances that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of SurgiCount capital
stock or other securities of SurgiCount (all of the rights referenced in the
foregoing clauses "(i)"through "(iv)" of this Section 2.3(b) being collectively
referred to herein as "SurgiCount Rights"). SurgiCount has never issued any debt
securities.
2.4 SurgiCount Financial Statements; Absence of Changes. As of the
Signing Date, SurgiCount does not have any audited or unaudited financial
statements. However, as provided in Section 6.5(j) and as a condition to the
obligations of Franklin and the Merger Subsidiary to effect the Merger,
SurgiCount will deliver to Franklin the SurgiCount Financial Statements and the
SurgiCount Financial Statements Certificate (each as defined below).
2.5 Title to Assets. SurgiCount owns, and has good, valid and marketable
title to, all (and no other Person has any interest in any) assets purported to
be owned by SurgiCount, including: (i) all assets reflected on the Latest
Balance Sheet (as defined below); (ii) all assets
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referred to in Part 2.5 of the SurgiCount Disclosure Schedule and all of
SurgiCount's rights under the SurgiCount Contracts; and (iii) all other assets
reflected in SurgiCount's books and records as being owned by SurgiCount. All of
such assets are owned by SurgiCount free and clear of any Encumbrances, except
for any lien for current taxes not yet due and payable and minor liens that have
arisen in the ordinary course of business and that do not (individually or in
the aggregate) materially detract from the value of the assets subject thereto
or materially impair the operations of SurgiCount. Part 2.5 of the SurgiCount
Disclosure Schedule identifies all assets of SurgiCount that are being leased or
licensed to or by SurgiCount. All such leases and licenses are valid and
enforceable against the parties thereto, subject to: (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors; and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.6 Bank Accounts; Receivables. Part 2.6 of the SurgiCount Disclosure
Schedule provides: (i) accurate and complete information with respect to each
account maintained by or for the benefit of SurgiCount at any bank or other
financial institution, including the name of the bank or financial institution,
the account number and the balance as of the Signing Date; and (ii) an accurate
and complete breakdown and aging of all accounts receivable and other
receivables of SurgiCount as of the Signing Date.
2.7 Equipment; Leasehold. All material items of equipment and other
tangible assets owned by or leased to SurgiCount are adequate for the uses to
which they are being put, are in good condition and repair (ordinary wear and
tear excepted) and are adequate for the conduct of SurgiCount's business in the
manner in which such business is currently being conducted. SurgiCount does not
own any real property or any interest in real property, except for the leasehold
interest created under the real property leases identified in Part 2.7 of the
SurgiCount Disclosure Schedule.
2.8 Intellectual Property.
(a) Part 2.8(a) of the SurgiCount Disclosure Schedule accurately
and completely identifies and describes each proprietary product or service that
has been developed by or is currently under development by SurgiCount.
SurgiCount has never manufactured, marketed or sold any such proprietary product
or service.
(b) Part 2.8(b) of the SurgiCount Disclosure Schedule accurately
identifies: (i) each item of Registered IP in which SurgiCount has or purports
to have an ownership interest of any nature (whether exclusively, jointly with
another Person, or otherwise); (ii) the jurisdiction in which such item of
Registered IP has been registered or filed and the applicable registration or
serial number; (iii) any other Person that has an ownership interest in such
item of Registered IP and the nature of such ownership interest; and (iv) each
product or service identified in Part 2.8(a) of the SurgiCount Disclosure
Schedule that embodies, utilizes, or is based upon or derived from (or, with
respect to products and services under development, that is expected to embody,
utilize, or be based upon or derived from) such item of Registered IP.
SurgiCount has provided to Franklin complete and accurate copies of all
applications, correspondence, and other material documents related to each such
item of Registered IP.
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(c) Part 2.8(c) of the SurgiCount Disclosure Schedule accurately
identifies: (i) all Intellectual Property Rights or Intellectual Property
licensed to SurgiCount (other than any non-customized software that is so
licensed solely in executable or object code form pursuant to a non-exclusive,
internal-use software license or is generally publicly available on standard
terms for less than $500.00); (ii) the corresponding Contract or Contracts
pursuant to which such Intellectual Property Rights or Intellectual Property is
or are licensed to SurgiCount; and (iii) whether the license or licenses granted
to SurgiCount are exclusive or non-exclusive.
(d) Part 2.8(d) of the SurgiCount Disclosure Schedule accurately
identifies each Contract pursuant to which any Person has been granted any
license under, or otherwise has received or acquired any right (whether or not
currently exercisable) or interest in, any SurgiCount IP. SurgiCount is not
bound by, and no SurgiCount IP is subject to, any Contract containing any
covenant or other provision that in any way limits or restricts the ability of
SurgiCount to use, exploit, assert, or enforce any SurgiCount IP anywhere in the
world.
(e) SurgiCount exclusively owns all right, title, and interest to
and in the SurgiCount IP (other than Intellectual Property Rights exclusively
licensed to SurgiCount, as identified in Part 2.8(c) of the SurgiCount
Disclosure Schedule) free and clear of any Encumbrances (other than
non-exclusive licenses granted pursuant to the Contracts listed in Part 2.8(d)
of the SurgiCount Disclosure Schedule). Without limiting the generality of the
foregoing:
(i) All documents and instruments necessary to perfect the
rights of SurgiCount in the SurgiCount IP have been validly executed, delivered
and filed in a timely manner with the appropriate Governmental Body.
(ii) Each Person who is or was an employee or contractor of
SurgiCount and who is or was involved in the creation or development of any
SurgiCount IP has signed a valid, enforceable written agreement containing an
assignment of Intellectual Property Rights to SurgiCount and confidentiality
provisions in favor of SurgiCount regarding the SurgiCount IP. No current or
former Representative or Affiliate of SurgiCount has any claim, right (whether
or not currently exercisable) or interest to or in any SurgiCount IP.
(iii) No funding, facilities or personnel of any Governmental
Body were used, directly or indirectly, to develop or create, in whole or in
part, any SurgiCount IP.
(iv) SurgiCount has taken all reasonable steps to maintain the
confidentiality of and otherwise protect and enforce its rights in all
proprietary information that SurgiCount holds, or purports to hold, as a trade
secret.
(v) SurgiCount has not assigned or otherwise transferred
ownership of, or agreed to assign or otherwise transfer ownership of, any
SurgiCount IP to any other Person.
(vi) SurgiCount is not, and has never been, a member or
promoter of, or a contributor to, any industry standards body or similar
organization that could require or obligate SurgiCount to grant or offer to any
other Person any license or right to any SurgiCount IP.
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(f) All SurgiCount IP is valid, subsisting and enforceable.
Without limiting the generality of the foregoing:
(i) Each U.S. patent application and U.S. patent in which
SurgiCount has or purports to have an ownership interest was filed within one
(1) year after a printed publication, public use or offer for sale of each
invention described in such U.S. patent application or U.S. patent. Each foreign
patent application and foreign patent in which SurgiCount has or purports to
have an ownership interest was filed or claims priority to a patent application
filed prior to each invention described in the foreign patent application or
foreign patent being made available to the public.
(ii) Each item of SurgiCount IP that is Registered IP is and
at all times has been maintained in compliance with all Legal Requirements and
all filings, payments and other actions required to be made or taken to maintain
such item of SurgiCount IP in full force and effect have been made by the
applicable deadline. No application for any type of Registered IP filed by or on
behalf of SurgiCount has been abandoned, allowed to lapse or rejected. Part
2.8(f)(ii) of the SurgiCount Disclosure Schedule accurately identifies and
describes each action, filing, and payment that must be taken or made on or
before the date that is ninety (90) days after the Closing Date in order to
maintain such item of SurgiCount IP in full force and effect.
(iii) No interference, opposition, reissue, reexamination or
other Legal Proceeding is pending or, to the Best Knowledge of the Shareholders,
threatened, in which the scope, validity or enforceability of any SurgiCount IP
is being, has been, or could reasonably be expected to be contested or
challenged. To the Best Knowledge of the Shareholders, there is no basis for a
claim that any SurgiCount IP is invalid or unenforceable.
(g) To the Best Knowledge of the Shareholders: (i) no Person has
infringed, misappropriated or otherwise violated; and (ii) no Person is
currently infringing, misappropriating or otherwise violating, any SurgiCount
IP. Part 2.8(g) of the SurgiCount Disclosure Schedule accurately identifies (and
SurgiCount has provided to Franklin a complete and accurate copy of) each letter
or other written or electronic communication or correspondence that has been
sent or otherwise delivered in the last five (5) years by or to SurgiCount or
any Representative or Affiliate of SurgiCount regarding any actual, alleged, or
suspected infringement or misappropriation of any SurgiCount IP, and Part 2.8(g)
of the SurgiCount Disclosure Schedule provides a brief description of the
current status of the matter referred to in such letter, communication, or
correspondence.
(h) Neither the execution, delivery or performance of the
Transaction Documents nor the consummation of any of the transactions
contemplated by the Transaction Documents will, with or without notice or lapse
of time, result in, or give any other Person the right or option to cause or
declare: (i) a loss of, or Encumbrance on, any SurgiCount IP; (ii) a breach of
any license agreement listed or required to be listed in Part 2.8(c) of the
SurgiCount Disclosure Schedule; (iii) the grant, assignment or transfer to any
other Person of any license or other right or interest under, to, or in any of
SurgiCount IP.
(i) No claim or Legal Proceeding involving any Intellectual
Property or Intellectual Property Right licensed to SurgiCount is pending or, to
the Best Knowledge of the
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Shareholders, has been threatened, except for any such claim or Legal Proceeding
that, if determined adversely to SurgiCount, would not adversely affect the use
or exploitation of such Intellectual Property or Intellectual Property Right by
SurgiCount.
(j) SurgiCount has never infringed (directly, contributorily, by
inducement or otherwise), misappropriated or otherwise violated any Intellectual
Property Right of any other Person. Without limiting the generality of the
foregoing:
(i) No infringement, misappropriation or similar claim or
Legal Proceeding is pending or, to the Best Knowledge of the Shareholders,
threatened against SurgiCount or against any other Person who may be entitled to
be indemnified, defended, held harmless or reimbursed by SurgiCount with respect
to such claim or Legal Proceeding. SurgiCount has never received any notice or
other communication, whether written or oral, relating to any actual, alleged or
suspected infringement, misappropriation or violation of any Intellectual
Property Rights of another Person.
(ii) SurgiCount is not bound by any Contract to indemnify,
defend, hold harmless or reimburse any other Person with respect to any
Intellectual Property infringement, misappropriation or any similar claim.
SurgiCount has never assumed, or agreed to discharge or otherwise take
responsibility for, any existing or potential liability of another Person for
the infringement, misappropriation or violation of any Intellectual Property
Right.
2.9 Contracts. Part 2.9 of the SurgiCount Disclosure Schedule identifies
each SurgiCount Contract and provides an accurate description of the terms of
each SurgiCount Contract that is not in written form. SurgiCount has delivered
to Franklin accurate and complete copies of all written SurgiCount Contracts.
Each SurgiCount Contract is valid, binding and enforceable by SurgiCount in
accordance with its terms and, after the Effective Time, will continue to be
valid, binding and enforceable on identical terms, in each case subject to: (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors; and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. SurgiCount has not violated or breached, or
committed any default under, any SurgiCount Contract, and, to the Best Knowledge
of the Shareholders, no other Person has violated or breached, or committed any
default under, any SurgiCount Contract. SurgiCount has not received any notice
or other communication regarding any actual or possible violation or breach of,
or default under, any SurgiCount Contract. Part 2.9 of the SurgiCount Disclosure
Schedule provides an accurate and complete list of all Consents required under
any SurgiCount Contract to consummate the transactions contemplated by the
Transaction Documents.
2.10 Liabilities; Fees, Costs and Expenses. SurgiCount has no accrued,
contingent or other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in the SurgiCount Financial Statements
and whether due or to become due), except for: (i) liabilities identified as
such in the "liabilities" column of the Latest Balance Sheet; (ii) accounts
payable or accrued salaries that have been incurred by SurgiCount and disclosed
on Part 2.10 of the SurgiCount Disclosure Schedule; and (iii) liabilities under
the SurgiCount Contracts listed in Part 2.9(a) of the SurgiCount Disclosure
Schedule, to the extent the nature and magnitude of such liabilities can be
specifically ascertained by reference to the text of such SurgiCount Contracts.
The total amount of all fees, costs and expenses, including any attorneys',
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accountants', or financial advisors' fees, incurred by or on behalf of
SurgiCount or the Shareholders in connection with: (i) the due diligence
conducted by SurgiCount with respect to the Merger; (ii) the negotiation,
preparation and review of the Transaction Documents; and (iii) the preparation
and submission of any filing or notice required to be made or given in
connection with any of the transactions contemplated by the Transaction
Documents and the obtaining of any Consent required to be obtained in connection
with any transactions contemplated by the Transaction Documents, do not in the
aggregate exceed $120,000. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or any of the other transactions contemplated by the Transaction Documents based
upon any arrangements or agreements made by or on behalf of SurgiCount or either
Shareholder.
2.11 Compliance with Legal Requirements. SurgiCount is, and has at all
times been, in compliance with all applicable Legal Requirements. SurgiCount has
never received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.12 Governmental Authorizations. Part 2.12 of the SurgiCount Disclosure
Schedule identifies each Governmental Authorization held by SurgiCount, and
SurgiCount has delivered to Franklin accurate and complete copies of all
Governmental Authorizations identified in Part 2.12 of the SurgiCount Disclosure
Schedule. The Governmental Authorizations identified in Part 2.12 of the
SurgiCount Disclosure Schedule are valid and in full force and effect and
collectively constitute all Governmental Authorizations necessary to enable
SurgiCount to conduct its business in the manner in which its business is
currently being conducted. SurgiCount is in substantial compliance with the
terms and requirements of the respective Governmental Authorizations identified
in Part 2.12 of the SurgiCount Disclosure Schedule and has never received any
notice or other communication from any Governmental Body regarding: (i) any
actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization; or (ii) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
2.13 Tax Matters. All Tax Returns required to be filed by or on behalf
of SurgiCount with any Governmental Body before the Closing Date (the
"SurgiCount Returns"): (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date); (ii) have been,
or will be when filed, accurately and completely prepared in all material
respects in compliance with all applicable Legal Requirements; and (iii) have
been provided or made available to Franklin. All amounts shown on any SurgiCount
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date. No SurgiCount Return has ever been examined or audited
by any Governmental Body. No claim or Legal Proceeding is pending or has been
threatened against or with respect to SurgiCount in respect of any Tax. There
are no unsatisfied liabilities for Taxes, including liabilities for interest,
additions to tax and penalties thereon and related expenses, with respect to
which any notice of deficiency or similar document has been received by
SurgiCount (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by
SurgiCount and with respect to which adequate reserves for payment have been
established).
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There are no liens for Taxes upon any of the assets of SurgiCount except liens
for current Taxes not yet due and payable.
2.14 Employee and Labor Matters; Benefit Plans. Part 2.14 of the
SurgiCount Disclosure Schedule contains a list of all of the employees of
SurgiCount as of the Signing Date and correctly reflects, in all material
respects, the nature and amount of all compensation payable to them, their dates
of employment and their positions. All of the employees listed on Part 2.14 of
the SurgiCount Disclosure Schedule are "at will" employees. Except as expressly
contemplated by the Transaction Documents, neither the execution, delivery or
performance of the Transaction Documents, nor the consummation of any of the
transactions contemplated thereby, will result in any liability to SurgiCount,
Franklin or the Merger Subsidiary or in any payment to any current or former
employee or director of, or consultant to, SurgiCount. SurgiCount is in
compliance in all material respects with all applicable Legal Requirements and
Contracts relating to employment, employment practices, wages, bonuses and terms
and conditions of employment, including employee compensation matters.
SurgiCount does not maintain, and has never maintained, any employee benefit
plans, including any equity incentive plan, bonus plan, deferred compensation
arrangement, health care plan or pension plan.
2.15 Insurance. Part 2.15 of the SurgiCount Disclosure Schedule
identifies all insurance policies maintained by, at the expense of, or for the
benefit of SurgiCount and identifies any material claims made thereunder.
SurgiCount has delivered to Franklin accurate and complete copies of the
insurance policies identified on Part 2.15 of the SurgiCount Disclosure
Schedule. Each of the insurance policies identified in Part 2.15 of the
SurgiCount Disclosure Schedule is in full force and effect.
2.16 Legal Proceedings; Orders. There is no pending Legal Proceeding,
and to the Best Knowledge of the Shareholders, no Person has threatened to
commence any Legal Proceeding that: (i) involves SurgiCount or any of the assets
owned, used or controlled by SurgiCount or any Person whose liability SurgiCount
has or may have retained or assumed, either contractually or by operation of
law; or (ii) challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, any of the transactions
contemplated by the Transaction Documents. To the Best Knowledge of the
Shareholders, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
There is no Order to which SurgiCount, or any of the assets owned or used by
SurgiCount, is subject. To the Best Knowledge of the Shareholders, no officer or
other employee of SurgiCount is subject to any Order that prohibits such officer
or other employee from engaging in or continuing any conduct, activity or
practice relating to SurgiCount's business.
2.17 Authority; Binding Nature of Agreement. SurgiCount and each of the
Shareholders has the absolute and unrestricted right, power and authority to
enter into and to perform its obligations under each of the Transaction
Documents to which it is a party, and the execution, delivery and performance by
SurgiCount of each of the Transaction Documents to which it is a party have been
duly authorized by all necessary action on the part of SurgiCount. Each of the
Transaction Documents to which SurgiCount or either Shareholder is a party
constitutes the legal, valid and binding obligation of SurgiCount or such
Shareholder,
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enforceable against SurgiCount or such Shareholder in accordance with its terms,
subject to: (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors; and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
2.18 Non-Contravention. Neither the execution, delivery or performance
of the Transaction Documents, nor the consummation of any of the transactions
contemplated thereby, will directly or indirectly (with or without notice or
lapse of time): (i) contravene, conflict with or result in a violation of any of
the provisions of the SurgiCount Documents; (ii) to the Best Knowledge of the
Shareholders, contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated by the Transaction Documents or to exercise any remedy or obtain
any relief under any Legal Requirement or any Order to which SurgiCount, or any
of the assets owned, used or controlled by SurgiCount, is subject; (iii)
contravene, conflict with or result in a violation or breach of, or result in a
default under, any provision of any SurgiCount Contract; or (iv) result in the
imposition or creation of any Encumbrance upon or with respect to any asset
owned or used by SurgiCount (except for minor liens that will not, individually
or in the aggregate, materially detract from the value of the assets subject
thereto).
2.19 Full Disclosure. None of the Transaction Documents to which
SurgiCount or either Shareholder is a party: (i) contains any representation,
warranty or information that is false or misleading with respect to any material
fact; or (ii) omits to state any material fact necessary in order to make the
representations, warranties and information contained herein and therein, in the
light of the circumstances under which such representations, warranties and
information were or will be made or provided, not false or misleading.
2.20 SurgiCount Corporate Action. The board of directors of SurgiCount
has: (i) unanimously determined that the Transaction Documents to which
SurgiCount is a party and the transactions contemplated thereby are advisable
and in the best interests of SurgiCount and its shareholders; and (ii)
unanimously recommended the Transaction Documents to which SurgiCount is a party
and the transactions contemplated thereby for approval by the shareholders of
SurgiCount. The Shareholders, as holders of one hundred percent (100%) of the
outstanding capital stock of SurgiCount, have unanimously approved the
Transaction Documents to which SurgiCount is a party and the transactions
contemplated thereby.
2.21 Reorganization. SurgiCount and the Shareholders have no reason to
believe that the Merger will not qualify as a "reorganization" within the
meaning of Section 368 of the Code.
3. REPRESENTATIONS AND WARRANTIES OF FRANKLIN AND THE MERGER SUBSIDIARY.
Each of Franklin and the Merger Subsidiary, jointly and severally, represents
and warrants to and for the benefit of SurgiCount and the Shareholders as
follows:
3.1 Corporate Existence and Power. Each of Franklin and the Merger
Subsidiary: (i) is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware; (ii) has all corporate power
required to conduct its business as presently conducted; and (iii) is duly
qualified to do business and is in good standing in each jurisdiction in which
the conduct of its business or the ownership or leasing of its properties
requires such
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qualification, except where the failure to be so qualified would not have a
material adverse effect on Franklin's or the Merger Subsidiary's business,
financial condition or results of operations.
3.2 Authority; Binding Nature of Agreement. Each of Franklin and the
Merger Subsidiary has the absolute and unrestricted right, power and authority
to perform its obligations under each of the Transaction Documents to which it
is a party, and the execution, delivery and performance by each of Franklin and
the Merger Subsidiary of each of the Transaction Documents to which it is a
party have been duly authorized by all necessary action on the part of Franklin
and the Merger Subsidiary and such parties' respective boards of directors. No
vote of Franklin's stockholders is needed to approve any of the Transaction
Documents to which it is a party or any of the transactions contemplated
thereby. Each of the Transaction Documents to which Franklin and the Merger
Subsidiary is a party constitutes a valid and binding obligation of Franklin and
the Merger Subsidiary, enforceable against Franklin and the Merger Subsidiary in
accordance with its terms, subject to: (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.3 SEC Filings; Financial Statements.
(a) Since January 1, 2004, Franklin has filed with the SEC all
required reports and filings (the "Franklin SEC Documents"). As of the time it
was filed with the SEC (or, if amended or superseded by a filing prior to the
Signing Date, then on the date of such amending or superseding filing) each of
the Franklin SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be.
(b) The financial statements contained in the Franklin SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with GAAP, except as may be indicated in the notes to such
consolidated financial statements and, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly presented the financial position of Franklin as of
the respective dates thereof and the results of operations of Franklin for the
periods covered thereby.
3.4 Valid Issuance. The shares of Franklin Common Stock to be issued as
Per Share Closing Stock Consideration pursuant to Section 1.4(b) will, when
issued in accordance with the provisions of this Agreement, be validly issued,
fully paid and nonassessable. In the event of the issuance of any Earn-Out
Shares pursuant to Section 5.5, the shares of Franklin Common Stock to be issued
as Earn-Out Shares will, when issued in accordance with the provisions of the
this Agreement, be validly issued, fully paid and nonassessable.
4. CERTAIN COVENANTS OF SURGICOUNT AND THE SHAREHOLDERS.
4.1 Access and Investigation. During the period commencing on the
Signing Date and ending as of the Effective Time (the "Pre-Closing Period"),
SurgiCount shall, and shall cause SurgiCount's Representatives to: (i) provide
Franklin and Franklin's Representatives with reasonable access to SurgiCount's
Representatives and assets and to all existing books, records,
14
Tax Returns, work papers and other documents and information relating to
SurgiCount; and (ii) provide Franklin and Franklin's Representatives with copies
of such existing books, records, Tax Returns, work papers and other documents
and information relating to SurgiCount, and with such additional financial,
operating and other data and information regarding SurgiCount, as Franklin or
Franklin's Representatives may reasonably request.
4.2 Operation of SurgiCount's Business.
(a) During the Pre-Closing Period, SurgiCount shall: (i) ensure
that SurgiCount conducts its business and operations in the ordinary course and
in accordance with past practices and in compliance with all applicable Legal
Requirements and the requirements of all SurgiCount Contracts; (ii) use its
commercially reasonable efforts in good faith to ensure that SurgiCount
preserves intact its current business organization, keeps available the services
of its current officers and employees and maintains its relations and goodwill
with all Persons having business relationships with SurgiCount; (iii) provide
all notices, assurances and support required by any Contract relating to any
Intellectual Property and otherwise use its commercially reasonable efforts to
ensure that no condition under such Contract occurs which could result in, or
could increase the likelihood of any transfer or disclosure by SurgiCount of any
Intellectual Property; and (iv) to the extent requested by Franklin reasonably
and in good faith as to the number and timing of such requests, cause its
officers to report regularly to Franklin concerning the status of SurgiCount's
business.
(b) During the Pre-Closing Period, absent the prior written
consent of Franklin, neither SurgiCount nor either Shareholder shall take any
action that would: (i) result in any of its representations and warranties set
forth in any Transaction Document to which SurgiCount or such Shareholder is a
party (including the representations and warranties set forth in the SurgiCount
Financial Statements Certificate) being or becoming untrue; (ii) result in any
of the conditions to the consummation of the Merger set forth in Sections 6 and
7 not being satisfied; (iii) breach any provision of any Transaction Document to
which SurgiCount or such Shareholder is a party; or (iv) authorize, agree,
commit or enter into any Contract to take any of the actions described in
clauses "(i)" through "(iii)" of this Section 4.2(b).
4.3 No Negotiation. During the Pre-Closing Period, SurgiCount and each
of the Shareholders acknowledge and agree that they will not, and will not
permit any of their respective Representatives to, directly or indirectly: (i)
solicit, initiate, encourage or facilitate the initiation or submission of any
expression of interest, inquiry, proposal or offer from any Person (other than
Franklin) relating to a possible Acquisition Transaction; (ii) participate in
any discussions or negotiations or enter into any agreement with, or provide any
information to, any Person (other than Franklin) relating to or in connection
with a possible Acquisition Transaction; or (iii) entertain, consider or accept
any proposal or offer from any Person (other than Franklin) relating to a
possible Acquisition Transaction. SurgiCount and each of the Shareholders shall,
and shall cause each of their respective Representatives to, immediately
discontinue any ongoing discussions or negotiations (other than any ongoing
discussions with Franklin) relating to a possible Acquisition Transaction and
shall promptly provide Franklin with both an oral and a written description of
any expression of interest, inquiry, proposal or offer relating to a possible
Acquisition Transaction that is received by SurgiCount, either Shareholder or by
any of their respective Representatives from any Person (other than Franklin)
during the Pre-Closing Period.
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5. ADDITIONAL COVENANTS OF THE PARTIES.
5.1 Additional Agreements. Franklin, SurgiCount and the Shareholders
shall use commercially reasonable efforts to: (i) cause the conditions set forth
in Section 6, in the case of SurgiCount and the Shareholders, and in Section 7,
in the case of Franklin, to be satisfied as soon as practicable prior to the
Termination Date; and (ii) take, or cause to be taken, any and all actions
necessary to consummate the transactions contemplated by the Transaction
Documents as soon as practicable prior to the Termination Date.
5.2 Regulatory Approvals. Franklin, SurgiCount and the Shareholders
shall use commercially reasonable efforts to file, as soon as practicable after
the Signing Date, all notices, reports and other documents required to be filed
with any Governmental Body with respect to any of the transactions contemplated
by the Transaction Documents and to submit promptly any additional information
requested by any such Governmental Body. Each of Franklin, on one hand, and
SurgiCount and the Shareholders, on the other hand, shall: (i) give the other
party prompt notice of the commencement of any Legal Proceeding by or before any
Governmental Body with respect to any of the transactions contemplated by the
Transaction Documents of which the notifying party is or becomes aware; (ii)
keep the other party timely informed in reasonable detail in writing or orally
as to the status of any such Legal Proceeding; and (iii) promptly inform the
other party of any communication to or from any Governmental Body relating to
any of the transactions contemplated by the Transaction Documents.
5.3 Public Announcements. During the Pre-Closing Period: (i) neither
SurgiCount nor any of the Shareholders shall issue any press release or make any
public statement, or permit their respective Representatives to issue any press
release or make any public statement, regarding the Transaction Documents or any
of the transactions contemplated thereby, without Franklin's prior written
consent.
5.4 Certain Notifications. During the Pre-Closing Period: (i) SurgiCount
shall promptly notify Franklin in writing of (a) the discovery by SurgiCount or
either Shareholder of any event, condition, fact or circumstance that occurred
or existed on or prior to the Signing Date and that caused or constitutes an
inaccuracy in or breach of any representation or warranty made by SurgiCount or
either Shareholder in any Transaction Document, (b) any event, condition, fact
or circumstance that occurs, arises or exists after the Signing Date and that
would cause or constitute an inaccuracy in or breach of any representation or
warranty made by SurgiCount or either Shareholder in this Agreement if (1) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance or (2)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the Signing Date, (c) any breach of any covenant or obligation of
SurgiCount or either Shareholder; and (d) any event, condition, fact or
circumstance that is likely to make the timely satisfaction of any condition set
forth in Section 6 or 7 impossible or unlikely; and (ii) Franklin shall promptly
notify SurgiCount and the Shareholders in writing of (w) the discovery by
Franklin of any event, condition, fact or circumstance that occurred or existed
on or prior to the Signing Date and that caused or constitutes an inaccuracy in
or breach of any representation or warranty made by Franklin or the Merger
Subsidiary in any Transaction Document, (x) any event, condition, fact or
circumstance that occurs, arises or exists after the Signing Date and that would
cause or constitute an inaccuracy in or breach of any representation or warranty
made by
16
Franklin or the Merger Subsidiary in this Agreement if (1) such representation
or warranty had been made as of the time of the occurrence, existence or
discovery of such event, condition, fact or circumstance or (2) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior to
the Signing Date, (y) any breach of any covenant or obligation of Franklin or
the Merger Subsidiary; and (z) any event, condition, fact or circumstance that
is likely to make the timely satisfaction of any condition set forth in Section
6 or 7 impossible or unlikely.
5.5 Earn-Out Shares. In the event that, at any time prior to the fifth
(5th) anniversary of the Closing Date (the "Earn-Out Deadline"), the cumulative
gross revenues generated by the operations of the Surviving Corporation exceed:
(i) $500,000, Franklin shall be obligated to pay an aggregate amount of Per
Share Earn-Out Consideration pursuant to Section 1.4(c) consisting of an
aggregate number of shares of Franklin Common Stock, rounded up to the nearest
whole share, equal to (a) $250,000, divided by (b) the 60-Day VWAP
(collectively, the "Initial Earn-Out Shares"); and (ii) $1,000,000, Franklin
shall be obligated to pay an aggregate amount of Per Share Earn-Out
Consideration pursuant to Section 1.4(c) consisting of, in addition to the
Initial Earn-Out Shares, an aggregate number of additional shares of Franklin
Common Stock, rounded up to the nearest whole share, equal to (x) $250,000,
divided by (y) the 60-Day VWAP (the "Additional Earn-Out Shares" and, together
with the Initial Earn-Out Shares, the "Earn-Out Shares"). Franklin shall use its
reasonable best efforts to issue any Earn-Out Shares it becomes obligated to
issue pursuant to this Section 5.5 within thirty (30) days after the discovery
by Franklin or the Surviving Corporation of the existence of the underlying
facts giving rise to such obligation to issue such Earn-Out Shares. The Earn-Out
Shares shall be considered and reported by the parties hereto as part of the
consideration paid by Franklin pursuant to Section 1.4.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF FRANKLIN AND THE MERGER
SUBSIDIARY. The obligations of Franklin and the Merger Subsidiary to effect the
Merger and to otherwise consummate the transactions contemplated by the
Transaction Documents are subject to the satisfaction or written waiver by
Franklin, at or prior to the Closing, of each of the following conditions:
6.1 Accuracy of Representations. Each of the representations and
warranties made by SurgiCount and the Shareholders in the Transaction Documents
shall have been accurate in all material respects as of the Signing Date
(without giving double effect to any materiality and knowledge qualifications,
or any similar qualifications, contained or incorporated directly or indirectly
in such representations and warranties) and shall be accurate in all material
respects as of the Closing Date as if made on the Closing Date (without giving
double effect to any materiality and knowledge qualifications, or any similar
qualifications, contained or incorporated directly or indirectly in such
representations and warranties).
6.2 Performance of Covenants. All of the covenants and obligations that
SurgiCount and the Shareholders are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material
respects.
6.3 Listing. The shares of Franklin Common Stock to be issued as Per
Share Closing Stock Consideration shall have been approved for listing on the
Exchange.
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6.4 Consents. All Consents required to be obtained by SurgiCount or the
Shareholders in connection with the transactions contemplated by the Transaction
Documents (including the Consents identified in Part 2.9 of the SurgiCount
Disclosure Schedule) shall have been obtained and shall be in full force and
effect, and all relevant statutory, regulatory or other governmental waiting
periods shall have expired.
6.5 Agreements and Documents. Franklin shall have received the following
agreements and documents, each of which shall be executed and delivered by the
other relevant parties hereto, and each of which at the Closing shall be in full
force and effect:
(a) the Xxxxxxx Consulting Agreement executed by Xxxxxxx;
(b) the Xx. Xxxxxxx Consulting Agreement executed by Xx. Xxxxxxx;
(c) a Noncompetition Agreement executed by each of Xxxxxxx and Xx.
Xxxxxxx;
(d) the Escrow Agreement executed by the Escrow Agent and each of
the Shareholders;
(e) the Registration Rights Agreement executed by each of the
Shareholders;
(f) an investment representation letter, in form and substance
satisfactory to Franklin, relating to the Shareholders' acquisition of the Per
Share Closing Stock Consideration and the Earn-Out Shares, if any, executed by
each of the Shareholders (the "Investment Representation Letter");
(g) written resignations of all directors and officers of
SurgiCount, effective as of the Effective Time;
(h) a legal opinion, in the form attached hereto as Exhibit G and
incorporated herein by reference, addressed to Franklin from Heller, Ehrman,
White & XxXxxxxxx LLP; and
(i) a certificate, dated as of the Closing Date, signed by the
Shareholders and the Chief Executive Officer of SurgiCount, on behalf of
SurgiCount (the "SurgiCount Compliance Certificate"), certifying after
reasonable investigation that the conditions set forth in Section 6.1 and
Section 6.2 have been duly satisfied.
(j) copies of: (i) the unaudited balance sheet of SurgiCount as of
December 31, 2004 and the related unaudited income statement of SurgiCount for
the twelve (12) months then ended; and (ii) the unaudited balance sheet of
SurgiCount as of December 31, 2004 (the "Latest Balance Sheet") and the related
unaudited income statement of SurgiCount for the twelve (12) months then ended
(all of the foregoing being referred to herein as the "SurgiCount Financial
Statements"), together with a certificate, identical in form to the certificate
attached hereto as Exhibit H (the "SurgiCount Financial Statements
Certificate"), executed by each of the Shareholders.
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6.6 Review and Acceptance of SurgiCount Financial Statements. Franklin
shall have reviewed and accepted, in its sole discretion, the SurgiCount
Financial Statements.
6.7 No Material Adverse Effect. There shall not have occurred any event,
fact or circumstance which could, in the reasonable and good faith judgment of
Franklin, result in a material adverse effect on the business, condition,
assets, liabilities, operations, financial performance or prospects of
SurgiCount.
6.8 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other Order preventing the consummation of the Merger
shall have been issued by any Governmental Body, and there shall not be any
Legal Requirement (including any Legal Requirement applicable to Franklin as a
BDC, in the event that Franklin remains a BDC as of the Closing Date) enacted or
deemed applicable to the Merger that makes consummation of the Merger illegal.
6.9 No Governmental Litigation. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved, and none of Franklin, SurgiCount or either
Shareholder shall have received any communication from any Governmental Body in
which such Governmental Body indicates the possibility of commencing any Legal
Proceeding or taking any other action: (i) challenging or seeking to restrain or
prohibit the consummation of any of the transactions contemplated by the
Transaction Documents; (ii) relating to the Merger and seeking to obtain from
any party hereto or its Subsidiaries any damages or other relief that may be
material to Franklin or the Merger Subsidiary; or (iii) which, if unfavorably
adjudicated, would materially and adversely affect the rights of Franklin or
Surviving Corporation to own the assets and operate the business of SurgiCount.
6.10 No Other Litigation. There shall not be pending any Legal
Proceeding: (i) which could have a material adverse effect on SurgiCount or
Franklin or the Merger Subsidiary; (ii) challenging or seeking to restrain or
prohibit the consummation of any of the transactions contemplated by the
Transaction Documents; (iii) relating to the Merger and seeking to obtain from
any party hereto, any damages or other relief that may be material to Franklin
or any the Merger Subsidiary; (iv) seeking to prohibit or limit in any material
respect Franklin's ability to vote, receive dividends with respect to, or
otherwise exercise ownership rights with respect to the capital stock of
SurgiCount or the Merger Subsidiary; or (v) which, if unfavorably adjudicated,
would materially and adversely affect the rights of Franklin or Surviving
Corporation to own the assets or operate the business of SurgiCount.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SURGICOUNT AND THE SHAREHOLDERS.
The obligations of SurgiCount and the Shareholders to effect the Merger and to
otherwise consummate the transactions contemplated by the Transaction Documents
to which they are parties are subject to the satisfaction or written waiver by
SurgiCount and the Shareholders, at or prior to the Closing, of the following
conditions:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Franklin and the Merger Subsidiary in the Transaction
Documents shall have been accurate in all material respects as of the Signing
Date (without giving double effect to any materiality and
19
knowledge qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties) and
shall be accurate in all material respects as of the Closing Date as if made on
the Closing Date (without giving double effect to any materiality and knowledge
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties).
7.2 Performance of Covenants. All of the covenants and obligations that
Franklin and the Merger Subsidiary are required to comply with or to perform at
or prior to the Closing shall have been complied with and performed in all
material respects.
7.3 Consents. All Consents required to be obtained by SurgiCount or the
Shareholders in connection with the transactions contemplated by the Transaction
Documents (including the Consents identified in Part 2.9 of the SurgiCount
Disclosure Schedule) shall have been obtained and shall be in full force and
effect, and all relevant statutory, regulatory or other governmental waiting
periods shall have expired.
7.4 Listing. The shares of Franklin Common Stock to be issued as Per
Share Closing Stock Consideration shall have been approved for listing on the
Exchange.
7.5 Agreement and Documents. SurgiCount and the Shareholders shall have
received the following documents, each of which shall be executed and delivered
by the other relevant parties hereto, and each of which at the Closing shall be
in full force and effect:
(a) the Xxxxxxx Consulting Agreement executed by the Surviving
Corporation;
(b) the Xx. Xxxxxxx Consulting Agreement executed by the Surviving
Corporation;
(c) the Noncompetition Agreement executed by the Surviving
Corporation;
(d) the Escrow Agreement executed by the Escrow Agent and
Franklin;
(e) the Registration Rights Agreement executed by Franklin; and
(f) a certificate signed by the Chief Executive Officer of
Franklin on behalf of Franklin representing and warranting that the conditions
set forth in Section 7.1 and Section 7.2 have been duly satisfied.
7.6 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other Order preventing the consummation of the Merger
shall have been issued by any Governmental Body and remain in effect, and there
shall not be any Legal Requirement (including any Legal Requirement applicable
to Franklin as a BDC, in the event that Franklin remains a BDC as of the Closing
Date) enacted or deemed applicable to the Merger that makes consummation of the
Merger illegal.
7.7 No Governmental Litigation. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved, and none of Franklin, SurgiCount or either
Shareholder shall have received
20
any communication from any Governmental Body in which such Governmental Body
indicates the possibility of commencing any Legal Proceeding or taking any other
action: (i) challenging or seeking to restrain or prohibit the consummation of
any of the transactions contemplated by the Transaction Documents; (ii) relating
to the Merger and seeking to obtain from any party hereto or its Subsidiaries
any damages or other relief that may be material to Franklin; or (iii) which, if
unfavorably adjudicated, would materially and adversely affect the rights of
SurgiCount or either Shareholder hereunder.
7.8 No Other Litigation. There shall not be pending any Legal
Proceeding: (i) which could have a material adverse effect on SurgiCount or
Franklin or any Subsidiary of Franklin; (ii) challenging or seeking to restrain
or prohibit the consummation of any of the transactions contemplated by the
Transaction Documents; (iii) relating to the Merger and seeking to obtain from
any party hereto or its Subsidiaries, any damages or other relief that may be
material to Franklin; (iv) seeking to prohibit or limit in any material respect
Franklin's ability to vote, receive dividends with respect to, or otherwise
exercise ownership rights with respect to the capital stock of SurgiCount or the
Merger Subsidiary; or (v) which, if unfavorably adjudicated, would materially
and adversely affect the rights of SurgiCount or either Shareholder hereunder.
8. TERMINATION.
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by mutual written consent of Franklin and SurgiCount
(execution of which consent by SurgiCount shall be binding upon both
Shareholders);
(b) by either Franklin or SurgiCount, if any Order by any
Governmental Body of competent jurisdiction preventing or prohibiting
consummation of the Merger shall have been issued and not removed within thirty
(30) days after the date of its issuance; provided, however, that the party
seeking to terminate this Agreement pursuant to this Section 8.1(b) must have
used all reasonable efforts to remove any such Order prior to the Termination
Date;
(c) by Franklin, in the event that Franklin reasonably determines
following its review of the SurgiCount Financial Statements pursuant to Section
6.6 that it is unable to accept such SurgiCount Financial Statements pursuant to
Section 6.6;
(d) by Franklin if any of the representations and warranties of
the Shareholders contained in this Agreement shall have been materially
inaccurate as of the Signing Date or shall have become materially inaccurate as
of any subsequent date prior to the Closing Date (as if made on such subsequent
date), or if any of the covenants of SurgiCount or the Shareholders contained in
this Agreement shall have been breached in any material respect; provided,
however, that Franklin may not terminate this Agreement under this Section
8.1(d) on account of an inaccuracy in the representations and warranties of the
Shareholders or on account of a breach of a covenant by SurgiCount or any of the
Shareholders if such inaccuracy or breach is curable, unless SurgiCount or the
Shareholders fail to cure such inaccuracy or breach within fifteen (15) days
after receiving written notice from Franklin, in reasonable detail, of such
inaccuracy or breach;
21
(e) by SurgiCount if any of the representations and warranties of
Franklin or the Merger Subsidiary contained in this Agreement shall have been
materially inaccurate as of the Signing Date or shall have become materially
inaccurate as of any subsequent date prior to the Closing Date (as if made on
such subsequent date), or if any of the covenants of Franklin or the Merger
Subsidiary contained in this Agreement shall have been breached in any material
respect; provided, however, that SurgiCount may not terminate this Agreement
under this Section 8.1(e) on account of an inaccuracy in the representations and
warranties of Franklin or the Merger Subsidiary or on account of a breach of a
covenant by Franklin or the Merger Subsidiary if such inaccuracy or breach is
curable, unless Franklin or the Merger Subsidiary fails to cure such inaccuracy
or breach within fifteen (15) days after receiving written notice from
SurgiCount, in reasonable detail, of such inaccuracy or breach; or
(f) by Franklin or SurgiCount if the Closing has not taken place
on or before April 1, 2005 (the "Termination Date") other than: (i) as to
Franklin as the terminating party, as a result of any failure on the part of
Franklin or the Merger Subsidiary to comply with or perform any of their
respective covenants or obligations set forth in this Agreement; or (ii) as to
SurgiCount as the terminating party, as a result of any failure on the part of
SurgiCount or either Shareholder to comply with or perform any of their
respective covenants or obligations set forth in this Agreement.
8.2 Termination Procedures. If any party wishes to terminate this
Agreement pursuant to Section 8.1, such party shall deliver to the other parties
a written notice stating that it is terminating this Agreement and setting forth
a brief description of the basis on which it is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (i) the parties shall, in all events, remain
bound by and continue to be subject to the provisions set forth in Sections 5.4
and 10; and (ii) no party hereto shall be liable to any other party or any other
Person for any consequential or punitive damages.
9. INDEMNIFICATION.
9.1 Survival of Representations.
(a) The representations and warranties made by the Shareholders in
the Transaction Documents shall survive the Closing and shall expire at the end
of the Escrow Period; provided, however, that: (i) the representations and
warranties contained in Section 2.3 shall survive the Closing indefinitely; (ii)
the representations and warranties contained in Section 2.5 and Section 2.13
shall survive the Closing until the expiration of the relevant statute of
limitations; (iii) if, at any time prior to the end of the Escrow Period,
Franklin delivers to the Shareholders a Claim Notice (as defined in the Escrow
Agreement) alleging the existence of an inaccuracy in or a breach of any of the
representations and warranties made by the Shareholders (each, an "Indemnifying
Party" and, collectively, the "Indemnifying Parties"), setting forth the
information required by Section 3.1 of the Escrow Agreement, then the
representation or warranty underlying the claim asserted in such Claim Notice
shall survive the end of the Escrow Period until such time as such claim is
fully and finally resolved pursuant to the Escrow
22
Agreement. All representations and warranties made by Franklin and the Merger
Subsidiary shall terminate and expire as of the Effective Time, and any
liability of Franklin and the Merger Subsidiary with respect to such
representations and warranties shall thereupon cease. All of the covenants,
agreements and obligations of the parties contained in the Transaction Documents
shall survive: (i) until fully performed or fulfilled, unless noncompliance with
such covenants, agreements or obligations is waived in writing by the party or
parties entitled to such performance; or (ii) if not fully performed or
fulfilled, until the expiration of the relevant statute of limitations with
respect thereto.
(b) The representations, warranties, covenants and obligations of
the Indemnifying Parties, and the rights and remedies that may be exercised by
the Indemnitees, shall not be limited or otherwise affected by or as a result of
any information furnished to, or any investigation made by or knowledge of, any
of the Indemnitees or any of their Representatives. The representations and
warranties of the Indemnifying Parties operate, in part, as bargained-for risk
allocation provisions and, accordingly, any party's knowledge, and the waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, shall not affect
the right to indemnification or payment of Damages pursuant to this Section 9,
or other remedy based on such representations, warranties, covenants and
obligations.
(c) For purposes of this Section 9, each statement or other item
of information set forth in the SurgiCount Disclosure Schedule shall be deemed
to be a representation and warranty made by the Indemnifying Parties in this
Agreement.
9.2 Indemnification.
(a) From and after the Closing Date (but subject to Section 9.1(a)
and Section 9.2(c)), each Indemnitee shall be indemnified and held harmless from
and against, and shall be compensated, reimbursed and paid for, any Damages
which are directly or indirectly suffered or incurred by any Indemnitee or to
which any Indemnitee may otherwise become subject (regardless of whether or not
such Damages relate to any third-party claim) and which arise from or as a
result of, or are directly or indirectly connected with: (i) any inaccuracy in
or breach or alleged breach of any representation or warranty of any
Indemnifying Party set forth in the Transaction Documents; (ii) any inaccuracy
in or breach or alleged breach of any representation or warranty of any
Indemnifying Party set forth in the Transaction Documents as of the Closing Date
as if such representations and warranties had been made on and as of the Closing
Date; (iii) any breach or alleged breach of any covenant or obligation of any
Indemnifying Party set forth in the Transaction Documents; and (iv) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in the
foregoing clauses "(i)" and "(ii)" in this Section 9.2(a), including any Legal
Proceeding commenced by any Indemnitee for the purpose of enforcing any of its
rights under this Section 9. For Tax purposes, the parties shall report any
indemnification payment made pursuant to this Section 9 as a purchase price
adjustment unless otherwise required by applicable Legal Requirements.
(b) In the event any Indemnitee suffers any Damages for which such
Indemnitee is entitled to indemnification under this Section 9, such Indemnitee
shall be entitled to recover such Damages by offsetting such Damages against the
Escrow Stock by canceling that
23
number of shares of Escrow Stock as are equal in value (as determined in
accordance with the terms and conditions of the Escrow Agreement) to the
aggregate amount of such Damages. Any such recovery shall be made such that the
amount of Escrow Stock delivered to an Indemnitee in connection with any such
recovery shall be deducted from each Shareholder's portion of the Escrow Stock
in accordance with such Shareholder's Pro Rata Percentage.
(c) Notwithstanding anything to the contrary set forth in this
Section 9:
(i) Subject to the provisions of Section 9.2(c)(ii),
9.2(c)(iii) and 9.2(c)(iv), from and after the Effective Time, the Shareholders
shall have no liability for Damages in any amount in excess of the value of the
Escrow Stock (as the value of the Escrow Stock, or any portion thereof, is
determined in accordance with the terms and conditions of the Escrow Agreement).
(ii) Subject to the provisions of Section 9.2(c)(iii) and
9.2(c)(iv), from and after the expiration of the Escrow Period, the Shareholders
shall have no liability for any Damages whatsoever, except, in each case, for
Damages directly or indirectly related to: (A) a breach of any representation or
warranty where either Shareholder had knowledge of such breach at the time such
representation or warranty was made; (B) fraud or intentional misrepresentation
by any Indemnifying Party; (C) any breach of the representations and warranties
set forth in Section 2.3, 2.5 or 2.13.
(iii) Each Indemnitee shall be entitled pursuant to this
Section 9 to recover from the Indemnifying Parties:
(1) The full amount of any Damages which are directly or
indirectly suffered or incurred by such Indemnitee as a result of any breach of
the representations and warranties set forth in Section 2.3 or 2.13, regardless
of when such Damages were directly or indirectly suffered or incurred; and
(2) The full amount of any Damages which are directly or
indirectly suffered or incurred by such Indemnitee as a result of any breach of
the representations and warranties set forth in Section 2.5 up to a maximum
amount equal to (1) the aggregate amount of the aggregate Per Share Merger
Consideration paid to the Shareholders pursuant to this Agreement as of the date
of such recovery (with the dollar value of each share of Franklin Common Stock
issued to the Shareholders as part of the aggregate Per Share Merger
Consideration deemed, for purposes of such aggregate amount calculation, to be
equal to the 60-Day VWAP), less (2) the aggregate dollar amount of all Damages
paid out of the Escrow Stock pursuant to the terms of the Escrow Agreement (with
the dollar value of each share of Escrow Stock to be calculated as provided in
the Escrow Agreement).
(iv) Nothing in this Section 9.2(c) shall preclude Franklin
from seeking injunctive relief or specific performance with respect to any
covenant, agreement or obligation of SurgiCount or the Shareholders contained in
this Agreement.
24
9.3 No Contribution. The Shareholders shall not have and shall not
exercise or assert, or attempt to exercise or assert, any right of contribution,
right of indemnity or other right or remedy against the Surviving Corporation in
connection with any indemnification obligation or any other liability to which
such Shareholders may become subject under or in connection with this Agreement
or the Escrow Agreement.
9.4 Defense of Third Party Claims.
(a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding with respect to which any of the Indemnitees may
be entitled to indemnification or any other remedy pursuant to this Section 9,
Franklin shall promptly give the Shareholders and the Escrow Agent written
notice of such claim or Legal Proceeding (a "Claim"); provided, however, that
any failure on the part of Franklin to so notify the Shareholders shall not
limit any of the Indemnitees' rights to indemnification under this Section 9
except to the extent such failure materially prejudices the defense of such
Legal Proceeding.
(b) Within ten (10) days of delivery of the written notice
referenced in Section 9.4(a), the Shareholders may elect by written notice
delivered to Franklin to take all necessary steps properly to contest any Claim
involving third parties or to prosecute such Claim to conclusion or settlement.
If the Shareholders so elect in writing to the relevant Indemnitee(s), an
Indemnitee will have the right to participate at such Indemnitee's own expense
in all proceedings. If the Shareholders do not make such election within such
period or fail to diligently contest such Claim after such election, then such
Indemnitee shall: (i) be free to handle the prosecution or defense of any such
Claim; (ii) take all necessary steps to contest the Claim involving third
parties or to prosecute such Claim to conclusion or settlement; (iii) notify the
Shareholders of the progress of any such Claim; (iv) permit the Shareholders, at
the sole cost of the Shareholders, to participate in such prosecution or defense
and provide the Shareholders with reasonable access to all relevant information
and documentation relating to the Claim and the prosecution or defense thereof.
Notwithstanding the foregoing, if any Claim includes a claim for Damages equal
to an amount that exceeds the value of the remaining Escrow Stock as of the date
of the Claim, or relates to any Intellectual Property issues, Franklin shall
have the right to elect to proceed with the defense of such Claim or Legal
Proceeding on its own. In any case, the party not in control of the Claim will
cooperate with the other party in the conduct of the prosecution or defense of
such Claim. Moreover, neither party will compromise or settle any Claim brought
by a third party without the prior written consent of Franklin (if the
Shareholders defend the Claim) or the Shareholders (if Franklin or any other
Indemnitee defends the Claim).
10. MISCELLANEOUS.
10.1 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents
(including any exhibits to this Agreement that are contemplated to be signed by
the parties at or prior to the Closing), and shall take such other actions, as
such other party may reasonably request for the purpose of carrying out or
evidencing any of the transactions contemplated by the Transaction Documents.
10.2 Certain Actions by Shareholders; Power of Attorney.
25
(a) Xxxxxxx shall have the full legal right to act as the agent
and attorney-in-fact for Xx. Xxxxxxx, being hereby so appointed by Xx. Xxxxxxx,
and shall be able to execute and deliver all documents and take all actions as
such agent and attorney-in-fact as Xxxxxxx believes appropriate or necessary, as
to all matters under this Agreement, including the matters governed by Section 9
hereof, during any period of mental incompetence or other disability or Xx.
Xxxxxxx, and from and after Xx. Xxxxxxx'x death. Xxxxxxx shall send written
notice to Franklin promptly upon assuming such position as agent and
attorney-in-fact for Xx. Xxxxxxx and promptly upon ceasing such service due to
the recovery of Xx. Xxxxxxx from such mental incompetence or other disability.
Franklin shall be entitled to rely without further inquiry or investigation upon
any written notice from Xxxxxxx given pursuant to this Section 10.2(a).
(b) Xx. Xxxxxxx shall have the full legal right to act as the
agent and attorney-in-fact for Xxxxxxx, being hereby so appointed by Xxxxxxx,
and shall be able to execute and deliver all documents and take all actions as
such agent and attorney-in-fact as Xx. Xxxxxxx believes appropriate or
necessary, as to all matters under this Agreement, including the matters
governed by Section 9 hereof, during any period of mental incompetence or other
disability or Xxxxxxx, and from and after Xxxxxxx'x death. Xx. Xxxxxxx shall
send written notice to Franklin promptly upon assuming such position as agent
and attorney-in-fact for Xxxxxxx and promptly upon ceasing such service due to
the recovery of Xxxxxxx from such mental incompetence or other disability.
Franklin shall be entitled to rely without further inquiry or investigation upon
any written notice from Xx. Xxxxxxx given pursuant to this Section 10.2(b).
10.3 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by the Transaction Documents; provided, however, that
any fees, costs and expenses (including legal fees and accounting fees) incurred
by or on behalf of SurgiCount or the Shareholders in connection with the
transactions contemplated by the Transaction Documents that are not paid by
SurgiCount or the Shareholders as of the Closing shall, pursuant to Section 1.4,
be deducted from the aggregate Per Share Cash Consideration payable to the
Shareholders at the Closing.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
10.5 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next Business Day; (iii) five (5) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) Business Day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this Section 10.5):
If to Franklin:
26
Franklin Capital Corporation
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx "Xxxx" Xxxx III
Fax: (000) 000-0000
E-mail: xxxx@xxxxxx.xxx
With a copy (which shall not constitute notice) to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
xxxxxxxxxxx@xxxxxxxxxxxx.xxx
If to SurgiCount or either Shareholder:
SurgiCount Medical, Inc.
000 Xxxxxxx Xxxxxx
Xx. 000 Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
E-mail: xxxxxxxxxxxx@xxxxxxx.xxx
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxx@xxxx.xxx
Notwithstanding the foregoing, the parties expressly acknowledge and agree that,
for purposes of delivering any notice pursuant to this Agreement: (i) any such
notice delivered to any of SurgiCount, Xxxxxxx or Xx. Xxxxxxx in accordance with
this Section 10.5 shall be deemed to have been delivered to all of SurgiCount,
Xxxxxxx and Xx. Xxxxxxx; and (ii) any such notice given by any of SurgiCount,
Xxxxxxx or Xx. Xxxxxxx in accordance with this Section 10.5 shall be deemed to
have been given by all of SurgiCount, Xxxxxxx and Xx. Xxxxxxx.
10.6 Headings. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 Governing Law; Jurisdiction and Venue. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of California
27
without giving effect to its principles of conflicts of laws. Any legal action
or other legal proceeding relating to this Agreement or the enforcement of any
provision of this Agreement shall be brought or otherwise commenced exclusively
in any state or federal court located in the County of Los Angeles, State of
California. Each of the parties hereto: (i) expressly and irrevocably consents
and submits to the jurisdiction of each state and federal court located in the
County of Los Angeles, State of California, in connection with any legal
proceeding; (ii) agrees that service of any process, summons, notice or document
by U.S. mail addressed to such party at the address set forth in Section 10.5
shall constitute effective service of such process, summons, notice or document
for purposes of any such legal proceeding; (iii) agrees that each state and
federal court located in the County of Los Angeles, State of California, shall
be deemed to be a convenient forum; and (iv) agrees not to assert, by way of
motion, as a defense or otherwise, in any such legal proceeding commenced in any
state or federal court located in the County of Los Angeles, State of
California, any claim that it is not subject personally to the jurisdiction of
such court, that such legal proceeding has been brought in an inconvenient
forum, that the venue of such proceeding is improper or that this Agreement or
the subject matter of this Agreement may not be enforced in or by such court.
10.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns, if
any. Neither SurgiCount nor either of the Shareholders shall assign or delegate,
by operation of law or otherwise, its rights or obligations under this Agreement
to any Person. Neither Franklin nor the Merger Subsidiary shall assign or
delegate, by operation of law or otherwise, such party's rights or obligations
under this Agreement to any Person without the prior written consent of the
Shareholders.
10.9 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative and not alternative. The parties agree
that, in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other party
shall be entitled, in addition to any other remedy that may be available to it,
to: (i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or threatened breach. The parties
further agree that no Person shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 10.9, and the parties irrevocably waive any
right they may have to require the obtaining, furnishing or posting of any such
bond or similar instrument.
10.10 Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person, and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
28
10.11 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.12 Severability. If one or more provisions of this Agreement are held
by a court of competent jurisdiction to be unenforceable under applicable law,
the parties agree to promptly renegotiate such provision in good faith. In the
event that the parties cannot reach a mutually agreeable and enforceable
replacement in writing for such provision, then: (i) such provision shall be
excluded from this Agreement; (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded; and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
10.13 Parties in Interest. Except for the provisions of Section 9, none
of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns, or, as applicable to the Shareholders, their heirs,
executors and administrators, if any.
10.14 Construction.
(a) For purposes of this Agreement, whenever the context requires:
(i) the singular number shall include the plural, and vice versa; (ii) the
masculine gender shall include the feminine and neuter genders; (iii) the
feminine gender shall include the masculine and neuter genders; and (iv) the
neuter gender shall include the masculine and feminine genders.
(b) Each of the parties hereto has been represented by legal
counsel except to the extent that such party has declined legal counsel;
provided, however, that the parties acknowledge that Xxxxxx Xxxxxx White &
XxXxxxxxx LLP has represented SurgiCount, and not the Shareholders, as to the
matters governed by the Transaction Documents, except for the representation by
Xxxxxx Xxxxxx White & XxXxxxxxx LLP of Xxxxxxx and Xx. Xxxxxxx in the
negotiation of the Xxxxxxx Consulting Agreement and Xx. Xxxxxxx Consulting
Agreement, respectively. Accordingly, the parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement.
(c) As used in this Agreement, the words "include" and
"including", and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation".
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
10.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
10.16 Entire Agreement. This Agreement, together with each of the other
Transaction Documents and the schedules and exhibits hereto and thereto, sets
forth the entire understanding
29
of the parties hereto relating to the subject matter hereof and thereof and
supersedes all prior agreements and understandings among or between any of the
parties relating to the subject matter hereof and thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
IN WITNESS WHEREOF, the parties have duly executed this AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION as of the Signing Date.
FRANKLIN: SURGICOUNT:
FRANKLIN CAPITAL CORPORATION SURGICOUNT MEDICAL, INC.
By: /s/ Xxxxxx "Xxxx" Xxxx III /s/ Xxxxx Xxxxxxx
--------------------------------------- ---------------------------------------
Xxxxxx "Xxxx" Xxxx III Xxxxx Xxxxxxx
Chairman and Chief Executive Officer President and Chief Executive Officer
MERGER SUBSIDIARY: SHAREHOLDERS:
SURGICOUNT ACQUISITION CORP.
By: /s/ Xxxxxx "Xxxx" Xxxx III /s/ Xxxxx Xxxxxxx
--------------------------------------- ------------------------------------------
Xxxxxx "Xxxx" Xxxx III Xxxxx Xxxxxxx
Chairman and Chief Executive Officer
/s/ Xx. Xxxxxxx Xxxxxxx
------------------------------------------
Xx. Xxxxxxx Xxxxxxx
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following respective meanings:
"Acquisition Transaction" shall mean any transaction or series of
transactions involving: (i) the sale, license, disposition or acquisition of all
or any material portion of the business or assets of SurgiCount; (ii) the
issuance, grant, disposition or acquisition of any capital stock or other
security of SurgiCount or any SurgiCount Right representing more than 5% of the
outstanding securities of any class of voting securities of SurgiCount; or (iii)
any merger, consolidation, business combination, tender offer, share exchange,
reorganization or similar transaction involving SurgiCount.
"Affiliate" shall mean, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by or under common control with
such Person.
"As-Adjusted" shall mean, with respect to any number of shares or price
per share of Franklin Common Stock, that number or price as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like occurring
with respect to the Franklin Common Stock following the Signing Date but prior
to the Effective Time.
"BDC" shall mean a "business development company" as defined in the
Investment Company Act of 1940, as amended.
The "Best Knowledge" of a party, in connection with a representation or
warranty of such party in this Agreement, means: (i) in the event that such
party is an individual, (a) such individual's actual knowledge as contained in
documents and instruments and information within the possession of such
individual or within the possession of such individual's legal and accounting
advisors and (b) any knowledge relating to an entity for which such individual
acts as an officer, director, employee or consultant that such individual would
be reasonably expected to have given such individual's position as an officer,
director, employee or consultant of such entity; and (ii) in the event that such
party is an entity, the collective Best Knowledge of each of the individual
officers, directors, employees and consultants of such entity; provided,
however, that the term "Best Knowledge" does not include or imply any
representation or warranty that such party has, in making such representation,
undertaken any special search, for purposes of making such representation, of
any public or private intellectual property databases or other databases or
records or agencies (outside of such representing party's own private database
and records).
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which either the SEC or
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.
"Closing Price" shall mean on any particular date: (i) the last reported
closing bid price for one share of Franklin Common Stock on such date on the
Exchange (as reported by Bloomberg L.P. at 4:15 p.m. New York time as the last
reported closing bid price for regular
session trading on such day); (ii) if there is no such closing bid price for one
share on such date, the closing bid price on the Exchange on the date nearest
preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. New York time as
the closing bid price for regular session trading on such day); (iii) if the
Franklin Common Stock is not then listed or quoted on an Exchange and if prices
for the Franklin Common Stock are then reported in the "pink sheets" published
by Pink Sheets LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Franklin Common Stock so reported; or (iv) if the shares of Franklin Common
Stock are not then publicly traded, the fair market value of a share of Franklin
Common Stock as determined in good faith by the board of directors of Franklin.
"Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization) of any third
party (including any Governmental Body).
"Contract" shall mean any written, oral or other agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, license,
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature, whether express or implied.
"Damages" shall mean and include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
"Encumbrance" shall mean any lien, license, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature affecting property, real or
personal, tangible or intangible, including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset, any restriction on the possession, exercise or transfer
of any other attribute of ownership of any asset, any lease in the nature
thereof and any filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statute of any jurisdiction).
"Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, limited liability company, joint venture, estate, trust, company
(including any limited liability company or joint stock company), firm or other
enterprise, association, organization or entity.
"Exchange" shall mean the following markets or exchanges on which the
Franklin Common Stock is listed or quoted for trading on a given date: (i) the
American Stock Exchange; (ii) the New York Stock Exchange; (iii) the Nasdaq
National Market; or (iv) the Nasdaq SmallCap Market.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Franklin Common Stock" shall mean the common stock, par value $1.00 per
share, of Franklin.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States of America applied on a consistent basis throughout the
periods covered.
"Governmental Authorization" shall mean any: (i) approval, permit,
license, certificate, franchise, permission, clearance, registration,
qualification or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (ii) right under any Contract with any Governmental Body.
"Governmental Body" shall mean any: (i) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (ii) federal, state, local, municipal, foreign, supranational or other
government; or (iii) governmental, self-regulatory or quasi-governmental
authority of any nature, including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal.
"Indemnitees" shall mean the following Persons: (i) Franklin; (ii)
Franklin's current and future Affiliates (including the Merger Subsidiary and
the Surviving Corporation); (iii) the respective Representatives of the Persons
referred to in the foregoing clauses "(i)" and "(ii)" of this definition; and
(iv) the respective successors and assigns of the Persons referred to in the
foregoing clauses "(i)", "(ii)" and "(iii)" of this definition.
"Intellectual Property" shall mean and includes all apparatus,
biological materials, clinical data, chemical compositions or structures,
databases and data collections, diagrams, formulae, inventions (whether or not
patentable), know-how, logos, marks (including brand names, product names,
logos, and slogans), methods, processes, proprietary information, protocols,
schematics, specifications, software, techniques, URLs, websites, works of
authorship, and other forms of technology (whether or not embodied in any
tangible form and including all tangible embodiments of the foregoing such as
instruction manuals, laboratory notebooks, prototypes, samples, studies, and
summaries).
"Intellectual Property Rights" shall mean and includes all past,
present, and future rights of the following types, which may exist or be created
under the laws of any jurisdiction in the world: (i) rights associated with
works of authorship, including exclusive exploitation rights, copyrights and
moral rights; (ii) trademark and trade name rights and similar rights; (iii)
trade secret rights; (iv) patents and industrial property rights; (v) other
proprietary rights in Intellectual Property of every kind and nature; and (vi)
all registrations, renewals, extensions, combinations, divisions, or reissues
of, and applications for, any of the rights referred to in the foregoing clauses
"(i)" through "(vi)" of this definition.
"Legal Proceeding" shall mean any ongoing or threatened action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign or international, multinational other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
"Order" shall mean any writ, decree, permanent injunction, order or
similar action.
"Person" shall mean any natural person, Entity or Governmental Body.
Each Shareholder's "Pro Rata Percentage" shall be equal to the quotient
(rounded to the nearest whole percent) of (i) the number of shares of SurgiCount
Common Stock held by such Shareholder as of immediately prior to the Effective
Time, divided by (ii) the aggregate number of shares of SurgiCount Common Stock
outstanding as of immediately prior to the Effective Time.
"Registered IP" shall mean all Intellectual Property Rights that are
registered, filed, or issued under the authority of any Governmental Body,
including all patents, registered copyrights, registered mask works, and
registered trademarks and all applications for any of the foregoing.
"Representatives" shall mean officers, directors, employees,
consultants, agents, attorneys, accountants, advisors and representatives.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
Any Entity shall be deemed to be a "Subsidiary" of another Person if
such Person directly or indirectly: (i) has the power to direct the management
or policies of such Entity; or (ii) owns, beneficially or of record (a) an
amount of voting securities or other interests in such Entity that is sufficient
to enable such Person to elect at least a majority of the members of such
Entity's board of directors or other governing body or (b) at least fifty
percent (50%) of the outstanding equity or financial interests of such Entity.
"SurgiCount Common Stock" shall mean the common stock, no par value, of
SurgiCount.
"SurgiCount Contract" shall mean any Contract, including any amendment
or supplement thereto: (i) to which SurgiCount is a party; (ii) by which
SurgiCount or any of its assets is or may become bound or under which SurgiCount
has, or may become subject to, any obligation; or (iii) under which SurgiCount
has or may acquire any right or interest.
"SurgiCount Disclosure Schedule" shall mean the schedule, dated as of
the Signing Date, delivered to Franklin on behalf of SurgiCount on the Signing
Date and signed by the Chief Executive Officer of SurgiCount.
"SurgiCount IP" shall mean all Intellectual Property Rights and
Intellectual Property owned by or exclusively licensed to SurgiCount.
"Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
"Tax Return" shall mean any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Trading Day" shall mean: (i) a day on which the Franklin Common Stock
is traded on an Exchange; (ii) if the Franklin Common Stock is not listed on an
Exchange, a day on which the Franklin Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board; or (iii) if the
Franklin Common Stock is not quoted on the OTC Bulletin Board, a day on which
the Franklin Common Stock is quoted in the over-the-counter market as reported
by Pink Sheets LLC (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that the
Franklin Common Stock is not listed or quoted as set forth in clause "(i)",
"(ii)" or "(iii)" of this definition, then Trading Day shall mean any Business
Day.
"Transaction Documents" shall mean and include this Agreement, the
Xxxxxxx Consulting Agreement, the Xx. Xxxxxxx Consulting Agreement, the
Noncompetition Agreement, the Escrow Agreement, the Registration Rights
Agreement, the Agreement of Merger, the Certificate of Merger, the Investment
Representation Letter, the SurgiCount Compliance Certificate, the SurgiCount
Financial Statements Certificate, the SurgiCount Disclosure Schedule and all
other agreements, certificates, instruments or other documents relating to the
transactions contemplated by this Agreement.
"VWAP" shall mean, for any Trading Day, the price of the Franklin Common
Stock as determined by the first of the following clauses that applies: (i) if
the Franklin Common Stock is then listed or quoted on an Exchange, the daily
volume weighted average price of the Franklin Common Stock for such Trading Day
on the Exchange on which the Franklin Common Stock is then listed or quoted as
reported by Bloomberg L.P. (or any organization or agency succeeding its
functions of reporting prices) using the VAP function; (ii) if the Franklin
Common Stock is not then listed or quoted on an Exchange, but if prices for the
Franklin Common Stock are then listed or quoted on the OTC Bulletin Board, the
volume weighted average price of the Franklin Common Stock for such Trading Day
on the OTC Bulletin Board; (iii) if the Franklin Common Stock is not then listed
or quoted on the OTC Bulletin Board, but if prices for the Franklin Common Stock
are then reported by Pink Sheets LLC (or any similar organization or agency
succeeding its functions of reporting prices), the most recent bid price per
share of the Franklin
Common Stock so reported; or (iv) in all other cases, the
fair market value of a share of Franklin Common Stock as determined by a
nationally recognized independent appraiser mutually selected by Franklin and
the Shareholders.
EXHIBIT B
XXXXXXX CONSULTING AGREEMENT
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of February 3, 2005, by and between SURGICOUNT MEDICAL, INC., a California
corporation ("SurgiCount"), and Xxxxx Xxxxxxx ("Xxxxxxx"). Capitalized terms
used and not otherwise defined herein shall have the meanings given to them in
the Merger Agreement (as defined below).
RECITALS
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Franklin Capital Corporation, a Delaware corporate ("Franklin"),
SurgiCount Acquisition Corp., a Delaware corporation, SurgiCount, Xxxxxxx and
Xx. Xxxxxxx Xxxxxxx are entering into that certain Agreement and Plan of Merger
and Reorganization (the "Merger Agreement"), dated as of even date herewith; and
WHEREAS, in connection with and as a condition to the consummation of
the Merger, SurgiCount desires to engage Xxxxxxx, and Xxxxxxx desires to accept
the engagement by SurgiCount, to act as a consultant to SurgiCount on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. CONSULTING SERVICES. Subject to the terms and conditions of this
Agreement, effective as of the Effective Time, SurgiCount hereby engages
Xxxxxxx, and Xxxxxxx hereby accepts the engagement by SurgiCount, to act as a
consultant to SurgiCount for the duration of the Term (as defined below). In his
capacity as a consultant to SurgiCount, Xxxxxxx agrees to perform such services
relating to SurgiCount's business and operations as are reasonably requested
from time to time by SurgiCount (collectively, the "Services"). The manner and
means by which Xxxxxxx chooses to perform the Services shall be in Xxxxxxx'x
sole discretion and control; provided, however, that Xxxxxxx shall perform all
Services in a timely and professional manner, using a degree of skill and care
at least consistent with industry standards.
2. COMPENSATION. As consideration for Xxxxxxx'x performance of the
Services, SurgiCount shall pay to Xxxxxxx fees in the amount of $40,000 per year
(the "Consulting Fees"), which Consulting Fees shall be payable in equal monthly
installments (prorated for partial months) coinciding with SurgiCount's ordinary
payroll dates.
3. STOCK OPTION. As further consideration for Xxxxxxx'x performance of the
Services, SurgiCount shall cause Franklin, subject to Franklin's receipt of the
requisite approvals from its
1
board of directors and stockholders of a new equity incentive plan for Franklin
(the "New EIP"), and subject to Franklin's receipt of the further approval from
its board of directors of such Option (as defined below), to issue to Xxxxxxx an
option pursuant to the New EIP to purchase up to 20,000 shares of Franklin
Common Stock (the "Option") at an exercise price equal to the fair market value
of such Franklin Common Stock on the date of the Option grant. Such Option shall
vest and become exercisable in three (3) annual installments beginning on the
first (1st) anniversary of the Closing Date, such that such Option shall be
vested and exercisable with respect to: (i) 6,666 shares of Franklin Common
Stock as of the first (1st) anniversary of the Closing Date; (ii) 13,333 shares
of Franklin Common Stock as of the second (2nd) anniversary of the Closing Date;
and (iii) 30,000 shares of Franklin Common Stock as of the third (3rd)
anniversary of the Closing Date; provided, however, that the vesting of such
Option shall accelerate and such Option shall become fully vested immediately
prior to the consummation of any transaction involving (a) a sale of all or
substantially all of the consolidated assets of Franklin and its Subsidiaries or
(b) a merger, consolidation or similar transaction involving the Franklin if,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Franklin immediately prior thereto do not
own, directly or indirectly, outstanding voting securities representing more
than fifty percent (50%) of the combined outstanding voting power of the
surviving entity in such merger, consolidation or similar transaction.
4. EXPENSES. SurgiCount shall reimburse Xxxxxxx for any reasonable
out-of-pocket expenses, including, without limitation, reasonable travel
expenses, incurred in connection with Xxxxxxx'x performance of the Services;
provided, however, that Xxxxxxx must: (i) obtain the prior written approval of
SurgiCount for any such expenses that, individually or in the aggregate, exceed
$150; and (ii) submit such written documentation of all such expenses as
SurgiCount may reasonably require. SurgiCount will reimburse Xxxxxxx for
expenses covered by this Section 4 within thirty (30) days of the date that
Xxxxxxx submits proper documentation of such expenses to SurgiCount.
5. INDEPENDENT CONTRACTOR RELATIONSHIP. Xxxxxxx'x relationship with
SurgiCount shall be solely that of an independent contractor, and nothing in
this Agreement shall be construed to create a partnership, joint venture, or
employer-employee relationship. Xxxxxxx is not the agent of SurgiCount and is
not authorized to make any representation, contract or commitment on behalf of
SurgiCount. Xxxxxxx shall not be entitled to any of the benefits that SurgiCount
may make available to its employees, such as group insurance, profit-sharing or
retirement benefits. Xxxxxxx shall be solely responsible for all tax returns and
payments required to be filed with or made to any federal, state or local tax
authority with respect to Xxxxxxx'x performance of the Services and receipt of
the Consulting Fees and Option pursuant to this Agreement. SurgiCount will
regularly report amounts paid to Xxxxxxx by filing Form 1099-MISC with the
Internal Revenue Service as required by law, but given that Xxxxxxx is an
independent contractor, SurgiCount will not withhold or make payments for social
security, make unemployment insurance or disability insurance contributions, or
obtain worker's compensation insurance on Xxxxxxx'x behalf. Xxxxxxx agrees to
accept exclusive liability for complying with all applicable federal, state and
local laws governing self-employed individuals, including, without limitation,
obligations such as payment of taxes, social security, disability and other
contributions based on the Consulting Fees paid to Xxxxxxx. Xxxxxxx hereby
agrees to
2
indemnify, hold harmless and defend SurgiCount from and against any and all such
taxes and contributions, as well as any penalties and interest arising
therefrom.
6. INFORMATION AND INTELLECTUAL PROPERTY RIGHTS.
6.1 Proprietary Information. Xxxxxxx agrees that, during the Term and
thereafter, Xxxxxxx shall take all steps necessary to hold the Proprietary
Information (as defined below) in trust and confidence, shall not use such
Proprietary Information in any manner or for any purpose except as expressly set
forth in this Agreement and shall not disclose any such Proprietary Information
to any third party without first obtaining SurgiCount's express written consent
on a case-by-case basis; provided, however, that Xxxxxxx may disclose certain
Proprietary Information, without violating his obligations under this Agreement,
to the extent such disclosure is required by a valid order of a court or other
governmental body having jurisdiction, provided that Xxxxxxx provides SurgiCount
with reasonable prior written notice of such disclosure and uses commercially
reasonable efforts to obtain, or to assist SurgiCount in obtaining, a protective
order preventing or limiting the disclosure and/or requiring that the
Proprietary Information so disclosed be used only for the purposes for which the
law or regulation required, or for which the order was issued. For purposes of
this Agreement, "Proprietary Information" means any and all confidential and/or
proprietary information regarding SurgiCount or any of its Affiliates and their
current and proposed business and operations, including, without limitation,
information pertaining to their current or forecasted capital structure, equity
or debt financing or investment activities, strategic plans, current or proposed
products or services, investors, employees, directors, consultants, and other
business and contractual relationships; provided, however, that information
received by Xxxxxxx shall not be considered to be Proprietary Information if
Xxxxxxx can demonstrate with competent evidence that such information has been
published or is otherwise readily available to the public other than by a breach
of this Agreement.
6.2 Third-Party Information. Xxxxxxx understands that SurgiCount has
received and will in the future receive from third parties certain confidential
or proprietary information relating to such third parties (collectively,
"Third-Party Information"), subject to duties on SurgiCount's part to maintain
the confidentiality of such Third-Party Information and to use such Third-Party
Information only for certain limited purposes. Xxxxxxx agrees to hold all
Third-Party Information in confidence and not to disclose to anyone (other than
personnel of Franklin or SurgiCount) or to use, except in connection with
Xxxxxxx'x performance of the Services, any Third-Party Information unless
expressly authorized in writing by an officer of SurgiCount.
6.3 Intellectual Property Rights. Xxxxxxx agrees that any and all
Intellectual Property and Intellectual Property Rights that Xxxxxxx conceived,
reduced to practice or developed during the course of his performance of
services as a director, officer, employee or consultant for SurgiCount prior to
the Effective Time, together with any and all Intellectual Property and
Intellectual Property Rights that Xxxxxxx conceives, reduces to practice or
develops during the course of his performance of the Services pursuant to this
Agreement, in each case whether alone or in conjunction with others (all of the
foregoing being collectively referred to herein as the "Inventions"), shall be
the sole and exclusive property of SurgiCount. Accordingly, Xxxxxxx hereby: (i)
assigns and agrees to assign to SurgiCount his entire right, title and interest
in and to all Inventions; and (ii) designates SurgiCount as his agent for, and
grants to the
3
officers of SurgiCount a power of attorney (which power of attorney shall be
deemed coupled with an interest) with full power of substitution solely for the
purpose of, effecting the foregoing assignments from Xxxxxxx to SurgiCount.
Xxxxxxx further agrees to cooperate with and provide reasonable assistance to
SurgiCount to obtain and from time to time enforce any and all current or future
Intellectual Property Rights covering or relating to the Inventions in any and
all jurisdiction.
7. NO CONFLICTING OBLIGATION. Xxxxxxx represents that his entering into
this Agreement, his performance of all of the terms of this Agreement and his
performance of the Services pursuant to this Agreement do not and will not
breach or conflict with any agreement or other arrangement between any Xxxxxxx
and any third party, including, without limitation, any agreement or other
arrangement between Xxxxxxx and any third party to keep in confidence any
proprietary information of another entity acquired by Xxxxxxx in confidence or
in trust prior to the date of this Agreement. During the Term, Xxxxxxx agrees
not to enter into any agreement that conflicts with this Agreement.
8. TERM AND TERMINATION.
8.1 TERM. This Agreement shall commence at the Effective Time and shall
continue for a period of one (1) year thereafter (the "Initial Term"). At the
end of such Initial Term, this Agreement shall terminate unless extended for one
or more additional periods of one (1) year each (each, a "Renewal Term") by
mutual written agreement of the parties. The Initial Term and all Renewal Terms,
if any, are collectively referred to herein as the "Term".
8.2 Automatic Termination. This Agreement shall automatically terminate
at any time during the Term upon the event of Xxxxxxx'x death.
8.3 Termination by Xxxxxxx. Xxxxxxx may voluntarily terminate this
Agreement at any time during the Term by delivering thirty (30) days prior
written notice to SurgiCount.
8.4 Termination by SurgiCount. SurgiCount may terminate this Agreement
at any time during the Term upon delivery to Xxxxxxx of notice of the good-faith
determination by the majority of the members of the board of directors of
SurgiCount (and the accompanying justification therefor) that such Agreement
should be terminated for Cause (as defined below) or as a result of Xxxxxxx'x
Disability (as defined below). For purposes of this Agreement:
(a) The term "Cause" shall mean: (i) Xxxxxxx'x willful misconduct;
(ii) Xxxxxxx'x willful failure to perform the Services; (iii) Xxxxxxx'x causing
of intentional damage to the tangible or intangible property of SurgiCount; (iv)
the conviction of Xxxxxxx of any felony or any other crime involving moral
turpitude; (v) Xxxxxxx'x performance of any dishonest or fraudulent act which
is, or would be, in each case as determined in good faith by the board of
directors of SurgiCount materially detrimental to the best interests of
SurgiCount or its stockholders or Affiliates; or (vi) Xxxxxxx'x breach of any of
the Transaction Documents to which he is a party.
(b) The term "Disability" shall mean Xxxxxxx'x inability to perform
the Services for any period of forty-five (45) consecutive Business Days (or any
ninety (90) Business Days during any period of twelve (12) consecutive months)
by reason of any physical
4
or mental incapacity or illness, as determined by the board of directors of
SurgiCount based upon medical advice provided by a licensed physician acceptable
to the board of directors of SurgiCount.
8.5 EFFECT OF TERMINATION. The obligations set forth in Sections 5, 6,
7, 8.5 and 10, as well as any outstanding payment or reimbursement obligations
of SurgiCount, shall survive any termination or expiration of this Agreement.
Upon any termination or expiration of this Agreement, Xxxxxxx shall promptly
deliver to SurgiCount all documents and other materials of any nature pertaining
to the Services, together with all documents and other items containing or
pertaining to any Proprietary Information, Third-Party Information or
Inventions.
9. GUARANTEE BY FRANKLIN. On the date of this Agreement, SurgiCount shall
cause Franklin to: (i) guarantee the full, faithful, timely and complete
performance of all obligations of SurgiCount pursuant to this Agreement; and
(ii) deliver to Xxxxxxx, as evidence of such guarantee, a guarantee certificate
in the form attached hereto as Exhibit A executed by Franklin as of the date of
this Agreement.
10. MISCELLANEOUS.
10.1 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
10.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next Business Day; (iii) five (5) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) Business Day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this Section 10.2):
If to SurgiCount:
SurgiCount Medical, Inc.
c/o Franklin Capital Corporation
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx "Xxxx" Xxxx III
Fax: (000) 000-0000
E-mail: xxxx@xxxxxx.xxx
With a copy (which shall not constitute notice) to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
5
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxxxxxx@xxxxxxxxxxxx.xxx
If to Xxxxxxx:
Xxxxx Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
E-mail: xxxxxxxxxxxx@xxxxxxx.xxx
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxx@xxxx.xxx
10.3 Headings. The bold-face headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.4 Governing Law; Jurisdiction and Venue. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of California without giving effect to its principles of conflicts
of laws. Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement shall be brought or
otherwise commenced exclusively in any state or federal court located in the
County of Los Angeles, State of California. Each of the parties hereto: (i)
expressly and irrevocably consents and submits to the jurisdiction of each state
and federal court located in the County of Los Angeles, State of California, in
connection with any legal proceeding; (ii) agrees that service of any process,
summons, notice or document by U.S. mail addressed to such party at the address
set forth in Section 10.2 shall constitute effective service of such process,
summons, notice or document for purposes of any such legal proceeding; (iii)
agrees that each state and federal court located in the County of Los Angeles,
State of California, shall be deemed to be a convenient forum; and (iv) agrees
not to assert, by way of motion, as a defense or otherwise, in any such legal
proceeding commenced in any state or federal court located in the County of Los
Angeles, State of California, any claim that it is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.
6
10.5 Successors and Assigns. The rights and liabilities of the parties
hereto shall bind and inure to the benefit of their respective successors,
heirs, executors and administrators, as the case may be; provided, however,
that, as SurgiCount has specifically contracted for Xxxxxxx'x Services, which
Services are unique and personal, Xxxxxxx may not assign or delegate his
obligations under this Agreement either in whole or in part to any Person
without the prior written consent of Franklin. SurgiCount may assign its rights
and obligations hereunder to any person or entity who succeeds to all or
substantially all of SurgiCount's business.
10.6 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative and not alternative. The parties agree
that, in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other party
shall be entitled, in addition to any other remedy that may be available to it,
to: (i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or threatened breach. The parties
further agree that no Person shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 10.6, and the parties irrevocably waive any
right they may have to require the obtaining, furnishing or posting of any such
bond or similar instrument.
10.7 Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person, and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
10.8 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement in writing for such provision, then: (i)
such provision shall be excluded from this Agreement; (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded; and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
7
10.11 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the parties hereto have executed this CONSULTING
AGREEMENT as of the date first written above.
SURGICOUNT: XXXXXXX:
SURGICOUNT MEDICAL, INC.
By: /s/ Xxxxxx "Xxxx" Xxxx III /s/ Xxxxx Xxxxxxx
---------------------------------------- ----------------------------------------
Xxxxxx "Xxxx" Xxxx III Xxxxx Xxxxxxx
President
[SIGNATURE PAGE TO CONSULTING AGREEMENT]
EXHIBIT A
GUARANTEE CERTIFICATE
This Guarantee Certificate is being executed and delivered on February
3, 2005 by FRANKLIN CAPITAL CORPORATION, a Delaware corporation ("Franklin"),
pursuant to Section 9 of that certain Consulting Agreement, dated as of February
3, 2005 (the "Consulting Agreement"), by and between SURGICOUNT MEDICAL, INC., a
Delaware corporation and a wholly owned subsidiary of Franklin ("SurgiCount"),
and Xxxxx Xxxxxxx. By signing below, Franklin does hereby absolutely and
unconditionally guarantee the full, faithful, timely and complete performance of
all obligations of SurgiCount pursuant to the Consulting Agreement.
FRANKLIN CAPITAL CORPORATION
By: /s/ Xxxxxx "Xxxx" Xxxx III
--------------------------------------
Xxxxxx "Xxxx" Xxxx III
Chairman and Chief Executive Officer
EXHIBIT C
XX. XXXXXXX CONSULTING AGREEMENT
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of February 3, 2005, by and between SURGICOUNT MEDICAL, INC., a California
corporation ("SurgiCount"), and Xx. Xxxxxxx Xxxxxxx ("Xx. Xxxxxxx"). Capitalized
terms used and not otherwise defined herein shall have the meanings given to
them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Franklin Capital Corporation, a Delaware corporate ("Franklin"),
SurgiCount Acquisition Corp., a Delaware corporation, SurgiCount, Xxxxx Xxxxxxx
and Xx. Xxxxxxx are entering into that certain Agreement and Plan of Merger and
Reorganization (the "Merger Agreement"), dated as of even date herewith; and
WHEREAS, in connection with and as a condition to the consummation of
the Merger, SurgiCount desires to engage Xx. Xxxxxxx, and Xx. Xxxxxxx desires to
accept the engagement by SurgiCount, to act as a consultant to SurgiCount on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. CONSULTING SERVICES. Subject to the terms and conditions of this Agreement,
effective as of the Effective Time, SurgiCount hereby engages Xx. Xxxxxxx, and
Xx. Xxxxxxx hereby accepts the engagement by SurgiCount, to act as a consultant
to SurgiCount for the duration of the Term (as defined below). In his capacity
as a consultant to SurgiCount, Xx. Xxxxxxx agrees to perform such services
relating to SurgiCount's business and operations as are reasonably requested
from time to time by SurgiCount (collectively, the "Services"). The manner and
means by which Xx. Xxxxxxx chooses to perform the Services shall be in Xx.
Xxxxxxx'x sole discretion and control; provided, however, that Xx. Xxxxxxx shall
perform all Services in a timely and professional manner, using a degree of
skill and care at least consistent with industry standards.
2. COMPENSATION. As consideration for Xx. Xxxxxxx'x performance of the Services,
SurgiCount shall pay to Xx. Xxxxxxx fees in the amount of $5,000 per month,
prorated for partial months (the "Consulting Fees"), which Consulting Fees shall
be payable coinciding with SurgiCount's ordinary payroll dates.
1
3. STOCK OPTION. As further consideration for Xx. Xxxxxxx'x performance of the
Services, SurgiCount shall cause Franklin, subject to Franklin's receipt of the
requisite approvals from its board of directors and stockholders of a new equity
incentive plan for Franklin (the "New EIP"), and subject to Franklin's receipt
of the further approval from its board of directors of such Option (as defined
below), to issue to Xx. Xxxxxxx an option pursuant to the New EIP to purchase up
to 20,000 shares of Franklin Common Stock (the "Option") at an exercise price
equal to the fair market value of such Franklin Common Stock on the date of the
Option grant. Such Option shall vest and become exercisable in three (3) annual
installments beginning on the first (1st) anniversary of the Closing Date, such
that such Option shall be vested and exercisable with respect to: (i) 6,666
shares of Franklin Common Stock as of the first (1st) anniversary of the Closing
Date; (ii) 13,333 shares of Franklin Common Stock as of the second (2nd)
anniversary of the Closing Date; and (iii) 30,000 shares of Franklin Common
Stock as of the third (3rd) anniversary of the Closing Date; provided, however,
that the vesting of such Option shall accelerate and such Option shall become
fully vested immediately prior to the consummation of any transaction involving
(a) a sale of all or substantially all of the consolidated assets of Franklin
and its Subsidiaries or (b) a merger, consolidation or similar transaction
involving the Franklin if, immediately after the consummation of such merger,
consolidation or similar transaction, the stockholders of the Franklin
immediately prior thereto do not own, directly or indirectly, outstanding voting
securities representing more than fifty percent (50%) of the combined
outstanding voting power of the surviving entity in such merger, consolidation
or similar transaction.
4. EXPENSES. SurgiCount shall reimburse Xx. Xxxxxxx for any reasonable
out-of-pocket expenses, including, without limitation, reasonable travel
expenses, incurred in connection with Xx. Xxxxxxx'x performance of the Services;
provided, however, that Xx. Xxxxxxx must: (i) obtain the prior written approval
of SurgiCount for any such expenses that, individually or in the aggregate,
exceed $150; and (ii) submit such written documentation of all such expenses as
SurgiCount may reasonably require. SurgiCount will reimburse Xx. Xxxxxxx for
expenses covered by this Section 4 within thirty (30) days of the date that Xx.
Xxxxxxx submits proper documentation of such expenses to SurgiCount.
5. INDEPENDENT CONTRACTOR RELATIONSHIP. Xx. Xxxxxxx'x relationship with
SurgiCount shall be solely that of an independent contractor, and nothing in
this Agreement shall be construed to create a partnership, joint venture, or
employer-employee relationship. Xx. Xxxxxxx is not the agent of SurgiCount and
is not authorized to make any representation, contract or commitment on behalf
of SurgiCount. Xx. Xxxxxxx shall not be entitled to any of the benefits that
SurgiCount may make available to its employees, such as group insurance,
profit-sharing or retirement benefits. Xx. Xxxxxxx shall be solely responsible
for all tax returns and payments required to be filed with or made to any
federal, state or local tax authority with respect to Xx. Xxxxxxx'x performance
of the Services and receipt of the Consulting Fees and Option pursuant to this
Agreement. SurgiCount will regularly report amounts paid to Xx. Xxxxxxx by
filing Form 1099-MISC with the Internal Revenue Service as required by law, but
given that Xx. Xxxxxxx is an independent contractor, SurgiCount will not
withhold or make payments for social security, make unemployment insurance or
disability insurance contributions, or obtain worker's compensation insurance on
Xx. Xxxxxxx'x behalf. Xx. Xxxxxxx agrees to accept exclusive liability for
complying with all applicable federal, state and local laws governing
self-employed individuals, including, without limitation, obligations such as
payment of taxes, social security,
2
disability and other contributions based on the Consulting Fees paid to Xx.
Xxxxxxx. Xx. Xxxxxxx hereby agrees to indemnify, hold harmless and defend
SurgiCount from and against any and all such taxes and contributions, as well as
any penalties and interest arising therefrom.
6. INFORMATION AND INTELLECTUAL PROPERTY RIGHTS.
6.1 Proprietary Information. Xx. Xxxxxxx agrees that, during the Term
and thereafter, Xx. Xxxxxxx shall take all steps necessary to hold the
Proprietary Information (as defined below) in trust and confidence, shall not
use such Proprietary Information in any manner or for any purpose except as
expressly set forth in this Agreement and shall not disclose any such
Proprietary Information to any third party without first obtaining SurgiCount's
express written consent on a case-by-case basis; provided, however, that Xx.
Xxxxxxx may disclose certain Proprietary Information, without violating his
obligations under this Agreement, to the extent such disclosure is required by a
valid order of a court or other governmental body having jurisdiction, provided
that Xx. Xxxxxxx provides SurgiCount with reasonable prior written notice of
such disclosure and uses commercially reasonable efforts to obtain, or to assist
SurgiCount in obtaining, a protective order preventing or limiting the
disclosure and/or requiring that the Proprietary Information so disclosed be
used only for the purposes for which the law or regulation required, or for
which the order was issued. For purposes of this Agreement, "Proprietary
Information" means any and all confidential and/or proprietary information
regarding SurgiCount or any of its Affiliates and their current and proposed
business and operations, including, without limitation, information pertaining
to their current or forecasted capital structure, equity or debt financing or
investment activities, strategic plans, current or proposed products or
services, investors, employees, directors, consultants, and other business and
contractual relationships; provided, however, that information received by Xx.
Xxxxxxx shall not be considered to be Proprietary Information if Xx. Xxxxxxx can
demonstrate with competent evidence that such information has been published or
is otherwise readily available to the public other than by a breach of this
Agreement.
6.2 Third-Party Information. Xx. Xxxxxxx understands that SurgiCount
has received and will in the future receive from third parties certain
confidential or proprietary information relating to such third parties
(collectively, "Third-Party Information"), subject to duties on SurgiCount's
part to maintain the confidentiality of such Third-Party Information and to use
such Third-Party Information only for certain limited purposes. Xx. Xxxxxxx
agrees to hold all Third-Party Information in confidence and not to disclose to
anyone (other than personnel of Franklin or SurgiCount) or to use, except in
connection with Xx. Xxxxxxx'x performance of the Services, any Third-Party
Information unless expressly authorized in writing by an officer of SurgiCount.
6.3 Intellectual Property Rights. Xx. Xxxxxxx agrees that any and all
Intellectual Property and Intellectual Property Rights that Xx. Xxxxxxx
conceived, reduced to practice or developed during the course of his performance
of services as a director, officer, employee or consultant for SurgiCount prior
to the Effective Time, together with any and all Intellectual Property and
Intellectual Property Rights that Xx. Xxxxxxx conceives, reduces to practice or
develops during the course of his performance of the Services pursuant to this
Agreement, in each case whether alone or in conjunction with others (all of the
foregoing being collectively referred to herein as the "Inventions"), shall be
the sole and exclusive property of SurgiCount. Accordingly, Xx. Xxxxxxx hereby:
(i) assigns and agrees to assign to SurgiCount his entire right,
3
title and interest in and to all Inventions; and (ii) designates SurgiCount as
his agent for, and grants to the officers of SurgiCount a power of attorney
(which power of attorney shall be deemed coupled with an interest) with full
power of substitution solely for the purpose of, effecting the foregoing
assignments from Xx. Xxxxxxx to SurgiCount. Xx. Xxxxxxx further agrees to
cooperate with and provide reasonable assistance to SurgiCount to obtain and
from time to time enforce any and all current or future Intellectual Property
Rights covering or relating to the Inventions in any and all jurisdiction.
7. NO CONFLICTING OBLIGATION. Xx. Xxxxxxx represents that his entering into this
Agreement, his performance of all of the terms of this Agreement and his
performance of the Services pursuant to this Agreement do not and will not
breach or conflict with any agreement or other arrangement between any Xx.
Xxxxxxx and any third party, including, without limitation, any agreement or
other arrangement between Xx. Xxxxxxx and any third party to keep in confidence
any proprietary information of another entity acquired by Xx. Xxxxxxx in
confidence or in trust prior to the date of this Agreement. During the Term, Xx.
Xxxxxxx agrees not to enter into any agreement that conflicts with this
Agreement.
8. TERM AND TERMINATION.
8.1 TERM. This Agreement shall commence at the Effective Time and shall
continue for a period of eighteen (18) months thereafter (the "Initial Term").
At the end of such Initial Term, this Agreement shall terminate unless extended
for one or more additional periods of one (1) year each (each, a "Renewal Term")
by mutual written agreement of the parties. The Initial Term and all Renewal
Terms, if any, are collectively referred to herein as the "Term".
8.2 Automatic Termination. This Agreement shall automatically terminate
at any time during the Term upon the event of Xx. Xxxxxxx'x death.
8.3 Termination by Xx. Xxxxxxx. Xx. Xxxxxxx may voluntarily terminate
this Agreement at any time during the Term by delivering thirty (30) days prior
written notice to SurgiCount.
8.4 Termination by SurgiCount. SurgiCount may terminate this Agreement
at any time during the Term upon delivery to Xx. Xxxxxxx of notice of the
good-faith determination by the majority of the members of the board of
directors of SurgiCount (and the accompanying justification therefor) that such
Agreement should be terminated for Cause (as defined below) or as a result of
Xx. Xxxxxxx'x Disability (as defined below). For purposes of this Agreement:
(a) The term "Cause" shall mean: (i) Xx. Xxxxxxx'x willful misconduct;
(ii) Xx. Xxxxxxx'x willful failure to perform the Services; (iii) Xx. Xxxxxxx'x
causing of intentional damage to the tangible or intangible property of
SurgiCount; (iv) the conviction of Xx. Xxxxxxx of any felony or any other crime
involving moral turpitude; (v) Xx. Xxxxxxx'x performance of any dishonest or
fraudulent act which is, or would be, in each case as determined in good faith
by the board of directors of SurgiCount materially detrimental to the best
interests of SurgiCount or its stockholders or Affiliates; or (vi) Xx. Xxxxxxx'x
breach of any of the Transaction Documents to which he is a party.
4
(b) The term "Disability" shall mean Xx. Xxxxxxx'x inability to perform
the Services for any period of forty-five (45) consecutive Business Days (or any
ninety (90) Business Days during any period of twelve (12) consecutive months)
by reason of any physical or mental incapacity or illness, as determined by the
board of directors of SurgiCount based upon medical advice provided by a
licensed physician acceptable to the board of directors of SurgiCount.
8.5 EFFECT OF TERMINATION. The obligations set forth in Sections 5, 6,
7, 8.5 and 10, as well as any outstanding payment or reimbursement obligations
of SurgiCount, shall survive any termination or expiration of this Agreement.
Upon any termination or expiration of this Agreement, Xx. Xxxxxxx shall promptly
deliver to SurgiCount all documents and other materials of any nature pertaining
to the Services, together with all documents and other items containing or
pertaining to any Proprietary Information, Third-Party Information or
Inventions.
9. GUARANTEE BY FRANKLIN. On the date of this Agreement, SurgiCount shall cause
Franklin to: (i) guarantee the full, faithful, timely and complete performance
of all obligations of SurgiCount pursuant to this Agreement; and (ii) deliver to
Xx. Xxxxxxx, as evidence of such guarantee, a guarantee certificate in the form
attached hereto as Exhibit A executed by Franklin as of the date of this
Agreement.
10. MISCELLANEOUS.
10.1 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
10.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next Business Day; (iii) five (5) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) Business Day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this Section 10.2):
If to SurgiCount:
SurgiCount Medical, Inc.
c/o Franklin Capital Corporation
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx "Xxxx" Xxxx III
Fax: (000) 000-0000
E-mail: xxxx@xxxxxx.xxx
5
With a copy (which shall not constitute notice) to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxxxxxx@xxxxxxxxxxxx.xxx
If to Xx. Xxxxxxx:
Xx. Xxxxxxx Xxxxxxx
c/o Xxxxx Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
E-mail: xxxxxxxxxxxx@xxxxxxx.xxx
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxx@xxxx.xxx
10.3 Headings. The bold-face headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.4 Governing Law; Jurisdiction and Venue. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of California without giving effect to its principles of conflicts
of laws. Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement shall be brought or
otherwise commenced exclusively in any state or federal court located in the
County of Los Angeles, State of California. Each of the parties hereto: (i)
expressly and irrevocably consents and submits to the jurisdiction of each state
and federal court located in the County of Los Angeles, State of California, in
connection with any legal proceeding; (ii) agrees that service of any process,
summons, notice or document by U.S. mail addressed to such party at the address
set forth in Section 10.2 shall constitute effective service of such process,
summons, notice or document for purposes of any such legal proceeding; (iii)
agrees that each state and federal court located in the County of Los Angeles,
State of California, shall be deemed to be a convenient forum; and (iv) agrees
not to assert, by way of motion, as a defense or otherwise, in any such legal
proceeding commenced in any state or federal court located in the County of Los
Angeles, State of California, any claim that it is not subject personally to the
6
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.
10.5 Successors and Assigns. The rights and liabilities of the parties
hereto shall bind and inure to the benefit of their respective successors,
heirs, executors and administrators, as the case may be; provided, however,
that, as SurgiCount has specifically contracted for Xx. Xxxxxxx'x Services,
which Services are unique and personal, Xx. Xxxxxxx may not assign or delegate
his obligations under this Agreement either in whole or in part to any Person
without the prior written consent of Franklin. SurgiCount may assign its rights
and obligations hereunder to any person or entity who succeeds to all or
substantially all of SurgiCount's business.
10.6 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative and not alternative. The parties agree
that, in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other party
shall be entitled, in addition to any other remedy that may be available to it,
to: (i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or threatened breach. The parties
further agree that no Person shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 10.6, and the parties irrevocably waive any
right they may have to require the obtaining, furnishing or posting of any such
bond or similar instrument.
10.7 Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person, and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
10.8 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement in writing for such provision, then: (i)
such provision shall be excluded from this Agreement; (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded; and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
7
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
10.11 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the parties hereto have executed this CONSULTING
AGREEMENT as of the date first written above.
SURGICOUNT: XX. XXXXXXX:
SURGICOUNT MEDICAL, INC.
By: /s/ Xxxxxx "Xxxx" Xxxx III /s/ Xx. Xxxxxxx Xxxxxxx
---------------------------------------- ----------------------------------------
Xxxxxx "Xxxx" Xxxx III Xx. Xxxxxxx Xxxxxxx
President
[SIGNATURE PAGE TO CONSULTING AGREEMENT]
EXHIBIT A
GUARANTEE CERTIFICATE
This Guarantee Certificate is being executed and delivered on February
3, 2005 by FRANKLIN CAPITAL CORPORATION, a Delaware corporation ("Franklin"),
pursuant to Section 9 of that certain Consulting Agreement, dated as of February
3, 2005 (the "Consulting Agreement"), by and between SURGICOUNT MEDICAL, INC., a
Delaware corporation and a wholly owned subsidiary of Franklin ("SurgiCount"),
and Xx. Xxxxxxx Xxxxxxx. By signing below, Franklin does hereby absolutely and
unconditionally guarantee the full, faithful, timely and complete performance of
all obligations of SurgiCount pursuant to the Consulting Agreement.
FRANKLIN CAPITAL CORPORATION
By: /s/ Xxxxxx "Xxxx" Xxxx III
-------------------------------------
Xxxxxx "Xxxx" Xxxx III
Chairman and Chief Executive Officer
EXHIBIT D
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made and entered
into as of February 3, 2005, by and among SURGICOUNT MEDICAL, INC., a California
corporation ("SurgiCount"), Xxxxx Xxxxxxx ("Xxxxxxx") and Xx. Xxxxxxx Xxxxxxx
("Xx. Xxxxxxx" and, together with Xxxxxxx, the "Shareholders"). Capitalized
terms used and not otherwise defined in this Agreement shall have the meanings
given to them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Franklin Capital Corporation, a Delaware corporation ("Franklin"),
SurgiCount Acquisition Corp., a Delaware corporation, SurgiCount and the
Shareholders are entering into that certain Agreement and Plan of Merger and
Reorganization (the "Merger Agreement"), dated as of even
date herewith;
WHEREAS, in connection with and as a condition to the consummation of
the Merger, and to enable Franklin and SurgiCount to secure more fully the
benefits of the Merger, Franklin and SurgiCount have required that the
Shareholders enter into this Agreement; and
WHEREAS, the Shareholders believe that the restrictions set forth in
this Agreement are just and reasonable in light of the Merger and are entering
into this Agreement in order to induce Franklin and SurgiCount to consummate the
Merger and the other transactions contemplated by the Transaction Documents.
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants, agreements and representations and warranties set forth
herein, the parties to this Agreement, intending to be legally bound, hereby
agree as follows:
AGREEMENT
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
1.1 "Competing Product" means any: (i) medical device product designed
to enhance patient safety by identifying, detecting and/or tracking surgical
items or other items before, during or after surgical procedures; (ii) product,
equipment, device or system that has been designed, developed, manufactured,
assembled, promoted, sold, supplied, distributed, resold, installed, supported,
maintained, repaired, refurbished, licensed, sublicensed, financed, leased or
subleased by or on behalf of SurgiCount (or any predecessor of SurgiCount), at
any time on or prior to the Closing Date; or (iii) product, equipment, device or
system that is substantially the same as, incorporates, is a material component
or part of, is based upon, is functionally similar to or competes in any
material respect with any product, equipment, device or system of the type
referred to in clause "(i)" or "(ii)" above.
1.2 "Competing Service" means any (i) service relating to enhancing
patient safety by identifying, detecting and/or tracking surgical items or
otherwise before, during or after surgical procedures; (ii) service that has
been provided, performed or offered by or on behalf of any of SurgiCount (or any
predecessor of SurgiCount), at any time on or prior to the Closing Date; (iv)
service that facilitates, supports or otherwise relates to the design,
development, manufacture, assembly, promotion, sale, supply, distribution,
resale, installation, support, maintenance, repair, refurbishment, licensing,
sublicensing, financing, leasing or subleasing of any Competing Product; or (v)
service that is substantially the same as, is based upon or competes in any
material respect with any service referred to in clause "(i)", "(ii)" or "(iii)"
above.
1.3 A Person shall be deemed to be engaged in "Competition" if: (i)
such Person or any of such Person's Affiliates or Representatives is engaged
directly or indirectly in the discovery, development, manufacture,
commercialization, promotion, sale, supply, licensing, sublicensing,
distribution or resale of any Competing Product; or (ii) such Person or any of
such Person's Affiliates or Representatives is engaged directly or indirectly in
providing, performing or offering any Competing Service.
1.4 "Confidential Information" means any non-public information
(whether or not in written form and whether or not expressly designated as
confidential) relating directly or indirectly to SurgiCount or its Affiliates or
Representatives or relating directly or indirectly to the business, operations,
financial affairs, performance, assets, technology, processes, products,
contracts, customers, licensees, sublicensees, suppliers, personnel, consultants
or plans of SurgiCount or its Affiliates or Representatives (including, without
limitation, any such information consisting of or otherwise relating to trade
secrets, know-how, technology, inventions, prototypes, designs, drawings,
sketches, processes, license or sublicense arrangements, formulae, proposals,
research and development activities, customer lists or preferences, pricing
lists, referral sources, marketing or sales techniques or plans, operations
manuals, service manuals, financial information, projections, lists of
consultants, lists of suppliers or lists of distributors); provided, however,
that "Confidential Information" shall not be deemed to include information of
SurgiCount or its Affiliates or Representatives that was already or subsequently
becomes (through no fault of SurgiCount or the Shareholders) publicly known and
in the public domain.
1.5 "Noncompetition Period" shall mean the period commencing on the
Closing Date and ending on the fifth (5th) anniversary of the Closing Date;
provided, however, that in the event of any breach by any Shareholder of any
provision of this Agreement, the Noncompetition Period shall be automatically
extended by a number of days equal to the total number of days in the period
from the date on which such breach shall have first occurred through the date as
of which such breach shall have been fully cured.
1.6 "Restricted Territory" means each state, territory or possession of
the United States of America and each member state of the European Union.
1.7 "Specified Employee" means any individual who: (i) is or was an
employee of SurgiCount or its Affiliates on the Closing Date or during the one
hundred eighty (180) day
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period ending on the Closing Date; or (ii) becomes an employee of SurgiCount or
its Affiliates at any time during the Noncompetition Period.
2. RESTRICTION ON COMPETITION. Each Shareholder agrees that, during the
Noncompetition Period, such Shareholder shall not, and shall not permit any of
its Affiliates or Representatives to: (i) engage directly or indirectly in
Competition in any Restricted Territory; or (ii) directly or indirectly be or
become an Affiliate, Representative, licensor, sublicensor, licensee or
sublicensee of, or otherwise be or become associated with or acquire or hold (of
record, beneficially or otherwise) any direct or indirect interest in, any
Person that engages directly or indirectly in Competition in any Restricted
Territory; provided, however, that such Shareholder may, without violating the
restrictions set forth in this Section 2, own, as a passive investment, shares
of capital stock of a publicly held corporation that engages in Competition if
(a) such shares are actively traded on an Exchange, (b) the number of shares of
such corporation's capital stock that are owned beneficially (directly or
indirectly) by such Shareholder and the number of shares of such corporation's
capital stock that are owned beneficially (directly or indirectly) by such
Shareholder's Affiliates and Representatives collectively represent less than
one percent (1%) of the total number of shares of such corporation's outstanding
capital stock and (c) neither such Shareholder nor any of its Affiliates or
Representatives is otherwise associated directly or indirectly with such
corporation or with any Affiliate or Representative of such corporation.
3. NO HIRING OR SOLICITATION OF SPECIFIED EMPLOYEES. Each Shareholder agrees
that, during the Noncompetition Period, such Shareholder shall not, and shall
not permit any of its Affiliates or Representatives to: (i) hire any Specified
Employee; or (ii) directly or indirectly encourage, induce, attempt to induce,
solicit or attempt to solicit (on such Shareholder's own behalf or on behalf of
any other Person) any Specified Employee to leave his or her employment with
SurgiCount or its Affiliate or Representative, as applicable.
4. NONDISPARAGEMENT. Each Shareholder agrees that, during the Noncompetition
Period, such Shareholder shall not make any written or oral statements or
disclosures, or cause or encourage any of such Shareholder's Affiliates or
Representatives to make any written or oral statements or disclosures, that
defame, disparage or in any way criticize the reputation, practices or conduct
of SurgiCount or any of its Affiliates or Representatives. Likewise, each of
Franklin and SurgiCount agrees that, during the Noncompetition Period, neither
Franklin nor SurgiCount shall make any written or oral statements or
disclosures, or cause or encourage any of their respective Affiliates or
Representatives to make any written or oral statements or disclosures, that
defame, disparage or in any way criticize the reputation, practices or conduct
of either Shareholder or any of either Shareholder's Affiliates or
Representatives.
5. CONFIDENTIALITY. Each Shareholder agrees that it shall hold all Confidential
Information in strict confidence and shall not at any time, whether during or
after the Noncompetition Period: (i) reveal, report, publish, disclose or
transfer any Confidential Information to any Person other than Franklin or
SurgiCount; (ii) use any Confidential Information for any purpose or for the
benefit of any Person other than Franklin or SurgiCount, without the prior
written consent of SurgiCount.
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6. REASONABLENESS AND ENFORCEABILITY OF COVENANTS.
6.1 Reasonableness of Covenants. The parties hereto expressly
acknowledge and agree that the character, duration and geographical scope of the
restrictive covenants set forth in this Agreement are reasonable in light of the
circumstances as they exist on the Signing Date, including, without limitation,
each Shareholder's substantial economic interest in the transactions
contemplated by the Transaction Documents. Without limiting the generality of
the foregoing, if any court determines that any of the restrictive covenants
contained herein, or any part thereof, is unenforceable because of the
character, duration or geographic scope of such covenant, the parties agree that
it would serve the mutual intent of such parties if such court would modify the
duration or scope of such provision so that such provision, in its modified
form, shall then be enforceable to the maximum extent permitted by applicable
law.
6.2 Knowledge of Shareholders; Enforceability of Covenants. Each
Shareholder expressly acknowledges and agrees that: (i) as part of the Merger,
SurgiCount will become a wholly owned subsidiary of Franklin at the Effective
Time; (ii) the restrictive covenants contained herein are an essential part of
this Agreement and no reasonable person would enter into the transactions
contemplated by the Transaction Documents without the benefit of such
restrictive covenants; and (iii) the transactions contemplated by the
Transaction Documents are designed and intended to qualify as a sale or other
disposition by the Shareholders of all of such Shareholder's interests in
SurgiCount within the meaning of section 16601 of the Business and Professions
Code of California (the "BPCC"), which section provides as follows:
"Section 16601. Sale of goodwill or corporation shares; agreement not to
compete. Any person who sells the goodwill of a business, or any
shareholder of a corporation selling or otherwise disposing of all his
shares in said corporation, or any shareholder of a corporation which
sells (a) all or substantially all of its operating assets together with
the goodwill of the corporation, (b) all or substantially all of the
operating assets of a division or a subsidiary of the corporation
together with the goodwill of such division or subsidiary, or (c) all of
the shares of any subsidiary, may agree with the buyer to refrain from
carrying on a similar business within a specified county or counties,
city or cities, or a part thereof, in which the business so sold, or
that of said corporation, division, or subsidiary has been carried on,
so long as the buyer, or any person deriving title to the goodwill or
shares from him, carries on a like business therein. For the purposes of
this section, "subsidiary" shall mean any corporation, a majority of
whose voting shares are owned by the selling corporation."
Each Shareholder further expressly acknowledges and agrees that: (i) such
Shareholder has been fully advised by legal counsel in connection with the
negotiation, preparation, execution and delivery of the Transaction Documents;
and (ii) such Shareholder has read section 16601 of the BPCC, understands its
terms and agrees that (a) section 16601 of the BPCC applies in the context of
the transactions contemplated by the Transaction Documents, (b) such
transactions are within the scope and intent of section 16601 and an exception
to section 16600 of the BPCC, and (c) such Shareholder shall be fully bound by
the restrictive covenants contained in this Agreement to the maximum extent
permitted by law, it being the intent and spirit of the parties that the
restrictive covenants contained herein shall be valid and enforceable in all
respects.
4
7. MISCELLANEOUS.
7.1 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
7.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next Business Day; (iii) five (5) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) Business Day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this Section 7.2):
If to Franklin:
Franklin Capital Corporation
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx "Xxxx" Xxxx III
Fax: (000) 000-0000
E-mail: xxxx@xxxxxx.xxx
With a copy (which shall not constitute notice) to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxxxxxx@xxxxxxxxxxxx.xxx
If to the Shareholders:
Xxxxx Xxxxxxx and Xx. Xxxxxxx Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
E-mail: xxxxxxxxxxxx@xxxxxxx.xxx
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
5
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxx@xxxx.xxx
Notwithstanding the foregoing, the parties expressly acknowledge and agree that,
for purposes of delivering any notice pursuant to this Agreement: (i) any such
notice delivered to either Shareholder in accordance with this Section 7.2 shall
be deemed to have been delivered to both Shareholders; and (ii) any such notice
given by either Shareholder in accordance with this Section 7.2 shall be deemed
to have been given by both Shareholders.
7.3 Headings. The bold-face headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.4 Governing Law; Jurisdiction and Venue. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of California without giving effect to its principles of conflicts
of laws. Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement shall be brought or
otherwise commenced exclusively in any state or federal court located in the
County of Los Angeles, State of California. Each of the parties hereto: (i)
expressly and irrevocably consents and submits to the jurisdiction of each state
and federal court located in the County of Los Angeles, State of California, in
connection with any legal proceeding; (ii) agrees that service of any process,
summons, notice or document by U.S. mail addressed to such party at the address
set forth in Section 7.2 shall constitute effective service of such process,
summons, notice or document for purposes of any such legal proceeding; (iii)
agrees that each state and federal court located in the County of Los Angeles,
State of California, shall be deemed to be a convenient forum; and (iv) agrees
not to assert, by way of motion, as a defense or otherwise, in any such legal
proceeding commenced in any state or federal court located in the County of Los
Angeles, State of California, any claim that it is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.
7.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and such Shareholder's successors and
assigns, if any. No Shareholder shall assign or delegate, by operation of law or
otherwise, its rights or obligations under this Agreement to any Person.
Franklin may freely assign or delegate any or all of its rights or obligations
under this Agreement, in whole or in part, to any other Person without obtaining
the consent or approval of any other party hereto or of any other Person.
7.6 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative and not alternative. The parties agree
that, in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other party
shall be entitled, in addition to any other remedy that may be available to it,
to: (i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or
6
threatened breach. The parties further agree that no Person shall be required to
obtain, furnish or post any bond or similar instrument in connection with or as
a condition to obtaining any remedy referred to in this Section 7.6, and the
parties irrevocably waive any right they may have to require the obtaining,
furnishing or posting of any such bond or similar instrument.
7.7 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person, and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
7.8 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
7.9 Severability. Subject to the provisions of Section 6.1, if one or
more provisions of this Agreement are held to be unenforceable under applicable
law, the parties agree to renegotiate such provision in good faith. In the event
that the parties cannot reach a mutually agreeable and enforceable replacement
in writing for such provision, then: (i) such provision shall be excluded from
this Agreement; (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded; and (iii) the balance of the Agreement shall be
enforceable in accordance with its terms.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
7.11 Entire Agreement. This Agreement, together with each of the other
Transaction Documents and the schedules and exhibits hereto and thereto, set
forth the entire understanding of the parties hereto relating to the subject
matter hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this NONCOMPETITION
AGREEMENT as of the Signing Date.
SURGICOUNT: SHAREHOLDERS:
SURGICOUNT MEDICAL, INC.
By: /s/ Xxxxxx "Xxxx" Xxxx III /s/ Xxxxx Xxxxxxx
--------------------------------------- ------------------------------------------
Xxxxxx "Xxxx" Xxxx III Xxxxx Xxxxxxx
President
/s/ Xx. Xxxxxxx Xxxxxxx
------------------------------------------
Xx. Xxxxxxx Xxxxxxx
EXHIBIT E
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
February 3, 2005, by and among FRANKLIN CAPITAL CORPORATION, a Delaware
corporation ("Franklin"), Xxxxx Xxxxxxx ("Xxxxxxx"), Xx. Xxxxxxx Xxxxxxx ("Xx.
Xxxxxxx" and, together with Xxxxxxx, the "Shareholders") and LaSalle Bank
National Association, as escrow agent (the "Escrow Agent"). Capitalized terms
used and not otherwise defined in this Agreement shall have the meanings given
to them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Franklin, Surgicount Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Franklin, Surgicount Medical, Inc., a California
corporation, and the Shareholders are entering into that certain Agreement and
Plan of Merger and Reorganization (the "Merger Agreement"), dated as of even
date herewith, a copy of which is attached hereto as Exhibit A; and
WHEREAS, pursuant to Section 1.5 of the Merger Agreement, a portion of
the aggregate Per Share Closing Stock Consideration otherwise payable to the
Shareholders in connection with the Merger is to be held in escrow pursuant to
the terms of this Agreement in order to secure certain indemnification,
compensation and reimbursement rights of the Indemnitees pursuant to Section 9
of the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants, agreements and representations and warranties set forth herein, the
parties to this Agreement, intending to be legally bound, hereby agree as
follows:
AGREEMENT
1. ESTABLISHMENT OF ESCROW ARRANGEMENT.
1.1 Creation of Escrow Fund. At or following the Reverse Merger
Closing, in accordance with Section 1.5 of the Merger Agreement, Franklin shall
deliver to the Escrow Agent, on behalf of each Shareholder, a certificate,
registered in the name of the LaSalle Bank National Association as Escrow Agent,
representing such Shareholder's Pro Rata Percentage of the Escrow Stock to be
held as security for the indemnification, compensation and reimbursement rights
of the Indemnitees pursuant to Section 9 of the Merger Agreement. The Escrow
Stock, together with any Derivative Property (as defined below) delivered to the
Escrow Agent pursuant to Section 2.4, shall collectively constitute the "Escrow
Fund".
1.2 Appointment of Escrow Agent. Franklin and the Shareholders hereby
appoint Escrow Agent, and Escrow Agent hereby agrees, to act as escrow agent and
to hold, safeguard and disburse the Escrow Fund pursuant to the terms and
conditions of this Agreement.
1.3 Fees and Expenses of Escrow Agent. The Escrow Agent shall be
entitled to receive fees and reimbursements for reasonable documented
out-of-pocket expenses incurred in
connection with this Agreement in accordance with the schedule attached hereto
as Exhibit B. All such fees and expenses shall be paid by Franklin.
1.4 Successor Escrow Agent. In the event that the Escrow Agent becomes
unwilling or unable to continue as escrow agent under this Agreement, such
Escrow Agent (the "Departing Escrow Agent") may resign by delivering a written
notice of resignation to Franklin and to the Shareholders, which resignation
shall take effect not less than thirty (30) days following the date it is
delivered to Franklin and the Shareholders. In connection with any such
resignation of the Departing Escrow Agent, Franklin and the Shareholders shall
mutually appoint a successor Escrow Agent (the "Successor Escrow Agent") within
fifteen (15) days following their receipt of the Departing Escrow Agent's notice
of resignation; provided, however, that if Franklin and the Shareholders fail to
appoint a Successor Escrow Agent prior to the end of such fifteen (15) day
period, the Departing Escrow Agent shall be entitled to apply to any court of
competent jurisdiction for the appointment of a Successor Escrow Agent. Any
Successor Escrow Agent appointed pursuant to this Section 1.4 shall execute and
deliver to Franklin, the Shareholders and the Departing Escrow Agent an
instrument accepting such appointment, at which time the Successor Escrow Agent
shall, without any further action, be automatically vested with all the estates,
property rights, powers, duties and responsibilities of the Departing Escrow
Agent as if such Successor Escrow Agent were originally named as Escrow Agent
herein. The Departing Escrow Agent shall act in accordance with written
instructions from Franklin as to the transfer of the Escrow Fund to any
Successor Escrow Agent.
2. ESCROW FUND.
2.1 Trust Fund. The Escrow Fund shall be held as a trust fund and shall
not be subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any Shareholder or of any other party hereto. Subject
to Section 4.4, the Escrow Agent shall hold and safeguard the Escrow Fund until
the earlier of its release in full pursuant to the terms of this Agreement or
the Termination Date. Notwithstanding the preceding portion of this Section 2.1,
if the Escrow Fund shall be attached, garnished, or levied upon pursuant to
judicial process, or the delivery of funds held in the Escrow Fund shall be
stayed or enjoined by any court order, or any court order or judgment shall be
made or entered into affecting the Escrow Fund or any part thereof, the Escrow
Agent is hereby expressly authorized to obey and comply with such judicial
process, court order or judgment. In the event the Escrow Agent so complies, it
shall not be liable to Franklin, to the Shareholders or to any other person,
firm or corporation by reason of such compliance, notwithstanding the subsequent
reversal, modification, annulment, or setting aside of such judicial process,
court order or judgment.
2.2 Security Interest. Franklin shall have, and the Shareholders hereby
grant to Franklin, as of and from the Reverse Merger Closing, a perfected,
first-priority security interest in the Escrow Fund to secure payment of any and
all amounts payable to the Indemnitees pursuant to Section 9 of the Merger
Agreement. In connection with such security interest, each Shareholder expressly
acknowledges and agrees that: (i) the Escrow Agent is acting as Franklin's agent
to the extent necessary to perfect Franklin's first-priority security interest
in the Escrow Stock; and (ii) such Shareholder shall execute and deliver such
instruments as Franklin may from time to time reasonably request for the purpose
of evidencing and perfecting such security interest.
3
2.3 Dividends, Interest, Etc. Franklin and the Shareholders agree that
any shares of Franklin Common Stock, other securities or other property
(collectively, "Derivative Property") distributable or issuable (whether by way
of stock dividend, stock split or otherwise) in respect of or in exchange for
any Escrow Stock (including pursuant to or as a part of a merger, consolidation,
acquisition of property or stock, reorganization or liquidation involving
Franklin) shall not be distributed or issued to the Shareholders, but rather
shall be issued to, registered in the name of and held by the Escrow Agent as
part of the Escrow Fund.
2.4 Voting of Escrow Stock. On any matter brought before the
stockholders of Franklin for a vote the Shareholders shall deliver written
notice to the Escrow Agent (the "Voting Notice") at least five (5) days prior to
the date of the taking of such vote (the "Voting Notice Date") setting forth the
manner in which the Escrow Agent shall vote the Escrow Stock. The Escrow Agent
shall vote the Escrow Stock in the manner set forth in the Voting Notice;
provided, however, that the Escrow Agent shall have no obligation to vote any of
the Escrow Stock if no Voting Notice is received prior to the Voting Notice Date
or if such Voting Notice does not clearly set forth the manner in which the
Escrow Agent shall vote the Escrow Stock.
2.5 Tax Reporting Documentation. The parties hereto agree that, for Tax
reporting purposes, all income, if any, attributable to the Escrow Fund shall be
allocable to the Shareholders in accordance with their relative Pro Rata
Percentages. Each Shareholder agrees to complete, sign and send to the Escrow
Agent within thirty (30) days after the Signing Date a Form W-9 and any other
forms and documents that the Escrow Agent may reasonably request for Tax
reporting purposes (collectively, "Tax Reporting Documentation"). Likewise, each
Shareholder acknowledges and agrees that, if such Tax Reporting Documentation is
not delivered to the Escrow Agent pursuant to this Section 2.6, the Escrow Agent
shall withhold a portion of any interest or other income earned on the Escrow
Fund and remit such withholding to the Internal Revenue Service in accordance
with the Code.
2.6 Fractional Shares. No fractional shares of Escrow Stock shall be
retained in or released from the Escrow Fund pursuant to this Agreement. In
connection with any release of Escrow Stock from the Escrow Fund, Franklin and
the Escrow Agent shall be permitted to follow such other rounding procedures as
Franklin reasonably determines to be appropriate in order to avoid retaining any
fractional shares in the Escrow Fund and in order to avoid releasing any
fractional shares from the Escrow Fund.
2.7 Transferability. The interests of the Shareholders in the Escrow
Fund shall not be assignable or transferable, other than by operation of law,
and no assignment or transfer of any of such interests by operation of law shall
be recognized or given effect until both Franklin and the Escrow Agent shall
have received written notice of such assignment or transfer.
3. CLAIMS AGAINST ESCROW FUND.
3.1 Claim Notice. If any Indemnitee (each, a "Claimant") has or claims
to have incurred or suffered Damages for which it is or may be entitled to
indemnification, compensation or reimbursement pursuant to Section 9 of the
Merger Agreement, Franklin shall deliver a written notice of such claim (each, a
"Claim Notice") on behalf of such Claimant to the Shareholders and to the Escrow
Agent. Each Claim Notice shall state: (i) that such Claimant
4
believes that it is entitled to indemnification, compensation or reimbursement
pursuant to Section 9 of the Merger Agreement; (ii) the basis, in reasonable
detail, for such Claimant's belief that it is entitled to indemnification,
compensation or reimbursement pursuant to Section 9 of the Merger Agreement;
(iii) the amount of Damages such Claimant claims to have so incurred or suffered
(the "Claimed Amount"); and (iv) the amount of Escrow Stock and/or Derivative
Property (in each case, valued at the Stipulated Value (as defined below))
required to satisfy such Damages.
3.2 Response Notice. Within twenty (20) days after receipt by the
Shareholders of a Claim Notice, the Shareholders shall deliver to Franklin and
to the Escrow Agent a written response (the "Response Notice") stating that the
Shareholders: (i) agree that Escrow Stock and/or Derivative Property (in each
case, valued at the Stipulated Value) equal to the full Claimed Amount may be
released from the Escrow Fund and delivered to the Claimant; (ii) agree that
Escrow Stock and/or Derivative Property (in each case, valued at the Stipulated
Value) equal to a portion, but not all, of the Claimed Amount (the "Agreed
Amount") may be released from the Escrow Fund and delivered to the Claimant; or
(iii) contest the Claim Notice entirely and believe that no portion of the
Escrow Stock and/or Derivative Property should be released from the Escrow Fund
to the Claimant in respect of the Claimed Amount (any such contested portion of
the Claimed Amount being referred to herein as the "Contested Amount"). In the
event that the Escrow Agent does not receive a Response Notice prior to the end
of the twenty (20) day period specified above, the Shareholders shall be
conclusively deemed to have agreed that Escrow Stock and/or Derivative Property
(in each case, valued at the Stipulated Value) equal to the full Claimed Amount
may be released from the Escrow Fund to the Claimant.
3.3 Resolution of Disputes as to Contested Amounts. In the event of any
dispute as to a Contested Amount, Franklin, on behalf of the Claimant, and the
Shareholders shall attempt in good faith to resolve such dispute. Any such
resolution reached by Franklin and the Shareholders shall be binding on the
Claimant and the Shareholders in all respects and shall be set forth in a
written settlement agreement signed by Franklin and the Shareholders, which
written settlement agreement shall be sent to, and complied with by, the Escrow
Agent. If Franklin and the Shareholders are unable to resolve such dispute, then
each of Franklin and the Shareholders shall be entitled to exercise any and all
other remedies provided for in this Agreement and the Merger Agreement in order
to resolve such dispute.
3.4 Valuation of Escrow Stock. Franklin and the Shareholders expressly
acknowledge and agree that, for purposes of this Agreement, as of any date on
which Escrow Stock and/or Derivative Property is to be released to a Claimant
pursuant to this Agreement, the value (the "Stipulated Value") on such date of:
(i) each share of Escrow Stock and each share of Franklin Common Stock issued as
Derivative Property (whether by way of stock dividend, stock split or otherwise)
shall be deemed to be equal to the Closing Price of the Franklin Common Stock on
the Trading Day immediately preceding such date; and (ii) any Derivative
Property other than shares of Franklin Common Stock issued in respect of
(whether by way of stock dividend or otherwise) or in exchange for (including
pursuant to or as a part of a merger, consolidation, acquisition of property or
stock, reorganization or liquidation involving Franklin) any Escrow Stock shall
be deemed to be equal to (a) the Closing Price of the Franklin Common Stock on
the date of issuance of such Derivative Property or exchange of such Escrow
Stock,
5
multiplied by (b) aggregate number of shares of Escrow Stock underlying or
exchanged for such Derivative Property on such date.
4. RELEASE OF ESCROW FUND.
4.1 Release of Claimed Amount. In the event that: (i) the Shareholders
deliver a Response Notice pursuant to Section 3.2 agreeing that Escrow Stock
and/or Derivative Property (in each case, valued at the Stipulated Value) equal
to the full Claimed Amount may be released from the Escrow Fund to the
appropriate Claimant; or (ii) the Shareholders fail to deliver a Response Notice
pursuant to Section 3.2 prior to the end of the twenty (20) day period
referenced in Section 3.2, the Escrow Agent shall, within five (5) Business Days
following the receipt of such Response Notice or the expiration of such twenty
(20) day period, as applicable, deliver to the appropriate Claimant an amount of
Escrow Stock and/or Derivative Property (in each case, valued at the Stipulated
Value) equal to the Claimed Amount, which Escrow Stock and/or Derivative
Property shall be deemed to satisfy in full the claim described in the
underlying Claim Notice.
4.2 Release of Agreed Amount. In the event that the Shareholders
deliver a Response Notice pursuant to Section 3.2 agreeing that Escrow Stock
and/or Derivative Property (in each case, valued at the Stipulated Value) equal
to an Agreed Amount may be released from the Escrow Fund to the appropriate
Claimant, the Escrow Agent shall, within five (5) Business Days following its
receipt of such Response Notice, deliver to the appropriate Claimant an amount
of Escrow Stock and/or Derivative Property (in each case, valued at the
Stipulated Value) equal to the Agreed Amount. Such Escrow Stock and/or
Derivative Property shall not be deemed to satisfy in full the claim described
in the underlying Claim Notice, but shall count toward the satisfaction of such
claim.
4.3 Release of Contested Amount. In the event that the Escrow Agent
receives: (i) a copy of a written settlement agreement executed by Franklin and
the Shareholders in accordance with Section 3.3 providing for the release of
Escrow Stock and/or Derivative Property (in each case, valued at the Stipulated
Value) equal or all or any portion of a Contested Amount; or (ii) a certified
copy of an Order issued or rendered by a court of competent jurisdiction
specifying that Escrow Stock and/or Derivative Property (in each case, valued at
the Stipulated Value) equal or all or any portion of a Contested Amount shall be
released to the appropriate Claimant, accompanied by a certificate executed by
Franklin and the Shareholders to the effect that such Order is a final
non-appealable Order from a court of competent jurisdiction and setting forth in
reasonable detail the substance of such Order, the Escrow Agent shall, within
five (5) Business Days following its receipt of such written settlement
agreement or Order and certificate, as applicable, deliver to the appropriate
Claimant an amount of Escrow Stock and/or Derivative Property (in each case,
valued at the Stipulated Value) equal to all or such portion of the Contested
Amount, as applicable, which Escrow Stock and/or Derivative Property shall be
deemed to satisfy in full the claim described in the underlying Claim Notice.
4.4 Release on Termination Date. Within fifteen (15) days following the
Termination Date (as defined below), the Escrow Agent shall distribute to the
Shareholders, in accordance with each Shareholder's Pro Rata Percentage, all of
the Escrow Stock and Derivative Property then remaining in the Escrow Fund.
Notwithstanding the foregoing, in the event that,
6
prior to the Termination Date, Franklin has delivered a Claim Notice to the
Shareholders and the Escrow Agent in accordance with Section 3.1 pertaining to a
claim that has not been resolved as of the Termination Date, the Escrow Agent
shall retain in the Escrow Fund following the Termination Date an amount of
Escrow Stock and/or Derivative Property (in each case, valued at the Stipulated
Value) equal to the Claimed Amount, minus any Agreed Amount for which Escrow
Stock and/or Derivative Property (in each case, valued at the Stipulated Value)
shall have been released to the appropriate Claimant prior to the Termination
Date.
4.5 Certificates for Escrow Stock. The parties hereto acknowledge that
the Escrow Agent is not the transfer agent for the Franklin Common Stock and
that whenever any shares of Escrow Stock are to be released pursuant to this
Agreement, the Escrow Agent must coordinate with the Company's transfer agent to
cause: (i) all or the appropriate number of shares of Franklin Common Stock
represented by the stock certificate registered in the name of Escrow Agent to
be cancelled; and (ii) one or more new stock certificates registered in the name
of the appropriate Person representing the corresponding number of shares of
Franklin Common Stock be issued to such appropriate Person; and (iii) if
applicable, an additional new stock certificate registered in the name of the
Escrow Agent representing the remaining balance, if any, of shares of Franklin
Common Stock resulting from the actions referenced in the foregoing clauses
"(i)" and "(ii)" to be issued to the Escrow Agent. In light of the foregoing,
the parties hereto expressly acknowledge and agree that, for purposes of this
Agreement, the Escrow Agent shall be deemed to have delivered shares of Escrow
Stock to the Person entitled to receive such Escrow Stock as of the date that
the Escrow Agent has delivered instructions to Franklin's transfer agent
specifying the details regarding the stock certificate representing the Escrow
Stock that must be issued and delivered to such Person.
4.6 Pro Rata Percentages. The aggregate amount of any Escrow Stock
and/or Derivative Property released to a Claimant pursuant to this Agreement
shall be deemed to have been derived from each Shareholder's portion of the
Escrow Fund in accordance with such Shareholder's Pro Rata Percentage. Likewise,
in the event of any release of Escrow Stock and/or Derivative Property to the
Shareholders pursuant to this Agreement, each Shareholder shall receive such
Shareholder's Pro Rata Percentage of the aggregate amount of such Escrow Stock
and/or Derivative Property.
5. DUTIES, LIMITED LIABILITY AND ASSUMPTIONS OF ESCROW AGENT.
5.1 Duties and Responsibilities. The Escrow Agent undertakes to perform
only such duties and responsibilities as are expressly set forth in this
Agreement or any other document or certificate delivered pursuant hereto, and no
implied covenants or obligations shall be read into this Agreement or any such
other document or certificate to expand the duties or responsibilities of the
Escrow Agent hereunder. The Escrow Agent shall discharge its duties set forth
herein without regard to the terms of the Merger Agreement. The Escrow Agent has
no responsibility for and shall incur no liability in connection with the
effectiveness, sufficiency or enforceability of the security interest that
Section 2.2 is intended to create and perfect.
5.2 Advice of Counsel. The Escrow Agent may seek the advice of any
legal counsel selected with reasonable care in the event of any dispute or
question as to the construction of any of the provisions of this Agreement or
the Escrow Agent's duties or responsibilities pursuant to
7
this Agreement. In the event that the Escrow Agent shall in any instance, after
seeking the advice of such legal counsel, in good faith remain uncertain as to
its duties or responsibilities hereunder, the Escrow Agent shall be entitled to
refrain from taking any action in such instance and shall have as its sole
obligation hereunder, in addition to the performance of those of its duties and
responsibilities pursuant to this Agreement as to which there is no such
uncertainty, to keep safely all property held in the Escrow Fund until it shall
be directed otherwise in writing by each of the parties hereto or by a final,
non-appealable Order; provided, however, in the event that the Escrow Agent has
not received such written direction or Order within one hundred eighty (180)
days after notifying the parties hereto as to its uncertainty, the Escrow Agent
shall have the right to interplead Franklin and the Shareholders in any court of
competent jurisdiction for the purpose of requesting that such court
definitively determine the Escrow Agent's duties and responsibilities hereunder.
5.3 Limitation of Liability. The parties hereto expressly acknowledge
and agree that the Escrow Agent shall incur no liability with respect to: (i)
any error of judgment, or for any act done or omitted by such Escrow Agent, or
for any mistake in fact or law, or for anything that such Escrow Agent may do or
refrain from doing pursuant to or in connection with this Agreement; and (ii)
such Escrow Agent's good-faith reliance upon the advice of legal counsel
pursuant to Section 5.2 or any written certification, notice, direction,
request, waiver, consent, receipt or other document that the Escrow Agent
reasonably believes to be genuine and duly authorized, executed and delivered
pursuant to this Agreement; provided, however, that notwithstanding any other
provision in this Agreement, the Escrow Agent shall be liable in all respects
for its gross negligence, willful misconduct or willful breach of this
Agreement; but provided further that in no event shall the Escrow Agent be
liable for incidental, punitive or consequential damages.
5.4 Indemnification. Franklin and each of the Shareholders (in each
case, to the extent of such Shareholder's Pro Rata Percentage of the Escrow
Fund) hereby agree jointly and severally to indemnify and hold harmless the
Escrow Agent and its officers, directors, employees and agents (each, an "Escrow
Agent Indemnified Party") from and against, any loss, liability or expense
incurred by any such Escrow Agent Indemnified Party arising out of or in
connection with the Escrow Agent's undertaking to assume the duties of Escrow
Agent hereunder and its performance under this Agreement; provided, however,
that the indemnity obligations set forth in this Section 5.4 shall not apply to
any loss, liability or expense incurred by any such Escrow Agent Indemnified
Party arising out of or in connection with such Escrow Agent Indemnified Party's
gross negligence, willful misconduct or willful breach of this Agreement. The
foregoing indemnities shall survive the termination of this Agreement and the
resignation or removal of the Escrow Agent.
5.5 Acknowledged Assumptions. For purposes of determining and
performing its duties and obligations pursuant to this Agreement, the parties
hereto acknowledge and agree that Escrow Agent shall be entitled to assume,
without further inquiry or verification, that: (i) any notice (including,
without limitation, any Claim Notice or Response Notice) received by the Escrow
Agent has likewise been received by any and all other parties entitled to
receive such notice on the date such notice is received by the Escrow Agent;
(ii) unless and until the Escrow Agent has received any notice (including,
without limitation, any Claim Notice or Response Notice) provided for in this
Agreement, no such notice has been delivered to any of the other
8
parties entitled to receive such notice; and (iii) unless and until the Escrow
Agent has received the written settlement agreement or Order and certificate
provided for in Section 4.3 relating to the resolution of any dispute as to a
Contested Amount, such dispute has not been resolved.
6. TERMINATION.
6.1 Termination Date. This Agreement shall terminate on the date that
is six (6) months following the Reverse Merger Closing Date (the "Termination
Date") or upon the earlier release by the Escrow Agent of the entire Escrow Fund
in accordance with Section 4 of this Agreement; provided, however, that if on or
prior to the Termination Date the Escrow Agent has received from Franklin a
Claim Notice setting forth a claim that has not been resolved as of the
Termination Date, then this Agreement shall continue in full force and effect
until such claim has been fully resolved and the Escrow Fund has been released
in accordance with Section 4 of this Agreement.
6.2 Effect of Termination. Sections 5 and 7 of this Agreement shall
survive the termination or expiration of this Agreement for any reason.
7. MISCELLANEOUS.
7.1 Certain Actions by Shareholders; Power of Attorney.
(a) Xxxxxxx shall have the full legal right to act as the agent and
attorney-in-fact for Xx. Xxxxxxx, being hereby so appointed by Xx. Xxxxxxx, and
shall be able to execute and deliver all documents and take all actions as such
agent and attorney-in-fact as Xxxxxxx believes appropriate or necessary, as to
all matters under this Agreement during any period of mental incompetence or
other disability or Xx. Xxxxxxx, and from and after Xx. Xxxxxxx'x death. Xxxxxxx
shall send written notice to Franklin and to the Escrow Agent promptly upon
assuming such position as agent and attorney-in-fact for Xx. Xxxxxxx and
promptly upon ceasing such service due to the recovery of Xx. Xxxxxxx from such
mental incompetence or other disability. Each of Franklin and the Escrow Agent
shall be entitled to rely without further inquiry or investigation upon any
written notice from Xxxxxxx given pursuant to this Section 7.1(a).
(b) Xx. Xxxxxxx shall have the full legal right to act as the agent
and attorney-in-fact for Xxxxxxx, being hereby so appointed by Xxxxxxx, and
shall be able to execute and deliver all documents and take all actions as such
agent and attorney-in-fact as Xx. Xxxxxxx believes appropriate or necessary, as
to all matters under this Agreement during any period of mental incompetence or
other disability or Xxxxxxx, and from and after Xxxxxxx'x death. Xx. Xxxxxxx
shall send written notice to Franklin and to the Escrow Agent promptly upon
assuming such position as agent and attorney-in-fact for Xxxxxxx and promptly
upon ceasing such service due to the recovery of Xxxxxxx from such mental
incompetence or other disability. Each of Franklin and the Escrow Agent shall be
entitled to rely without further inquiry or investigation upon any written
notice from Xx. Xxxxxxx given pursuant to this Section 7.1(b).
7.2 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
9
7.3 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next Business Day; (iii) five (5) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) Business Day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this Section 7.3):
If to Franklin:
Franklin Capital Corporation
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx "Xxxx" Xxxx III
Fax: (000) 000-0000
E-mail: xxxx@xxxxxx.xxx
With a copy (which shall not constitute notice) to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxxxxxx@xxxxxxxxxxxx.xxx
If to the Shareholders:
Surgicount Medical, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxxxxxxx@xxxxxxx.xxx
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
E-mail: xxxxxxx@xxxx.xxx
If to the Escrow Agent:
10
LaSalle Bank National Association
Corporate Trust Department
000 X. XxXxxxx Xx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
E-mail: xxxxx.xxxxxx@xxxxxxx.xxx
Notwithstanding the foregoing, the parties expressly acknowledge and agree that,
for purposes of delivering any notice pursuant to this Agreement: (i) any such
notice delivered to any of either Shareholder in accordance with this Section
7.3 shall be deemed to have been delivered to both Shareholders; and (ii) any
such notice given by either Shareholder in accordance with this Section 7.3
shall be deemed to have been given by both Shareholders.
7.4 Headings. The bold-face headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.5 Governing Law; Jurisdiction and Venue. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of California without giving effect to its principles of conflicts
of laws. Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement shall be brought or
otherwise commenced exclusively in any state or federal court located in the
County of Los Angeles, State of California. Each of the parties hereto: (i)
expressly and irrevocably consents and submits to the jurisdiction of each state
and federal court located in the County of Los Angeles, State of California, in
connection with any legal proceeding; (ii) agrees that service of any process,
summons, notice or document by U.S. mail addressed to such party at the address
set forth in Section 7.3 shall constitute effective service of such process,
summons, notice or document for purposes of any such legal proceeding; (iii)
agrees that each state and federal court located in the County of Los Angeles,
State of California, shall be deemed to be a convenient forum; and (iv) agrees
not to assert, by way of motion, as a defense or otherwise, in any such legal
proceeding commenced in any state or federal court located in the County of Los
Angeles, State of California, any claim that it is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.
7.6 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto and each of their
respective permitted successors and assigns, if any.
7.7 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of
11
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person, and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
7.8 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
7.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement in writing for such provision, then: (i)
such provision shall be excluded from this Agreement; (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded; and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
7.11 Entire Agreement. This Agreement, together with each of the other
Transaction Documents and the schedules and exhibits hereto and thereto, set
forth the entire understanding of the parties hereto relating to the subject
matter hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this ESCROW AGREEMENT
as of the Signing Date.
FRANKLIN: SHAREHOLDERS:
FRANKLIN CAPITAL CORPORATION
By: /s/ Xxxxxx "Xxxx" Xxxx III /s/ Xxxxx Xxxxxxx
--------------------------------------- ---------------------------------------
Xxxxxx "Xxxx" Xxxx III Xxxxx Xxxxxxx
Chairman and Chief Executive Officer
/s/ Xx. Xxxxxxx Xxxxxxx
---------------------------------------
Xx. Xxxxxxx Xxxxxxx
ESCROW AGENT:
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
---------------------------------------
Title: Vice President
---------------------------------------
[SIGNATURE PAGE TO ESCROW AGREEMENT]
EXHIBIT A
MERGER AGREEMENT
[Omitted]
EXHIBIT B
SCHEDULE OF FEES
Acceptance Fee: $ 500.00
Annual Administration Fee: $ 3,000.00*
The Acceptance and first year's Annual Administration Fees are due upon
execution of the Escrow Agreement.
*Should the Escrow Account remain open for less than a full year after an
initial twelve-month period, the Annual Administration Fee will be prorated on a
six-month basis.
Any investment transaction not in a money market fund or a LaSalle
Enhanced Liquidity Management account will incur a $150.00 per transaction fee.
The parties to the agreement understand and agree that the Escrow Agent may
receive certain revenue on certain mutual fund investments. These revenues take
one of two forms:
Shareholder Servicing Payments: Escrow Agent may receive Shareholder
Servicing Payments as compensation for providing certain services for the
benefit of the Money Market Fund Company. Shareholder Services typically
provided by LaSalle include the maintenance of shareholder ownership records,
distributing prospectuses and other shareholder information materials to
investors and handling proxy-voting materials. Typically Shareholder Servicing
payments are paid under a Money Market Fund's 12b-1 distribution plan and impact
the investment performance of the Fund by the amount of the fee. The shareholder
servicing fee payable from any money market fund is detailed in the Fund's
prospectus that will be provided to you.
Revenue Sharing Payments: Escrow Agent may receive revenue sharing
payments from a Money Market Fund Company. These payments represent a
reallocation to Escrow Agent of a portion of the compensation payable to the
fund company in connection with your account's money market fund investment.
Revenue Sharing payments constitute a form of fee sharing between the fund
company and Escrow Agent and do not, as a general rule, result in any additional
charge or expense in connection with a money market fund investment, are not
paid under a 12b-1 plan, and do not impact the investment performance of the
Fund. The amount of any revenue share, if any, payable to Escrow Agent with
respect to your account's investments is available upon request.
All out-of-pocket expenses will be billed at the Escrow Agent's cost.
Out-of-pocket expenses include, but are not limited to, professional services
(e.g. legal or accounting), travel expenses, telephone and facsimile
transmission costs, postage (including express mail and overnight delivery
charges), and copying charges.
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
[Omitted]
EXHIBIT G
OPINION OF HELLER, EHRMAN, WHITE & XXXXXXXXX LLP
[Omitted]
EXHIBIT H
SURGICOUNT FINANCIAL STATEMENTS CERTIFICATE
This certificate is being delivered pursuant to Section 6.5(j) of the
Agreement and Plan of Merger and Reorganization, dated as of _________, 2005
(the "Merger Agreement"), by and among FRANKLIN CAPITAL CORPORATION, a Delaware
corporation ("Franklin"), FRANKLIN MEDICAL CORPORATION, a Delaware corporation
and a wholly owned subsidiary of Franklin, SURGICOUNT MEDICAL, INC., a
California corporation, Xxxxx Xxxxxxx ("Xxxxxxx") and Xx. Xxxxxxx Xxxxxxx ("Xx.
Xxxxxxx" and, together with Xxxxxxx, the "Shareholders"). Capitalized terms used
and not otherwise defined herein shall have the meanings given to them in the
Merger Agreement.
Pursuant to Section 6.5(j), each of the undersigned Shareholders hereby
certifies, after a reasonable investigation, as follows:
1. The SurgiCount Financial Statements are accurate and complete in all material
respects and present fairly the financial position of SurgiCount as of the
respective dates thereof and the results of operations for the periods covered
thereby.
2. The SurgiCount Financial Statements have been prepared in accordance with
GAAP, except insofar as they do not contain footnotes and are subject to normal
and recurring year-end audit adjustments, which would not, individually or in
the aggregate, be material in magnitude.
3. Since the date of the Latest Balance Sheet:
(a) There has not been: (i) any material adverse change in the
business, condition, assets, liabilities, operations, financial performance or
prospects of SurgiCount, and no event has occurred that will, or could
reasonably be expected to, have such a material adverse change; and (ii) any
material loss, damage or destruction to, or any material interruption in the use
of, any of the assets of SurgiCount.
(b) SurgiCount has not: (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of SurgiCount
capital stock; (ii) effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction; (iii) amended or authorized the amendment of its
articles of incorporation or bylaws; (iv) authorized or issued any shares of
SurgiCount capital stock or other securities of SurgiCount or any SurgiCount
Rights. No Shareholder has sold, transferred or exchanged any shares of
SurgiCount Common Stock.
(c) SurgiCount has not: (i) made any capital expenditure except as
contemplated by the budget mutually agreed-upon in writing prior to the Signing
Date by Franklin and SurgiCount; (ii) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business and consistent with SurgiCount's past practice), or incurred or
guaranteed any indebtedness for borrowed money; (iii) paid any bonus or made any
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees; or (iv) hired any new employee or appointed
any new director or officer.
(d) SurgiCount has not: (i) entered into or permitted any of the assets
owned or used by it to become bound by any Contract, or amended or prematurely
terminated, or waived any right or remedy under, any such Contract; (ii) made
any pledge of any of its assets or otherwise permitted any of its assets to
become subject to any Encumbrance; or (iii) acquired, leased or licensed any
right or other asset from any other Person, sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or waived or
relinquished any right.
(e) SurgiCount has not: (i) threatened, commenced or settled any Legal
Proceeding; or (ii) entered into any transaction or taken any other action
outside the ordinary course of business or inconsistent with its past practices,
other than entering into the Transactions Documents to which it is a party.
(f) SurgiCount has not agreed to take, or committed to take, any of the
actions referred to in clauses "(b)" through "(e)" of this Section 2.
4. The total amount of all fees, costs and expenses, including any attorneys',
accountants', or financial advisors' fees, incurred but not paid as of the
Closing Date by or on behalf of SurgiCount or the Shareholders in connection
with: (i) the due diligence conducted by SurgiCount with respect to the Merger;
(ii) the negotiation, preparation and review of the Transaction Documents; (iii)
the preparation and submission of any filing or notice required to be made or
given in connection with any of the transactions contemplated by the Transaction
Documents and the obtaining of any Consent required to be obtained in connection
with any transactions contemplated by the Transaction Documents; and (iv) any
other fees, costs and expenses incurred in connection with the transactions
contemplated by the Transaction Documents (all of the foregoing, the "SurgiCount
Transaction Fees") is equal to $________. A complete accounting of such
SurgiCount Transaction Fees is set forth on Schedule 1 attached hereto. Except
for the SurgiCount Transaction Fees, SurgiCount is not directly indebted to, or
responsible for the indebtedness of, the Shareholders or any other third party.
5. All unpaid balances of any debts previously owed by the Company to either
Shareholder that have not been repaid in full as of the Closing have been
irrevocably waived in writing by the appropriate Shareholder.
6. The aggregate account balance for all bank accounts of SurgiCount is equal to
$0.
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2
IN WITNESS WHEREOF, the undersigned Shareholders have executed this
certificate as of the Closing Date.
SHAREHOLDERS:
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
/s/ Xx. Xxxxxxx Xxxxxxx
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Xx. Xxxxxxx Xxxxxxx
SCHEDULE 1
SURGICOUNT TRANSACTION FEES
