Execution Copy
Exhibit 2.1
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XXXXXX MEDICAL TECHNOLOGY, INC.,
WARBURG, XXXXXX EQUITY PARTNERS, L.P.,
XXXXXX ACQUISITION HOLDINGS, INC.
and
XXXXXX ACQUISITION CORP., INC.
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
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Dated as of December 7, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I. THE MERGER.......................................................2
SECTION 1.1. The Merger...............................................2
SECTION 1.2. Effective Time...........................................2
SECTION 1.3. Effect of the Merger.....................................3
SECTION 1.4. Subsequent Actions.......................................3
SECTION 1.5. Certificate of Incorporation; By-Laws; Directors
and Officers.........................................3
SECTION 1.6. Conversion of Securities.................................4
SECTION 1.7. Dissenting Shares........................................7
SECTION 1.8. Surrender of Shares; Stock Transfer Books;
Fractional Shares....................................8
SECTION 1.9. Stock Option Plans; Warrants.............................9
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PARENT, HOLDINGS AND
PURCHASER..................................................10
SECTION 2.1. Corporate Organization; No Prior Activities.............10
SECTION 2.2. Authority Relative to This Agreement....................11
SECTION 2.3. No Conflict; Required Filings and Consents..............11
SECTION 2.4. Brokers.................................................12
SECTION 2.5. Capitalization..........................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................13
SECTION 3.1. Organization and Qualification; Subsidiaries............13
SECTION 3.2. Capitalization..........................................14
SECTION 3.3. Authority Relative to This Agreement and Other
Transaction Documents; Stockholder Approval.........16
SECTION 3.4. No Conflict; Required Filings and Consents..............16
SECTION 3.5. SEC Filings; Financial Statements.......................17
SECTION 3.6. Absence of Certain Changes or Events....................19
SECTION 3.7. Litigation..............................................21
SECTION 3.8. Employee Benefit Plans..................................21
SECTION 3.9. Properties..............................................24
SECTION 3.10. Intellectual Property...................................28
SECTION 3.11. Insurance...............................................30
SECTION 3.12. Environmental...........................................31
SECTION 3.13. Material Contracts......................................32
SECTION 3.14. Conduct of Business.....................................34
SECTION 3.15. Taxes...................................................36
SECTION 3.16. Labor Relations.........................................40
SECTION 3.17. Transactions with Affiliates............................41
SECTION 3.18. Brokers.................................................41
SECTION 3.19. Business Combination/Fair Price Statute.................41
SECTION 3.20. Y2K Compliance..........................................42
SECTION 3.21. Opinion of the Financial Advisor........................42
SECTION 3.22. Books and Records.......................................42
SECTION 3.23. Status of Assets........................................43
ARTICLE IV. CONDUCT OF BUSINESS PENDING THE MERGER.........................43
SECTION 4.1. Conduct of Business by the Company Pending the
Closing.............................................43
SECTION 4.2. No Solicitation.........................................46
ARTICLE V. ADDITIONAL AGREEMENTS...........................................47
SECTION 5.1. Compliance with Law.....................................47
SECTION 5.2. Notification of Certain Matters.........................47
SECTION 5.3. Access to Information...................................47
SECTION 5.4. Public Announcements....................................48
SECTION 5.5. Reasonable Best Efforts; Cooperation....................49
SECTION 5.6. Agreement to Defend and Indemnify.......................50
SECTION 5.7. State Takeover Laws.....................................50
SECTION 5.8. Certain Employee Matters................................50
SECTION 5.9. Title Commitments.......................................50
SECTION 5.10. Non-Imputation Endorsements and Estoppel
Certificates........................................51
SECTION 5.11. Indemnification of Officers and Directors...............51
SECTION 5.12. Additional Covenant of Parent, Holdings and
Purchaser...........................................53
SECTION 5.13. Management Options......................................53
SECTION 5.14. Issuance to Parent and Co-Investors.....................54
ARTICLE VI. CONDITIONS OF MERGER...........................................55
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SECTION 6.1. Conditions to Each Party's Obligations to Effect
the Merger..........................................55
SECTION 6.2. Conditions to Obligations of Parent and Purchaser.......55
SECTION 6.3. Conditions to Obligations of the Company................58
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER.............................59
SECTION 7.1. Termination.............................................59
SECTION 7.2. Effect of Termination...................................60
ARTICLE VIII. GENERAL PROVISIONS...........................................60
SECTION 8.1. Survival of Representations, Warranties and
Agreements..........................................60
SECTION 8.2. Notices.................................................61
SECTION 8.3. Expenses................................................62
SECTION 8.4. Certain Definitions.....................................62
SECTION 8.5. Headings................................................62
SECTION 8.6. Severability............................................62
SECTION 8.7. Entire Agreement; No Third-Party Beneficiaries..........63
SECTION 8.8. Assignment..............................................63
SECTION 8.9. Governing Law...........................................63
SECTION 8.10. Amendment...............................................63
SECTION 8.11. Waiver..................................................63
SECTION 8.12. Counterparts............................................64
EXHIBITS
Exhibit A-1 - Certificate of Incorporation of Purchaser
Exhibit A-2 - Form of Amended and Restated Certificate of Incorporation
of Holdings
Exhibit A-3 - Certificate of Incorporation of Holdings
Exhibit B-1 - Form of By-laws of Purchaser
Exhibit B-2 - Form of By-laws of Holdings
Exhibit C-1 Form of Subordinated Note
Exhibit C-2 Form of New Warrant
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Exhibit D - Form of Lessor Estoppel Certificate
Exhibit E - Form of Series A Option
Exhibit F - Form of Opinion of Weil, Gotshal & Xxxxxx
Exhibit G - Form of Registration Rights Agreement
Exhibit H - Form of Stockholders Agreement
Exhibit I - Form of Release
Exhibit J - Form of Escrow Agreement
Exhibit K - Form of Opinion of Xxxxxxx Xxxx & Xxxxxxxxx
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
December 7, 1999 (the "Agreement"), among Xxxxxx Medical Technology, Inc., a
Delaware corporation (the "Company"), Warburg, Xxxxxx Equity Partners, L.P.,
a Delaware limited partnership ("Parent"), Xxxxxx Acquisition Holdings, Inc.,
a Delaware corporation ("Holdings"), and Xxxxxx Acquisition Corp., Inc., a
Delaware corporation and a direct wholly owned subsidiary of Holdings
("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, Parent and Purchaser entered into an Agreement
and Plan of Merger, dated as of September 9, 1999, as amended on October 15,
1999, as amended on November 19, 1999; and
WHEREAS, the parties hereto and thereto desire to amend and
restate the Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has determined that it is in the best interests of its stockholders
for Holdings to acquire the Company upon the terms and subject to the conditions
set forth herein; and
WHEREAS, in furtherance of such acquisition, the Board of Directors
has approved the merger (the "Merger") of Purchaser with and into the Company in
accordance with the Delaware General Corporation Law ("Delaware Law") and upon
the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors has approved this Agreement, the
Registration Rights Agreement among Parent, Holdings and certain stockholders of
the Company (the "Registration Rights Agreement") and the Stockholders Agreement
among Parent, Holdings and certain stockholders of the Company (the
"Stockholders Agreement") and has determined that the consideration to be paid
for (i) each share of Class A common stock, par value $.001 per share, of the
Company ("Company Common Stock"), (ii) each share of Series A Preferred Stock,
par value $.01 per share, of the Company ("Series A Preferred"), (iii) each
share of Series B Preferred Stock, par value $.01 per share, of the Company
("Series B Preferred") and (iv) each share of Series C Preferred Stock, par
value $.01 per share, of the Company
("Series C Preferred" and, together with the Series A Preferred and Series B
Preferred, the "Preferred Stock"; the Preferred Stock and the Company Common
Stock are collectively referred to as the "Shares") in the Merger is fair to the
holders of such Shares and recommended that the holders of such Shares approve
the Merger, this Agreement and the transactions contemplated hereby; and
WHEREAS, each of Xxxx Xxxx Equity Partners, L.P. ("Xxxx Xxxx"),
California Public Employees' Retirement System ("CalPERS"), Princes Gate
Investors, L.P. ("PGILP"), PGI Investments Limited ("PGI Ltd."), PGI Sweden AB
("PGI Sweden") and Marinbeach United S.A. ("Marinbeach" and, together with
PGILP, PGI Ltd. and PGI Sweden, "Princes Gate") representing a majority of each
class of Preferred Stock of the Company and a majority of the outstanding shares
of Company Common Stock, has approved the Merger, this Agreement and the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
Article I.
THE MERGER
SECTION 1.1. THE MERGER. At the Effective Time (as defined in
Section 1.2) and subject to and upon the terms and conditions of this Agreement
and Delaware Law, Purchaser shall be merged with and into the Company, the
separate corporate existence of Purchaser shall cease, and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger hereinafter sometimes is referred to as the "Surviving
Corporation."
SECTION 1.2. EFFECTIVE TIME. Subject to the provisions of ARTICLE
VI, the closing of the Merger (the "Closing") shall take place in New York City
at the offices of Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX
00000, as soon as practicable but in no event later than 10:00 A.M., New York
City time, on the second business day after the date on which each of the
conditions set forth in Article VI (other than conditions that are satisfied by
the delivery of documents or the payment of money at the Closing) have been
satisfied or waived by the party or parties entitled to the benefit of such
conditions,
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or at such other place, time or date as Parent and the Company may mutually
agree. The date on which the Closing actually occurs is hereinafter referred to
as the "Closing Date." At the Closing, the parties hereto shall cause the Merger
to be consummated by filing a Certificate of Merger with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, Delaware Law (the time of such
filing being the "Effective Time").
SECTION 1.3. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.4. SUBSEQUENT ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Purchaser, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.5. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS
AND OFFICERS.
(a) At the Effective Time, the Certificate of Incorporation of
Purchaser, substantially in the form of Exhibit A-1 hereto, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law
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and such Certificate of Incorporation; PROVIDED, HOWEVER, that Article One of
the Certificate of Incorporation of the Surviving Corporation shall be amended
to read as follows: "FIRST: The name of the corporation is Xxxxxx Medical
Technology, Inc."
(b) The By-Laws of Purchaser, as in effect immediately before
the Effective Time and in substantially the form of Exhibit B-1 hereto, shall be
the By-Laws of the Surviving Corporation until thereafter amended as provided by
law, the Certificate of Incorporation of the Surviving Corporation and such
By-Laws.
(c) The board of directors of the Surviving Corporation at the
Effective Time will be constituted as provided in Section 6.2(i) of this
Agreement, and the officers of the Company immediately before the Effective Time
will be the initial officers of the Surviving Corporation, in each case until
their successors are elected or appointed and qualified. If, at the Effective
Time, a vacancy shall exist on the Board of Directors or in any office of the
Surviving Corporation, such vacancy may thereafter be filled in the manner
provided by law.
SECTION 1.6. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder of any Shares, the following actions shall occur:
(a) As further set forth on Schedule 1.6, each share of
Company Common Stock issued and outstanding immediately before the Effective
Time (other than any Shares to be canceled pursuant to Section 1.6(d) and any
Dissenting Shares (as defined in Section 1.7(a)) shall be canceled and
extinguished and be converted into the right to receive an amount in cash equal
to $0.0333 per share (the "Per Share Amount"), payable to the holder thereof,
without interest, upon surrender of the certificate representing such Share in
accordance with Section 1.8 hereof. Each holder of a certificate representing
any such Shares shall cease to have any rights with respect thereto, except the
right to receive the Per Share Amount, without interest, upon the surrender of
such certificate in accordance with Section 1.8 hereof. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of the Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any dividend,
subdivision, reclassification, split, combination or exchange of shares or
otherwise, the Per Share Amount shall be correspondingly adjusted on a per share
basis to reflect such
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dividend, subdivision, reclassification, split, combination or exchange of
shares.
(b) As further set forth on Schedule 1.6, each share of Series
A Preferred issued and outstanding immediately before the Effective Time (other
than any Shares to be canceled pursuant to Section 1.6(d) and any Dissenting
Shares (as defined in Section 1.7(a)) shall be canceled and extinguished and be
converted into the right to receive an amount in cash equal to $0.333 per share
(the "Series A Per Share Amount"), payable to the holder thereof, without
interest, upon surrender of the certificate representing such Share in
accordance with Section 1.8 hereof. Each holder of a certificate representing
any such Shares shall cease to have any rights with respect thereto, except the
right to receive the Series A Per Share Amount, without interest, upon the
surrender of such certificate in accordance with Section 1.8 hereof.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding shares of the Series A Preferred shall have been
changed into a different number of shares or a different class, by reason of any
dividend, subdivision, reclassification, split, combination or exchange of
shares or otherwise, the Series A Per Share Amount shall be correspondingly
adjusted on a per share basis to reflect such dividend, subdivision,
reclassification, split, combination or exchange of shares.
(c) As further set forth on Schedule 1.6, all issued and
outstanding shares of Series B Preferred and Series C Preferred issued and
outstanding immediately before the Effective Time (other than any Shares to be
canceled pursuant to Section 1.6(d) and any Dissenting Shares (as defined in
Section 1.7(a)) shall, subject to Section 1.8(d), be canceled and extinguished
and be converted into the right to receive in the aggregate:
(i) 1,840,000 shares of Series A Voting Convertible Preferred
Stock, par value $.01 per share, of Holdings ("New Series A Preferred");
(ii) 167 shares of common stock, par value $.01 per share, of
Holdings ("New Company Common Stock" and, together with the New Series A
Preferred issued pursuant to subsection (i) above, the "Stock
Consideration");
(iii) solely in the case of the Series B Preferred, $9.08375
per share (the "Series B Per Share Amount");
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(iv) solely in the case of the Series C Preferred, $3.8085714
per share (the "Series C Per Share Amount");
(v) $3,666,667 aggregate principal amount of subordinated
notes (the "Subordinated Notes") of Holdings, with such terms and
conditions as set forth in the form of Subordinated Note attached hereto
as Exhibit C-1; and
(vi) warrants to purchase up to 460,000 shares of New Company
Common Stock (the "New Warrants" and, collectively with the Stock
Consideration, the Series B Per Share Amount, the Series C Per Share
Amount and the Subordinated Notes, the "Series B and C Consideration") of
Holdings, with such terms and conditions as set forth in the form of
Warrant attached hereto as Exhibit C-2;
in each case payable to the holder thereof, without interest and upon surrender
of the certificate representing such Share in accordance with Section 1.8 hereof
and subject to Section 1.8(d), as follows:
(i) each share of Series B Preferred shall be canceled and
extinguished and converted into the right to receive: (A) 1.9435 shares of
New Series A Preferred; (B) 0.000176 shares of New Company Common Stock;
(C) $2,850,467 aggregate principal amount of Subordinated Notes (in the
aggregate, among all Series B Preferred outstanding on the date of this
Agreement); (D) a New Warrant to purchase 0.485875 shares of New Company
Common Stock and (E) the Series B Per Share Amount; and
(ii) each share of Series C Preferred shall be canceled and
extinguished and converted into the right to receive: (A) 0.814857 shares
of New Series A Preferred; (B) 0.0000743 shares of New Company Common
Stock; (C) $522,867 aggregate principal amount of Subordinated Notes (in
the aggregate, among all Series C Preferred outstanding on the date of
this Agreement); (D) a New Warrant to purchase 0.2037143 shares of New
Company Common Stock and (E) the Series C Per Share Amount.
Each holder of a certificate representing any Series B
Preferred or Series C Preferred shall cease to have any rights with respect
thereto, except the right to receive the Series B and C Consideration as
provided in this Section 1.6(c), upon the surrender of such certificate in
accordance with Section 1.8 hereof. Notwithstanding the foregoing, if between
the date of this Agreement and the Effective Time the outstanding shares of
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the Series B Preferred or the Series C Preferred shall have been changed into a
different number of shares or a different class, by reason of any dividend,
subdivision, reclassification, split, combination or exchange of shares or
otherwise, the Series B and C Consideration shall be correspondingly adjusted on
a per share basis to reflect such dividend, subdivision, reclassification,
split, combination or exchange of shares.
(d) Each share of Company Common Stock, Series A Preferred,
Series B Preferred and Series C Preferred held in the treasury of the Company
and each Share owned by Parent or any direct or indirect wholly owned subsidiary
of Parent or of the Company immediately before the Effective Time shall be
canceled and extinguished and no payment or other consideration shall be made
with respect thereto.
(e) Each share of (i) common stock, $.0l par value, of
Purchaser issued and outstanding immediately before the Effective Time shall
thereafter represent one validly issued, fully paid and nonassessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
SECTION 1.7. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any Shares held by a holder who has demanded and perfected such
holder's demand for appraisal of such holder's Shares in accordance with
Delaware Law (including but not limited to Section 262 thereof) and as of the
Effective Time has neither effectively withdrawn nor lost his right to such
appraisal ("Dissenting Shares"), shall not be converted into or represent a
right to receive the consideration specified in Section 1.6, but the holder
thereof shall be entitled to only such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a) of this
Section, if any holder of Shares who demands appraisal of such holder's Shares
under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to appraisal, then as of the Effective Time or
the occurrence of such event, whichever later occurs, such holder's Shares shall
automatically be converted into and represent only the right to receive the
consideration specified in Section 1.6(a), Section 1.6(b) or Section 1.6(c), as
applicable, without interest thereon (in the case of cash consideration), upon
surrender of the certificate or certificates representing such Shares.
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(c) The Company shall give Parent prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served pursuant to Delaware Law received
by the Company. Prior to the Effective Time, Parent shall be entitled to
participate directly in all negotiations and proceedings with respect to demands
for appraisal under Delaware Law and, except with the prior written consent of
Parent, the Company shall not voluntarily make any payment with respect to any
demands for appraisal and shall not settle or offer to settle any such demands.
SECTION 1.8. SURRENDER OF SHARES; STOCK TRANSFER BOOKS;
FRACTIONAL SHARES.
(a) After the Effective Time, each holder of a certificate or
certificates representing any Shares canceled upon the Merger pursuant to
Section 1.6(a), Section 1.6(b) or Section 1.6(c) may surrender such certificate
or certificates to the Company. The Company agrees that promptly after the
Effective Time it shall cause the distribution to holders of record of Shares as
of the Effective Time of appropriate materials to facilitate such surrender.
Upon the surrender of certificates representing the Shares, the Company shall
(subject to applicable abandoned property, escheat and similar laws) (i) pay the
holder of certificates representing Company Common Stock and Series A Preferred
in exchange therefor cash in an amount equal to the Per Share Amount and the
Series A Per Share Amount, respectively, multiplied by the number of Shares
represented by such certificate and (ii) deliver to the holder of certificates
representing Series B Preferred, in exchange therefor, cash in the Series B Per
Share Amount multiplied by the number of Shares represented by such certificate
and certificates representing New Series A Preferred and New Company Common
Stock, Subordinated Notes and New Warrants as provided by Section 1.6(c) based
upon the number of Shares represented by such certificate, subject to Section
1.8(d) and (iii) deliver to the holder of certificates representing Series C
Preferred, in exchange therefor, cash in the Series C Per Share Amount
multiplied by the number of Shares represented by such certificate and
certificates representing New Series A Preferred and New Company Common Stock,
Subordinated Notes and New Warrants as provided by Section 1.6(c) based upon the
number of Shares represented by such certificate, subject to Section 1.8(d).
Until so surrendered, each such certificate (other than certificates
representing Dissenting Shares and certificates representing Shares held by
Parent or in the treasury of the Company) shall represent solely the right to
8
receive the aggregate Per Share Amount, Series A Per Share Amount or the Series
B and C Consideration, as applicable, relating thereto.
(b) If payment of cash or Series B and C Consideration in
respect of canceled Shares is to be made to a Person other than the Person in
whose name a surrendered certificate or instrument is registered, it shall be a
condition to such payment that the certificate or instrument so surrendered
shall be properly endorsed or shall be otherwise in proper form for transfer and
that the Person requesting such payment shall have paid any transfer and other
taxes required by reason of such payment in a name other than that of the
registered holder of the certificate or instrument surrendered or shall have
established to the satisfaction of the Company that such tax either has been
paid or is not payable.
(c) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of any shares of capital stock thereafter on the records of the
Company. If, after the Effective Time, certificates for Shares are presented to
the Surviving Corporation, they shall be canceled and exchanged for cash as
provided in Section 1.6(a) and Section 1.6(b) or for the Stock Consideration as
provided in Section 1.6(c). No interest shall accrue or be paid on any cash
payable upon the surrender of a certificate or certificates which immediately
before the Effective Time represented outstanding Shares.
(d) Notwithstanding any other provision of this Agreement, no
fractional shares of New Series A Preferred or New Company Common Stock will be
issued and any holder of Shares entitled to receive a fractional share of New
Series A Preferred or New Company Common Stock but for this Section 1.8(d) shall
be entitled to receive a cash payment in lieu thereof, which payment shall equal
the amount determined by multiplying (i) the fraction of a share of New Series A
Preferred or New Company Common Stock, as applicable, to which such holder would
otherwise be entitled by (ii) $3.166456 and $.01, respectively.
SECTION 1.9. STOCK OPTION PLANS; WARRANTS.
(a) The Company shall use commercially reasonable efforts to
take all actions necessary to provide that, upon consummation of the Merger, (i)
each then outstanding option to purchase shares of Company Common Stock (the
"Options") granted under any of the Company's stock option plans referred to in
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Section 3.2, each as amended (collectively, the "Option Plans"), (ii) any and
all other outstanding options, stock warrants and stock rights, including any
subrights as may be granted under the Company's ITSA Stock Purchase Plan,
Employees' Common Stock Grant Plan and Distributor Stock Purchase Plan
(collectively, "Warrants and Other Rights") granted pursuant to such stock
Option Plans, warrant agreements or otherwise (collectively, the "Warrant
Agreements"), whether or not then exercisable or vested, shall be canceled and
(iii) in consideration of such cancellation, the Company (or, at Parent's
option, Parent) shall pay to each such holder of an Option or Warrant and Other
Rights an amount in respect thereof equal to the product of (A) the excess, if
any, of the Per Share Amount over the exercise price thereof and (B) the number
of Shares subject thereto (such payment to be net of applicable withholding
taxes). As promptly as practicable following the consummation of the Merger,
Parent shall provide the Company with any funds necessary to satisfy its
obligations under this Section 1.9(a).
(b) Except as provided herein or as otherwise agreed to by the
parties, the Company shall use commercially reasonable efforts to cause the
Option Plans to terminate as of the Effective Time.
(c) Except as provided herein or as otherwise agreed to by the
parties, the Company shall cause all Warrant Agreements to terminate as of the
Effective Time and shall ensure that following the Effective Time no holder of
Warrants and Other Rights shall have any right to acquire any equity securities
of the Company, the Surviving Corporation, Holdings or any subsidiary thereof.
Article II.
REPRESENTATIONS AND WARRANTIES OF
PARENT, HOLDINGS AND PURCHASER
Parent, Holdings and Purchaser each represents and warrants to the
Company as follows:
SECTION 2.1. CORPORATE ORGANIZATION; NO PRIOR ACTIVITIES. Parent is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware and each of Holdings and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and each of Parent, Holdings and Purchaser has the
requisite power and authority and any necessary
10
governmental authority and approvals to own, operate or lease the properties
that it purports to own, operate or lease and to carry on its business as it is
now being conducted. Holdings is a newly formed corporation, wholly-owned
subsidiary of Parent, and Purchaser is a newly formed, wholly-owned subsidiary
of Holdings, and, except for activities incident to the Merger, neither Holdings
nor Purchaser has engaged in any business activities of any type or kind
whatsoever. Attached hereto as Exhibits A-1 and B-1, respectively, are true and
complete copies of Purchaser's Certificate of Incorporation, as filed with the
Secretary of State of the State of Delaware, and Bylaws. Attached hereto as
Exhibits A-3 and B-2, respectively, are true and complete copies of Holdings'
Certificate of Incorporation, as filed with the Secretary of State of the State
of Delaware, and By-laws.
SECTION 2.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Parent, Holdings
and Purchaser each has the necessary power and authority to enter into this
Agreement and to carry out their obligations hereunder. The execution and
delivery of this Agreement by Parent, Holdings and Purchaser and the
consummation by Parent, Holdings and Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of Parent,
Holdings and Purchaser and no other proceeding is necessary for the execution
and delivery of this Agreement by Parent, Holdings or Purchaser, the performance
by Parent, Holdings or Purchaser of their respective obligations hereunder and
the consummation by Parent, Holdings or Purchaser of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent, Holdings and Purchaser and (assuming the accuracy of the representations
and warranties of the Company in Section 3.3) constitutes a legal, valid and
binding obligation of each of Parent, Holdings and Purchaser, enforceable
against each of them in accordance with its terms.
SECTION 2.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent,
Holdings and Purchaser do not, and the performance of this Agreement by Parent,
Holdings and Purchaser will not, (i) conflict with or violate any law,
regulation, court order, judgment or decree applicable to Parent, Holdings or
Purchaser or by which any of their property is bound or affected, (ii) violate
or conflict with either the Certificate of Incorporation, By-Laws, limited
partnership agreement or other organizational documents of Parent, Holdings or
Purchaser, or (iii) result in any breach of or constitute a default (or an event
which with
11
notice or lapse of time or both would become a default) under, or give to others
any rights of termination or cancellation of, any contract, instrument, permit,
license or franchise to which Parent, Holdings or Purchaser is a party or by
which Parent, Holdings or Purchaser or any material portion of their property is
bound or affected, except for, in the case of clauses (i) and (iii), conflicts,
violations, breaches or defaults which would not prevent or delay the
consummation of any of the transactions contemplated by this Agreement.
(b) Except for (i) the pre-merger notification requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and any approvals of and consents to the Merger required under applicable
foreign antitrust or competition laws, (ii) the filing and recordation of
appropriate merger documents as required by Delaware Law and (iii) filings as
may be required by any applicable "blue sky" laws, none of Parent, Holdings or
Purchaser is required to submit any notice, report or other filing with any
governmental or regulatory authority or accreditation or certification agency,
board or other organization, domestic or foreign, in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby, except for such of the foregoing as are
required by reason of the legal or regulatory status or the activities of the
Company or by reason of facts specifically pertaining to it. No waiver, consent,
approval or authorization of any governmental or regulatory authority or
accreditation or certification agency, board or other organization, domestic or
foreign, or third party is required to be obtained or made by Parent, Holdings
or Purchaser in connection with their execution, delivery or performance of this
Agreement, except for such of the foregoing as are required by reason of the
legal or regulatory status or the activities of the Company or by reason of
facts specifically pertaining to it.
SECTION 2.4. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent, Holdings or Purchaser.
SECTION 2.5. CAPITALIZATION. The authorized capital stock of each of
Holdings and Purchaser consists of (i) 1,000 shares of common stock, par value
$.01 per share, 10 shares of which are issued and outstanding and have been duly
authorized, validly issued, fully paid and nonassessable and not subject to
12
any preemptive rights and (ii) 100 shares of preferred stock, par value $.01 per
share, none of which shares have been issued. The authorized capital stock of
Holdings will, immediately prior to the Effective Time, consist of (i)
50,000,000 shares of New Company Common Stock, (ii) 25,000,000 shares of New
Series A Preferred Stock and (iii) 15,000,000 shares of Series B non-voting
Preferred Stock, par value $.01 per share ("New Series B Preferred").
Article III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent, Holdings and
Purchaser, as of September 9, 1999, as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
the Company and its Subsidiaries (defined below in this Section 3.1) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority and any necessary governmental authority and approvals to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification or
licensing necessary, except for such failure which, individually or in the
aggregate, would not have a Material Adverse Effect (as defined below in this
Section 3.1). For purposes of this Agreement, (i) "Subsidiary" means any
corporation or other legal entity of which the Company (either alone or through
or together with any other Subsidiary) owns, directly or indirectly, more than
50% of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity and (ii) "Material Adverse
Effect" means any change in or effect on the business of the Company or any of
the Subsidiaries that is or is reasonably likely to be materially adverse to the
business, results of operations, properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or prospects of the
Company and the Subsidiaries taken as a whole. A true and complete list of all
the Subsidiaries, together with the jurisdiction of incorporation or
organization of each Subsidiary and the percentage of each Subsidiary's
outstanding capital stock owned by the Company or
13
another Subsidiary, is set forth in Schedule 3.1 hereto. The Company has
previously delivered or made available to Parent correct and complete copies of
the certificates of incorporation and by-laws (or equivalent governing
instruments) as currently in effect of the Company and each Subsidiary.
SECTION 3.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of:
(i) 46,000,000 shares of Company Common Stock; (ii) 1,000,000 shares of Class B
common stock, par value $.01 per share ("Class B Common"); (iii) 1,200,000
shares of Series A Preferred; (iv) 800,000 shares of Series B Preferred; (v)
350,000 shares of Series C Preferred and (vi) 650,000 shares of preferred stock,
par value $.01 per share ("Undesignated Preferred Stock"). As of the date hereof
and as set forth on Schedule 3.2(a)(i), (A) 9,731,665 shares of Company Common
Stock were issued and outstanding, all of which were duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights, (B)
no shares of Class B Common were issued and outstanding, (C) 828,637 shares of
Series A Preferred were issued and outstanding, all of which were duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, (D) 800,000 shares of Series B Preferred were issued and
outstanding, all of which were duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights, (E) 350,000 shares of Series
C Preferred were issued and outstanding, all of which were duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights, (F) no shares of Undesignated Preferred Stock were issued and
outstanding, (G) 1,500,000 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Options under the Company's Management
Stock Option Plan, (H) 200,000 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Options under the Company's
Supplemental Management Stock Option Plan, (I) 125,000 shares of Company Common
Stock were reserved for issuance upon the exercise of outstanding Options under
the Company's Non-Employee Stock Option Plan, (J) 500,000 shares of Company
Common Stock were reserved for issuance upon the exercise of outstanding Options
under the Company's Distributor Stock Option Plan and (K) 2,292,334 shares of
Company Common Stock were reserved for issuance upon the exercise of outstanding
warrants ("Warrants") under the Warrant Agreements. Schedule 3.2(a)(ii) sets
forth, with respect to each Option that is outstanding under the Option Plans
and each Warrant that is outstanding under the Warrant Agreements as of the date
hereof, the name of the holder of such
14
Option and Warrant, the number of shares of Company Common Stock subject to such
Option and Warrant and the exercise price per share of such Option and Warrant.
Except as set forth in Schedule 3.2(a)(ii) or contained in the Company's
Certificate of Incorporation: (x) there are no other options, calls, warrants or
rights, agreements, arrangements or commitments of any character obligating the
Company or any of its Subsidiaries to issue, deliver or sell any shares of
capital stock of or other equity interests in the Company or any of the
Subsidiaries; (y) there are no bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company generally may vote; and (z) there are no stockholders agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting, registration or disposition of any
shares of the capital stock of the Company (including any such agreements or
understandings that may limit in any way the solicitation of proxies by or on
behalf of the Company from, or the casting of votes by, the stockholders of the
Company with respect to the Merger) or granting to any person or group of
persons the right to elect, or to designate or nominate for election, a director
to the Board of Directors. Except as set forth in Schedule 3.2(a)(ii) or
contained in the Company's Certificate of Incorporation, there are no programs
in place or outstanding contractual obligations of the Company or any of the
Subsidiaries (1) to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or (2) to vote or to dispose of any shares of the
capital stock of any of the Subsidiaries.
(b) All the outstanding capital stock of each of the
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights and, except as set forth in Schedule 3.1,
is owned by the Company or a Subsidiary free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances of any nature
whatsoever ("Encumbrances"). There are no existing options, calls, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the acquisition of issued or unissued capital stock or other equity interests
or securities of any Subsidiary. Except for the Subsidiaries and except as set
forth in Schedule 3.2(b), the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in any other corporation,
partnership, joint venture or other business
15
association or entity. Except as set forth in Schedule 3.2(b), neither the
Company nor any Subsidiary is under any current or prospective obligation to
make a capital contribution or investment in or loan to, or to assume any
liability or obligation of, any corporation, partnership, joint venture or
business association or entity other than a wholly-owned Subsidiary.
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT AND OTHER
TRANSACTION DOCUMENTS; STOCKHOLDER APPROVAL.
The Company has the necessary legal power and authority to enter into this
Agreement, the Stockholders Agreement, the Escrow Agreement (as hereinafter
defined) and the Registration Rights Agreement (collectively, the "Transaction
Documents") and to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the other Transaction Documents by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, including the approval contemporaneous with the
execution of this Agreement of the Merger by the holders of all of the issued
and outstanding Series B Preferred and Series C Preferred, as well as by a
majority of the issued and outstanding shares of the Series A Preferred and the
Company's Common Stock, in accordance with Delaware Law. Each of this Agreement
and the other Transaction Documents has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). No other vote of the holders of any Shares is
required to approve this Agreement and the other Transaction Documents under
Delaware law and the Company's Certificate of Incorporation and Bylaws.
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Schedule 3.4(a), the execution and delivery of
this Agreement and the other Transaction Documents by the Company do not, and
the performance of such agreements by the Company will not, (i) conflict with or
violate any law, statute, rule, regulation, court order,
16
judgment, writ, injunction, award, determination or decree applicable to the
Company or any of the Subsidiaries or by which its or any of their property is
bound or affected ("Legal Requirements"), (ii) violate or conflict with the
Certificate of Incorporation or By-Laws or equivalent organizational documents
of the Company or any Subsidiary, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time of both would become a
default) under, or result in any, or give rise to any rights of termination,
cancellation or acceleration of any obligations or any loss of any material
benefit under or, result in the creation of an Encumbrance on any of the
properties or assets of the Company or any of the Subsidiaries pursuant to, any
agreement, contract, instrument, note, bond, mortgage, indenture, permit,
license or franchise to which the Company or any of the Subsidiaries is a party
or by which the Company or any of the Subsidiaries or its or any of their
property is bound or affected, except for, in the case of clauses (i) and (iii),
conflicts, violations, breaches or defaults which, individually or in the
aggregate, would not be reasonably likely to (y) have a Material Adverse Effect
or (z) prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(b) Except for (i) the pre-merger notification requirements of
the HSR Act and any approvals of and consents to the Merger required under
applicable foreign antitrust or competition laws, (ii) the filing and
recordation of appropriate merger or other documents as required by Delaware Law
and (iii) filings as may be required by any "blue sky" laws of various states,
the Company and each of the Subsidiaries are not required to submit any notice,
report or other filing with any Governmental Entity in connection with the
execution, delivery or performance of this Agreement or the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. No waiver, consent, approval or authorization of any Governmental
Entity is required to be obtained or made by the Company in connection with its
execution, delivery or performance of this Agreement or the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby, except (i) as set forth in Schedule 3.4(b) or (ii) where the failure to
obtain such waivers, consents, approvals or authorizations would not,
individually or in the aggregate, be reasonably likely to (x) have a Material
Adverse Effect or (y) prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
SECTION 3.5. SEC FILINGS; FINANCIAL STATEMENTS.
17
(a) The Company has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission ("SEC"),
and has heretofore delivered to Parent, in the form filed with the SEC or, since
October 1998, in the form delivered to the holders of the Company's Senior
Secured Step-Up Notes due July 1, 2000 (the "Notes"), its (i) Annual Reports on
Form 10-K for the fiscal years ended December 31, 1996, December 31, 1997 and
December 31, 1998, respectively, (ii) Quarterly Reports on Form 10-Q for all
fiscal quarters ended since December 31, 1997, and (iii) all other reports or
registration statements filed by the Company with the SEC since January 1, 1997
(collectively, the "SEC Reports"). The SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Neither the Company nor any of the Subsidiaries is
currently required to file any statements or reports with the SEC pursuant to
Sections 12(g), 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the SEC
Reports were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly presented
the consolidated financial position of the Company and its Subsidiaries as at
the respective dates thereof and the consolidated results of operations and
changes in financial position of the Company and its Subsidiaries for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments (which in the
aggregate are not material in amount).
(c) Except as (i) set forth in Schedule 3.5(c), (ii) disclosed
in the consolidated balance sheet of the Company and its Subsidiaries as at June
30, 1999 or (iii) incurred in the ordinary course of business consistent with
past practice, since June 30, 1999, the Company and the Subsidiaries have no
material liabilities of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a consolidated balance
sheet of the Company and its Subsidiaries prepared in accordance with GAAP.
18
SECTION 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
expressly permitted by this Agreement or as set forth in Schedule 3.6 hereto or
in the SEC Reports, since June 30, 1999, the business of the Company and the
Subsidiaries has been conducted in the ordinary course consistent with past
practice and there has not been:
(a) any changes, events or conditions which, individually or
in the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any of the assets of the Company or any of its
Subsidiaries having a Material Adverse Effect;
(c) any redemption or other acquisition of any capital stock
of the Company or any of the Subsidiaries or any declaration or payment of any
dividend or other distribution in cash, stock or property with respect to any
capital stock of the Company;
(d) any change by the Company in accounting methods,
principles or practices used in preparing the Company's consolidated
financial statements;
(e) any revaluation by the Company of any asset (including,
without limitation, any writing down of the value of inventory or writing off of
notes or accounts receivable), other than in the ordinary course of business
consistent with past practice;
(f) any entry by the Company or any Subsidiary into any
commitment or transaction material to the Company and the Subsidiaries taken as
a whole, other than commitments or transactions entered into in the ordinary
course of business consistent with past practice;
(g) any material increase in or establishment of or material
amendment, modification, supplement or extension to any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any directors, officers or key
employees of the Company or any Subsidiary,
19
except in the ordinary course of business consistent with past practice;
(h) any entry by the Company or any Subsidiary into any
employment, consulting, severance, termination or indemnification agreement with
any director, officer or key employee of the Company or any Subsidiary or any
entry into any such agreement with any other person;
(i) (i) any settlement or compromise by the Company or any
Subsidiary of any claim, litigation or other legal proceeding, other than in the
ordinary course of business consistent with past practice in an amount not
involving more than $100,000 or (ii) any payment, discharge or satisfaction by
the Company or any Subsidiary of any other claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
(A) in the ordinary course of business and consistent with past practice or (B)
with respect to any other such claims, liabilities or obligations reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company;
(j) any sale, assignment, transfer, conveyance or
abandonment by the Company or any Subsidiary of any Intellectual Property
Rights (as defined in Section 3.10);
(k) any amendment or modification to the certificate of
incorporation or by-laws (or equivalent governing documents) of the Company
or any Subsidiary;
(l) any agreement, in writing or otherwise, by the Company or
any Subsidiary to take any of the actions described in this Section 3.6, except
as expressly contemplated by this Agreement;
(m) any new election, or change or revocation of an
existing election, with respect to Taxes affecting or relating to the Company
or the Subsidiaries;
(n) any change in the method of accounting with respect
to Taxes affecting or relating to the Company or the Subsidiaries; or
(o) any agreement to a closing or other agreement or
settlement with respect to Taxes affecting or relating to the Company or any of
its Subsidiaries.
20
SECTION 3.7. LITIGATION. Except as disclosed in Schedule 3.7 hereto,
(a) there are no claims, actions, suits, proceedings or investigations pending
or, to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, before any Governmental Entity or arbitrator, the outcome of
which, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect, (b) there is no judgment, decree, injunction, rule or order
(collectively, "Orders") of any court, arbitrator or Government Entity
outstanding against the Company or any Subsidiary which is reasonably likely to
have a Material Adverse Effect on the Company, or (c) to the knowledge of the
Company, there are no facts that would result in any bona fide claim, dispute,
action, proceeding, suit, appeal, investigation or inquiry which is reasonably
likely to have such a Material Adverse Effect on the Company.
SECTION 3.8. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.8(a) sets forth a list of all "employee benefit
plans", as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and all severance pay, sick leave, vacation
pay, salary continuation, disability, retirement benefits, deferred
compensation, bonus pay, incentive compensation, stock options, stock purchase,
Section 125 Plan (including those held by Directors, employees, and
consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, that are maintained by the Company, any
Subsidiary or any entity within the same "controlled group" as the Company or
Subsidiary, within the meaning of Section 4001(a)(14) of ERISA (a "Company ERISA
Affiliate"), or to which the Company, any Subsidiary or Company ERISA Affiliate
is obligated to contribute thereunder for current or former employees of the
Company, any Subsidiary or Company ERISA Affiliate (the "Company Employee
Benefit Plans").
(b) None of the Company Employee Benefit Plans is a
"multiemployer plan", as defined in Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan, nor has any of them incurred, or is reasonably likely to
incur, any unsatisfied liability due to the termination or reorganization of a
Multiemployer Plan.
21
(c) None of the Company Employee Benefit Plans is a "single
employer plan", as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA. Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has incurred, or is reasonably likely to incur, any liability under
Section 4062 of ERISA to the Pension Benefit Guaranty Corporation (the "PBGC")
or to a trustee appointed under Section 4042 of ERISA. Neither the Company, any
Subsidiary nor any Company ERISA Affiliate has engaged in any transaction
described in Section 4069 of ERISA.
(d) Each Company Employee Benefit Plan that is intended to
qualify under Section 401 of Internal Revenue Code of 1986, as amended (the
"Code"), and each trust maintained pursuant thereto, has been determined to be
exempt from federal income taxation under Section 501 of the Code by the IRS,
and, to the best of the Company's knowledge, nothing has occurred with respect
to the operation of any such Company Employee Benefit Plan that would cause the
loss of such qualification or exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code.
(e) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans to any funds or trusts established
thereunder or in connection therewith have been made by the due date thereof,
and all contributions for any period ending on or before the Effective Time
which are not yet due will have been paid or accrued on or prior to the
Effective Time.
(f) None of the Company, the Subsidiaries, the officers of the
Company or any of the Subsidiaries or the Company Employee Benefits Plans which
are subject to ERISA, any trusts created thereunder or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility that could subject the Company, any of the
Subsidiaries or any officer of the Company or any of the Subsidiaries to any
material tax or penalty on prohibited transactions imposed by such Section 4975
or to any material liability under Section 502 of ERISA.
(g) None of the Company Employee Benefit Plans provides
retiree life or retiree health benefits except as may be required under Section
4980B of the Code or Section 601 of ERISA
22
and at the expense of the participant or the participant's beneficiary.
(h) True, correct and complete copies of the following
documents, with respect to each of the Company Employee Benefit Plans, have been
delivered to Parent by the Company: (i) all Company Employee Benefit Plans and
related trust documents, and amendments thereto; (ii) the most recent Forms
5500, (iii) summary plan descriptions and (iv) the most recent actuarial report
describing the funded status of such plans.
(i) Except as set forth on Schedule 3.8(i) hereto, there are
no pending actions, claims or lawsuits which have been asserted, instituted or,
to the Company's knowledge, threatened, against the Company Employee Benefit
Plans, the assets of any of the trusts under such plans or the plan sponsor or
the plan administrator, or against any fiduciary of the Company Employee Benefit
Plans with respect to the operation of such plans (other than routine benefit
claims). No fiduciary of any Company Employee Benefit Plan has incurred or, to
the best knowledge of the Company, is reasonably likely to incur, any liability
for a breach of fiduciary duty or any other failure to comply with the
applicable provisions of ERISA or the Code in connection with the administration
or investment of the assets of any such plan.
(j) All Company Employee Benefit Plans have been maintained
and administered, in all material respects, in accordance with their terms and
with all applicable provisions of ERISA and the Code (including regulations
thereunder) and other applicable federal and state laws and regulations. None of
the Company, its Subsidiaries, or, to the best knowledge of the Company, any
"party in interest" or "disqualified person" with respect to the Company
Employee Benefit Plans has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or 4975 of the Code. All amendments and actions
required to bring the Company Employee Benefit Plans into conformity in all
material respects with all of the applicable provisions of ERISA, the Code and
other applicable laws have been made or taken except to the extent that such
amendments or actions are not required by law to be made or taken until a date
after the Effective Time.
(k) Except as elsewhere required by this Agreement or as set
forth in Schedule 3.8(k) hereto, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will,
either alone or upon the occurrence of subsequent events, (i) result in any
payment
23
becoming due to any employee (current, former or retired) of the Company or the
Subsidiaries, (ii) increase any benefits otherwise payable under any Company
Employee Benefit Plan, (iii) result in the acceleration of the time of payment
or vesting of any benefits under any Company Employee Benefit Plan or (iv)
constitute a "change in control" or similar event under any Company Employee
Benefit Plan.
(l) With respect to each Company Employee Benefit Plan not
subject to United States law (a "Company Foreign Benefit Plan"): (i) the fair
market value of the assets of each funded Company Foreign Benefit Plan, the
liability of each insurer for any Company Foreign Benefit Plan funded through
insurance or the book reserve established for any Company Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or provide for
the accrued benefit obligations, as of the Effective Time, with respect to all
current and former participants in such plan according to the actuarial
assumptions and valuations most recently used to determine employer
contributions to such Company Foreign Benefit Plan and no transaction
contemplated by this Agreement shall cause such assets or insurance obligations
or book reserve to be less than such benefit obligations; (ii) each Company
Foreign Benefit Plan is in material compliance with applicable law; and (iii)
each Company Foreign Benefit Plan required to be registered has been registered
and has been maintained in good standing with the appropriate regulatory
authorities.
Section 3.9. PROPERTIES.
(a) PERSONAL PROPERTY. Except as set forth in Schedule 3.9(a),
the Company and each of the Subsidiaries has good and valid title to, or a valid
leasehold interest in, all of its material personal property, free and clear of
all Encumbrances, except for Permitted Exceptions.
(b) OWNED REAL PROPERTY. Schedule 3.9(b) contains a true and
complete description of all real property owned by the Company and used or
occupied in connection with the business as currently operated (the "OWNED REAL
PROPERTY"). The Company has good and marketable fee simple title to the Owned
Real Property and owns all of the improvements located thereon, free and clear
of all Encumbrances, except for Permitted Exceptions (hereinafter defined).
Except as set forth on Schedule 3.9(b)(ii), none of the Owned Real Property is
subject to any right or option of any Person to purchase, lease or otherwise
obtain title to such property. Except as set forth on Schedule 3.9(b)(ii), no
Person
24
other than the Company or its Subsidiaries has any right to use, occupy or lease
all or any portion of the Owned Real Property. The real property comprising the
Owned Real Property is designated as a separate tax lot. There are no tax
abatements or exemptions specifically affecting the Owned Real Property, and the
Company has not received any written notice of (and the Company does not have
any actual knowledge of) any proposed increase in the assessed valuation of the
Owned Real Property or of any proposed public improvement assessments. None of
the Permitted Exceptions materially interferes with or has materially interfered
with the maintenance, use or operation of the Owned Real Property or Leased Real
Property (as hereinafter defined). "PERMITTED EXCEPTIONS" means (i) matters
listed or described on Schedule 3.9(b)(iii), (ii) easements, covenants,
rights-of-way and other encumbrances or restrictions arising as a matter of law
(including workmans', mechanics' and similar liens) which do not, individually
or in the aggregate, materially detract from the value or materially impair the
present and continued use, operation and maintenance of the property subject
thereto, or materially impair the operation of the Company or any Subsidiary and
(iii) real estate taxes not yet due or payable, that may be paid later without
penalty or that are payable but contested in good faith pursuant to appropriate
legal proceedings such that the Owned Real Property or Leased Real Property
would not be subject to loss or foreclosure.
(c) LEASED REAL PROPERTY. Schedule 3.9(c) contains a true and
correct description, including the correct name, address and telephone number of
the respective landlords, the termination date and any options, the fixed rent
and additional rent, the amount of space and location of the property of all
leases, licenses, permits, subleases, and occupancy agreements, together with
any amendments thereto (the "COMPANY LEASES"), with respect to (x) all real
property leased or subleased by the Company as a tenant and used or occupied in
connection with the business (the "LEASED REAL PROPERTY"), and (y) all real
property leased or subleased by the Company as landlord, to third parties.
(i) The Company has valid leasehold interests in the
Leased Real Property free and clear of all Encumbrances, except for Permitted
Exceptions.
(ii) True, complete and accurate copies of each of
the Company Leases have been delivered to the Parent and Purchaser. Each of the
Company Leases is in full force and effect without modification or amendment
from the form delivered and are valid, binding and enforceable in accordance
with their
25
respective terms. Except as set forth on Schedule 3.9(c) the Company has not
assigned its interest under any Company Leases, or subleased for all or any part
of the space demised thereby, to any third party. No option (to extend or reduce
the term of any Company Lease, or reduce or expand the space conveyed under any
sublease or to purchase the property leased under any such lease) has been
exercised or has expired under any of the Company Leases, except options whose
exercise or expiration have been evidenced by a written document, a true,
complete and accurate copy of which has been delivered to the Parent and
Purchaser with the corresponding Company Leases.
(iii) Neither the Company nor, to the Company's
knowledge, any of the other parties to the Company Leases, is in material
default under any of the Company Leases, and no material amount due under any of
the Company Leases remains unpaid, no material controversy, claim, dispute or
disagreement exists between the parties to any of the Company Leases, and no
event has occurred which with the passage of time or giving of notice, or both
would constitute a material default thereunder.
(iv) The lessor under each of the Company Leases has
completed all tenant improvement work and other alterations required to be
completed by the lessor pursuant to such Company Leases.
(v) Except as otherwise set forth in Schedule
3.9(c)(v), no Company Leases or sublease will cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those currently
in effect as a result of the consummation of the transactions contemplated by
this Agreement, nor will the consummation of such transactions constitute a
breach or default under any of the Company Leases or otherwise give the landlord
a right to terminate any of the Company Leases.
(d) ALL REAL PROPERTY. The Owned Real Property and the Leased
Real Property is all of the real property (the "REAL PROPERTY") used by the
Company in connection with its business. The Company does not own or lease any
real property other than the Owned Real Property and the Leased Real Property.
(e) ACCESS. The Company has access to public roads, streets or
the like or valid perpetual easements over private streets, roads or other
private property for such ingress to and egress from the Owned Real Property and
the Leased Real Property, except as would not materially impair the ability to
use any such
26
Owned Real Property or Leased Real Property in the operation of the business of
the Company as currently conducted.
(f) EMINENT DOMAIN. There is no pending or, to the
Company's knowledge, threatened condemnation of any part of the Owned Real
Property or the Leased Real Property by any governmental authority.
(g) IMPROVEMENTS.
(i) All improvements on the Leased Real Property
constructed by or on behalf of the Company or any Subsidiary, to the knowledge
of the Company, constructed by or on behalf of any other Person were constructed
in material compliance and remain in material compliance with all applicable
federal, state and local laws, zoning, land use and building ordinances and
health and safety ordinances (including, without limitation, the Americans with
Disabilities Act), and neither the Company nor any of its Affiliates, has
received any notice of any violation of any such laws, ordinances or agreement.
The Owned Real Property and the Leased Real Property are zoned for the various
purposes for which the real estate and improvements have been used in connection
with the normal operation of the business as currently operated and do not
require any rights for non-conforming uses.
(ii) All improvements and building systems on the
Owned Real Property and Leased Real Property, are free of material defects and
have not suffered any casualty or other material damage that has not been
repaired in all material respects. To the Company's knowledge, there is no
material latent or patent structural, mechanical or other significant defect,
soil condition or deficiency in any of the improvements located on the Owned
Real Property or Leased Real Property.
(h) INSURANCE. There are no outstanding requirements or
recommendations by any insurance company which has issued to the Company a
policy covering the Owned Real Property or Leased Real Property, or by any board
of fire underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on such property.
(i) UTILITIES. All public utilities required for the operation
of the Owned Real Property and the Leased Real Property and necessary for the
conduct of the business of the Company are installed from public right of ways
or across valid easements for the benefit of the Company and operating, and all
installation and connection charges, to the Company's knowledge, are paid in
full.
27
(j) FOREIGN INVESTMENTS. Neither the Company, or any of
its Subsidiaries, is a "foreign person" within the meaning of Section 1445(f)
of the Code.
(k) NO COMMISSIONS. All brokerage commissions and other
compensation and fees payable by reason of the Company Leases or the Owned Real
Property, have been paid in full, except for such commissions and other
compensation related to options or extensions in the Company Leases which are
not yet exercised and are set forth on Schedule 3.9(k).
SECTION 3.10. INTELLECTUAL PROPERTY.
(a) As used herein, "Intellectual Property" shall mean all of
the following that are owned or used in the operations of the business of the
Company and its Subsidiaries: (i) trademarks and service marks (registered or
unregistered), trade dress, trade names and other names and slogans embodying
business or product goodwill or indications of origin, all applications or
registrations in any jurisdiction pertaining to the foregoing and all goodwill
associated therewith; (ii) patents, patentable inventions, discoveries,
improvements, ideas, know-how, formula methodology, processes, technology and
computer programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and data)
and all applications or registrations in any jurisdiction pertaining to the
foregoing, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; (iii) trade secrets,
including confidential and other non-public information, and the right in any
jurisdiction to limit the use or disclosure thereof; (iv) copyrights in
writings, sound recordings, software, artwork, designs, mask works or other
works, and registrations or applications for registration of copyrights in any
jurisdiction; (v) databases and database rights; (vi) Internet Web sites, domain
names and registrations or applications for registration thereof; (vii)
licenses, immunities, covenants not to xxx and the like relating to any of the
foregoing; (viii) books and records describing or used in connection with any of
the foregoing; and (ix) claims or causes of action arising out of or related to
infringement or misappropriation of any of the foregoing. The Company and each
of the Subsidiaries own all right, title and interest in and to or has a valid
and enforceable license to use all of the Intellectual Property used by it in
connection with the business of the Company and its Subsidiaries, which
represents all material intellectual property rights necessary to the conduct of
the business of the Company
28
and its Subsidiaries. Schedule 3.10(a) sets forth a complete list of all
patents, trademarks and service marks, trade names, domain names, copyrights,
and all registrations and applications for all such Intellectual Property in the
name of the Company or any of its Subsidiaries in all jurisdictions worldwide.
Except as described in Schedule 3.10(a), all listed Intellectual Property is
owned by the Company or any of its Subsidiaries, free and clear of security
interests, liens and encumbrances, and is valid, subsisting, unexpired, in
proper form and enforceable (except as rights to non-competition provisions
relating to such Intellectual Property may be limited by state laws and the
public policy underlying such laws).
(b) Schedule 3.10(b) sets forth each agreement, contract,
permission, license or sublicense to which the Company or any of its
Subsidiaries is a party whereby (i) the Company has licensed any rights or is
obligated to pay royalties or other payments with respect to the intellectual
property rights or consulting services of any third party; or (ii)the Company
has granted to any third party a right or license with respect to any of its
Intellectual Property (such agreements, contracts, permissions, licenses and
sublicenses being referred to collectively as the "Licenses"). Except as set
forth in Schedule 3.10(b), (i) the Licenses are legal, valid, binding,
enforceable against the Company and, to the Company's knowledge, each other
party thereto and is in full force and effect and will continue to be so
following the Closing, and (ii) the Company is not, and to the Company's
knowledge, no other party to any of the Licenses is in material breach or
default and no event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination, modification or
acceleration thereunder.
(c) Except as set forth in Schedule 3.10(c), (i) there are no
pending oppositions, cancellations, invalidity proceedings, interferences or
re-examination proceedings with respect to the Intellectual Property; (ii)
neither the Company nor any of the Subsidiaries has received notice from any
other person or entity challenging the right of the Company or any of its
Subsidiaries to use or register any of the Intellectual Property; (iii) to the
knowledge of the Company, the conduct of the business of the Company and the
Subsidiaries as currently conducted does not conflict with or infringe any
proprietary right of any third party, nor is any claim, suit, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or the Subsidiaries alleging any such conflict or infringement with any
third party's proprietary
29
rights; and (iv) neither the Company nor any of the Subsidiaries has any pending
claim or is aware of any violation or infringement by others of its rights to or
in connection with the Intellectual Property.
(d) Each of the Company and the Subsidiaries owns or has right
to use the Intellectual Property sufficient to allow it to conduct, and continue
to conduct, its business as currently conducted in all material respects, and
the consummation of the transactions contemplated hereby will not materially
alter or impair such ability in any respect.
(e) No former or present employee, officer or director of the
Company holds any right, title or interest, directly or indirectly, in whole or
in part, in or to any Intellectual Property.
(f) Except as set forth on Schedule 3.10(f), all personnel,
including employees, agents, consultants and contractors, who have contributed
to or participated in the conception and development of any Intellectual
Property on behalf of the Company have been a party to a "work-for-hire"
arrangement or agreements with the Company in accordance with applicable federal
and state law that has accorded the Company full, effective, exclusive and
original ownership of all tangible and intangible property thereby arising, or
have executed appropriated instruments of assignment in favor of Company as
assignee that have conveyed to Company effective and exclusive ownership of all
tangible and intangible property thereby arising.
SECTION 3.11. INSURANCE. Schedule 3.11 sets forth a true and
complete list of all insurance policies (without limitation title insurance)
carried by, or covering the Company and the Subsidiaries with respect to their
businesses, assets and properties, together with, in respect of each such
policy, the name of the insurer, the policy number, the type of policy, the
amount of coverage and the deductible. True and complete copies of each such
policy have previously been provided to Parent. All such policies are in full
force and effect, and no notice of cancellation has been given with respect to
any such policy. All premiums due on such policies have been paid in a timely
manner and the Company and the Subsidiaries have complied in all material
respects with the terms and provisions of such policies. The insurance coverage
provided by such policies is provided by insurers that, to the knowledge of the
Company, are solvent and is in such amount and types of coverage which are
adequate and
30
customary for the industries in which the Company and the Subsidiaries operate.
Schedule 3.11 lists all material claims that have been asserted under any of
such insurance policies or relating to the properties, assets or operations of
the Company or any Subsidiary since January 1, 1998.
SECTION 3.12. ENVIRONMENTAL. Except as set forth in Schedule
3.12:
(a) The Company and the Subsidiaries are and have been in
compliance in all material respects with all applicable Environmental Laws, have
obtained all material Environmental Permits and are in compliance in all
material respects with their requirements, and have resolved all past
non-compliance with Environmental Laws and Environmental Permits charged in
writing by any Governmental Entity without any pending, on-going or future
obligation, cost or liability.
(b) There are no material Environmental Claims (as hereinafter
defined) pending or, to the knowledge of the Company, threatened, or reasonably
likely to be asserted against the Company or any of its Subsidiaries.
(c) No Hazardous Substance has been placed, stored, located,
released, transported, disposed of or otherwise come to be located on, under or
near any of the Company's or any of the Subsidiaries' Owned Real Property or, to
the knowledge of the Company and its Subsidiaries, any Leased Real Property or
any property formerly owned or operated by the Company or its Subsidiaries
except in the ordinary course of business and in strict compliance with
Environmental Laws.
(d) No Environmental Law imposes any obligation upon the
Company or the Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree, except
such as would not be reasonably likely to have a Material Adverse Effect.
(e) No Encumbrance has been placed upon any of the Company's
or the Subsidiaries' properties under any Environmental Law.
31
(f) The Company and the Subsidiaries have provided Parent with
copies of any environmental assessment or audit report or other relevant and
material studies or analyses in the possession of the Company or the
Subsidiaries relating to any real property currently or formerly owned, leased
or occupied by the Company or the Subsidiaries. The Company and the Subsidiaries
have provided Parent with copies of all material records maintained for required
environmental compliance.
(g) As used in this Agreement, the following terms have the
meanings set forth below:
(i) "Environmental Claim" means any written claim, demand,
suit, action, proceeding, investigation or notice to the Company or any of
its Subsidiaries by any Person or entity alleging any potential liability
(including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resource
damages, or penalties) arising out of, based on, or related in any manner
to Environmental Law;
(ii) "Environmental Law" means any local, state, federal or
foreign statute, ordinance, law, common law duty or other requirement now
in effect and as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environment, health or safety or natural resources, including, without
limitation, those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous
Substances.
(iii) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law, including any and all obligations and
conditions specified therein.
(iv) "Hazardous Substances" means (a) petroleum and petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (b) any
other chemicals, materials or substances regulated as toxic or hazardous
or as a pollutant, contaminant or waste under any applicable Environmental
Law.
SECTION 3.13. MATERIAL CONTRACTS.
32
(a) Except as set forth in the SEC Reports or Schedule 3.13,
neither the Company nor any of the Subsidiaries is a party to or bound by:
(i) any "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K promulgated by the SEC);
(ii) any contract or agreement for the purchase of materials
or personal property from any supplier or for the furnishing of services
to the Company or any Subsidiary that involves or is likely to involve
future aggregate payments by the Company or any of the Subsidiaries of
$250,000 or more;
(iii) any contract or agreement for the sale, license or lease
(as lessor) by the Company or any Subsidiary of services, materials,
products, supplies or other assets, owned or leased by the Company or the
Subsidiaries, that involves or is likely to involve future aggregate
payments to the Company or any of the Subsidiaries of $250,000 or more;
(iv) any contract, indenture, agreement or instrument
relating to or evidencing indebtedness for borrowed money of the
Company or any Subsidiary;
(v) any non-competition agreement or any other agreement or
obligation which purports to limit in any respect the manner in which, or
the localities in which, the business of the Company or the Subsidiaries
may be conducted;
(vi) any agreement with any present or former affiliates of
the Company;
(vii) any partnership, joint venture, strategic alliance or
cooperation agreement (or any agreement similar to any of the
foregoing);
(viii) any voting or other agreement governing how any
Shares shall be voted;
(ix) any agreement with any present or former stockholders,
officers or directors of the Company; or
(x) any contract or other agreement which would be reasonably
likely to prohibit or materially delay the
33
consummation of the Merger or any of the transactions contemplated by this
Agreement.
The foregoing contracts and agreements to which the
Company or any Subsidiary are parties or are bound are collectively referred to
herein as "Company Material Contracts."
(b) Except as disclosed in Schedule 3.13, (i) each Company Material
Contract is valid and binding on the Company (or, to the extent a Subsidiary is
a party, such Subsidiary) and, to the Company's knowledge, each other party
thereto and is in full force and effect, and the Company and each Subsidiary
have performed all obligations required to be performed by them to date under
each Company Material Contract and each other contract and agreement to which
the Company or any Subsidiary is party or bound (collectively, the "Other
Contracts"), except where such noncompliance, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect and (ii)
neither the Company nor any Subsidiary knows of, or has given or received notice
of, any violation or default under (nor, to the knowledge of the Company, does
there exist any condition which with the passage of time or the giving of notice
or both would result in such a violation or default under) any Company Material
Contract or Other Contract.
(c) Except as disclosed in the SEC Reports or in Schedule 3.13
or as expressly provided for in this Agreement, neither the Company nor any of
the Subsidiaries is a party to any oral or written (i) employment, severance or
consulting agreement that cannot be terminated on thirty days' or less notice
without liability to the Company or such Subsidiary, (ii) agreement with any
officer or other key employee of the Company or any of the Subsidiaries the
benefits of which are contingent or vest, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or any the
Subsidiaries of the nature contemplated by this Agreement, (iii) agreement with
respect to any officer or other key employee of the Company or any of the
Subsidiaries providing any term of employment or compensation guarantee or (iv)
stock or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of such
transactions.
SECTION 3.14. CONDUCT OF BUSINESS.
34
(a) Except as set forth in Schedule 3.14, the business and
operations of the Company and the Subsidiaries are not being conducted in
default or violation of any term, condition or provision of (i) their respective
Certificates of Incorporation or By-Laws or similar organizational documents, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease or other
instrument or agreement of any kind to which the Company or any of the
Subsidiaries is now a party or by which the Company or any of the Subsidiaries
or any of their respective properties or assets may be bound, except, with
respect to the foregoing clause (ii), defaults or violations that would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
(b) Except as set forth in Schedule 3.14, the business and
operations of the Company and the Subsidiaries have been, and are being,
conducted in compliance with all Federal, state, local and foreign statutes,
laws, ordinances, rules, regulations, judgments, decrees, orders, concessions,
grants, franchises, permits, licenses and other governmental authorizations and
approvals applicable to the Company or any of the Subsidiaries, except for
failures to so comply that would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.14, the Company
manufactures and distributes and for the past three years has manufactured and
has distributed its products in all material respects in accordance with all
applicable rules and regulations of the United States Food and Drug
Administration ("FDA") (including the "Good Manufacturing Practices" and the
"Medical Device Reporting" regulations) and the Company's quality control
procedures in effect at the time of manufacture. All of the products currently
sold by the Company have been approved or cleared for sale by the FDA and all
other applicable federal, state and, to the knowledge of the Company, foreign
regulatory agencies. Except as set forth in Schedule 3.14, the Company has not
received any notice from the FDA or any other federal, state or foreign
regulatory agency questioning its manufacturing practices or threatening to
revoke or curtail any product clearance or approval, and the Company is not
aware of any intent to deliver any such notice. Schedule 3.14 contains a
complete list of all products manufactured or marketed by the Company, including
those which require the approval of, or premarket notification to, or listing
with the FDA or any other United States federal or state or foreign governmental
agency or bureau under any existing law, regulation or policy, specifying the
type
35
of approval, premarket notification or listing required and the reference number
or identification of each currently effective approval, notice and registration.
Except as set forth in Schedule 3.14, none of the products identified in
Schedule 3.14 has been the subject of any voluntary or involuntary recall or any
governmental investigation other than routine inspections of the Company's
facilities and all United States and international regulatory approvals or
premarket notifications therefor are owned by and registered in the name of the
Company and are in full force and effect.
(d) The Company and the Subsidiaries have in effect all
franchises, permits, licenses, and other governmental authorizations and
approvals (collectively, the "Company Permits") necessary to own, lease or
operate their properties and assets and to carry on their businesses (including,
without limitation, any federal, state and local laws and regulations regulating
the design, manufacture and distribution of medical devices), and no proceedings
are pending or, to the knowledge of the Company, threatened, to revoke, cancel,
suspend or limit any Company Permit, except for revocations, cancellations,
suspensions or limitations which, individually or in the aggregate, would be not
reasonably likely to have a Material Adverse Effect.
SECTION 3.15. TAXES. Except as set forth in Schedule 3.15:
(a) The Company and each Subsidiary (i) are members of an
affiliated group of corporations (within the meaning of section 1504(a) of the
Tax Code) of which the Company is the common parent eligible to file
consolidated federal income Tax Returns. Since the taxable year ending December
31, 1993, a consolidated federal income Tax Return has been filed for the
affiliated group of which the Company is the common parent. Neither the Company
nor any of its Subsidiaries has liability for the Taxes of any person (other
than the Company and any of its Subsidiaries) under Treasury Regulations section
1.1502-6 or similar or corresponding provision of state, local, or foreign law.
(b) Except such as would not be reasonably likely to have a
Material Adverse Effect, the Company and each of its Subsidiaries have timely
and properly paid all Taxes for which they are liable.
36
(c) All taxes required to be withheld with respect to the
Company and each of its Subsidiaries or their employees, operators, or assets
have been withheld and paid to the appropriate Taxing Authority in the manner
required by law.
(d) Except such as would not be reasonably likely to have a
Material Adverse Effect, the Company and each of its Subsidiaries has timely and
properly filed (or joined in the filing of) all Tax Returns that they were
required to file. All such Tax Returns were correct and complete in all material
respects as of the date of filing and continue to the best of the knowledge of
the Company or the Subsidiary, as the case may be, to be correct and complete in
all material respects.
(e) Except such as would not be reasonably likely to have a
Material Adverse Effect, any liability of the Company or any of its Subsidiaries
for Taxes not yet due and payable, and any liability for Taxes which have been
proposed, assessed, or asserted against them, have been provided for on the
financial statements of the Company in accordance with generally accepted
accounting principles.
(f) No extension of time has been secured with respect to the
filing of any Tax Return of the Company or any of its Subsidiaries, which Tax
Return has not since been filed.
(g) No extension of time has been secured with respect to the
assessment or payment of any Tax of the Company or any of its Subsidiaries,
which Tax has not since been paid.
(h) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns that have been given by the Company or any of its
Subsidiaries.
(i) The federal income Tax Returns of the Company and its
Subsidiaries have never been examined by the Internal Revenue Service.
(j) Neither the Company nor any of its Subsidiaries will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any (x) change in method of accounting, (y)
"closing agreement," as described in Section 7121 of the Tax Code (or any
corresponding provision of state, local, or foreign income Tax law) or (z) any
ruling received by the Internal Revenue Service.
37
(k) No power of attorney granted by the Company or any of its
Subsidiaries with respect to any matter relating to Taxes is currently in force.
(l) Neither the Company nor any of its Subsidiaries is a party
to or is potentially liable under any agreement providing for the allocation or
sharing of, or indemnification for, any liability for Taxes.
(m) There is no action, suit, proceeding, investigation, audit
or claim now pending against, or initiated with respect to, the Company or any
of its Subsidiaries in respect of any Tax. Neither the Company nor any of its
Subsidiaries has any knowledge of any such action, suit, proceeding,
investigation, audit, or claim being threatened by any Tax Authority against, or
with respect to, the Company or any of its Subsidiaries in respect of any Tax.
(n) No property of the Company or any of its Subsidiaries is
"tax-exempt use property" within the meaning of section 168(h) of the Tax Code.
(o) Neither the Company nor any of its Subsidiaries is a party
to any lease made pursuant to former Section 168(f)(8) of the Internal Revenue
Code of 1954.
(p) Neither the Company nor its Subsidiaries has a deferred
gain or loss arising from any intercompany transactions within the meaning of
Treasury Regulation section 1.1502-13.
(q) No excess loan account within the meaning of Treasury
Regulation section 1.1502-19 exists with respect to the Company or any of its
Subsidiaries.
(r) Neither the Company nor any of its Subsidiaries has filed
any agreement or consent under section 341(f) of the Tax Code.
(s) No ruling with respect to Taxes (other than a request for
a determination of the status of a qualified pension plan) has been requested by
or on behalf of the Company or any of its Subsidiaries.
(t) Neither the Company nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning of section
897(c)(2) of the Tax Code during the applicable period specified in section
897(c)(1)(A)(ii) of the Tax Code.
38
(u) Neither the Company nor any of its Subsidiaries is a
partner for U.S. federal income tax purposes in any entity treated as a
partnership for U.S. federal income tax purposes.
(v) No closing agreement pursuant to section 7121 of the Code
(or any predecessor provision) or any similar provision of any state, local or
foreign law has been entered into by or on behalf of the Company or any
Subsidiary.
(w) Except such as would not be reasonably likely to have a
Material Adverse Effect, no jurisdiction where the Company or any Subsidiary has
not filed a Tax Return has made a claim that the Company or such Subsidiary is
required to file a Tax Return in such jurisdiction.
(x) All material current elections with respect to Taxes of
the Company or any Subsidiary are set forth in Schedule 3.15.
(y) The Company and each Subsidiary have previously delivered
or made available to Purchaser complete and accurate copies of each of (i) all
audit reports, letter rulings and technical advice memoranda relating to United
States federal, state, local or foreign Taxes due with respect to the income or
business of the Company or any Subsidiary, (ii) all income Tax Returns filed
with any taxing authority (or the relevant portions of any combined,
consolidated, or unitary Tax Return filed in any jurisdiction of which the
Company or any Subsidiary is a member, including, without limitation,
information relating to the computation of taxable income) filed by or on behalf
of the Company or any Subsidiary in the last six years, (iii) any closing
agreement, settlement agreement or similar agreement or arrangement entered into
by or on behalf of the Company or any Subsidiary with any taxing authority, and
(iv) any Tax sharing agreement, Tax indemnification agreement or similar
contract or arrangement entered into by or on behalf of the Company or any
Subsidiary.
(z) The net operating losses, capital losses, charitable
contributions, foreign tax credits, general business credits and minimum tax
credits for United States federal, state, foreign and all other purposes, as
applicable, of each of the Company and the dates on which such net operating
losses and such other tax attributes will expire are set forth in Schedule 3.15.
(aa) Neither the Company nor any Subsidiary has an overall
foreign loss (as defined in section 904 of the Code and allocated under Treasury
Regulation section 1.1502-9) as of the
39
taxable year ending December 31, 1999. For all prior periods for which the
statute of limitations has not expired, through the Closing, the Company and
each Subsidiary have not and will not take any action or engage in any
transaction including, without limitation, causing the Company or any Subsidiary
to incur additional liabilities and/or additional expenses (other than (i) any
actions or transaction made in the ordinary course of business, or (ii) any
transactions contemplated by this Agreement) that would create an overall
foreign loss allocable to the Company or any Subsidiary under Treasury
Regulation section 1.1502-9.
(bb) No QEF elections (as defined in section 1295 of the Code)
have been filed by or on behalf of the Company or any Subsidiary.
(cc) For purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, AD
VALOREM, goods and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, severance, stamp,
occupation, real and personal property, social security, estimated, recording,
gift, value assessed, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed by any
taxing authority (domestic or foreign). For purposes of this Agreement, "Tax
Return" shall mean any return, declaration, report, estimate, information or
other document (including any documents, statements or schedules attached
thereto) required to be filed with any federal, state, local or foreign tax
authority with respect to Taxes.
SECTION 3.16. LABOR RELATIONS. Except as disclosed in Schedule 3.16:
(i) each of the Company and the Subsidiaries is, and has at all times been, in
material compliance with all applicable laws, rules, regulations and orders
respecting employment and employment practices, terms and conditions of
employment, wages, hours or work and occupational safety and health, and is not
engaged in any unfair labor practices as defined in the National Labor Relations
Act or other applicable law; (ii) there is no strike, slowdown, stoppage,
material arbitration, material grievance or other material labor dispute or
lockout pending, or, to the knowledge of the Company, threatened against or
affecting the Company or any of the
40
Subsidiaries; (iii) neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any union or
other labor organization or is engaged in any labor negotiations with any labor
union; (iv) there are no proceedings pending between the Company and any of the
Subsidiaries or any of their respective employees before any federal or state
agency; and (v) to the knowledge of the Company, there are no activities or
proceedings of any labor union to organize any non-union employees of the
Company or any of the Subsidiaries.
SECTION 3.17. TRANSACTIONS WITH AFFILIATES. Except as disclosed in
Schedule 3.17, no present or former affiliate of the Company has, or since
January 1, 1998 has had, (i) any interest in any property (whether real,
personal or mixed and whether tangible or intangible) used in or pertaining to
any of the businesses of the Company or any of the Subsidiaries, (ii) has had
material business dealings or a material financial interest in any transaction
with the Company or any of the Subsidiaries (other than compensation and
benefits received in the ordinary course of business as an employee or director
of the Company or any of the Subsidiaries) or (iii) an equity interest or any
other financial or profit interest in any Person that has had business dealings
or a material financial interest in any transaction with the Company or any of
the Subsidiaries.
SECTION 3.18. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company, except for Xxxxxxxx Inc.
and Gleacher & Co. ("Gleacher") whose total fees and expenses shall not
exceed, in the aggregate, $2,500,000. The Company has heretofore furnished
to Parent true and complete copies of all agreements and other arrangements
between the Company, Xxxxxxxx Inc. and Gleacher.
SECTION 3.19. BUSINESS COMBINATION/FAIR PRICE STATUTE. The Company's
Board of Directors has approved the Merger, this Agreement and the other
Transaction Documents, and such approval is sufficient to render inapplicable to
the Merger, this Agreement and the other Transaction Documents the limitations
on business combinations contained in Section 203 of Delaware Law. No other
state takeover statute or similar statute or regulation or other comparable
takeover provision of the Company's Certificate of Incorporation or By-Laws
applies or purports to apply to the Merger, this Agreement or the other
Transaction
41
Documents, or any of the transactions contemplated hereby or thereby.
SECTION 3.20. Y2K COMPLIANCE. (a) Except as set forth in Schedule
3.20(a), all items, products, software, components and systems used in and
material to the operation of the business of the Company and the Subsidiaries,
which incorporate the processing of dates or date-related data (including, but
not limited to, representing, calculating, comparing and sequencing), including,
but not limited to, computer systems, infrastructure items, software
applications, hardware and related equipment and utilities, developed, in whole
or part, by the Company or any of the Subsidiaries (the "Components") are
subject to plans adopted by the Company to ensure that the Components set forth
in Schedule 3.20(a) will be Y2K-compliant, and the Company has attached to
Schedule 3.20(a) a Y2K-compliance plan that details the Company's current plan
to render such Components Y2K-compliant. Such plan details the cost to date,
budget and timing of the Company's Y2K-compliance efforts and its contingency
plan.
(b) Notwithstanding the foregoing, the core business systems listed
on Schedule 3.20(b) will be Y2K-compliant in all material respects as indicated
on Schedule 3.20(b).
(c) Except as set forth in Schedule 3.20(c), the Company has
obtained commitments that all vendors that are material to the Company and the
Subsidiaries are or will be Y2K-compliant.
(d) For purposes of this Agreement, "Y2K-compliant" means being able
to provide specific dates and calculate spans of dates, and to record, store,
process and provide true and accurate dates and calculations for dates and spans
of dates within the closed interval January 1, 1900 through December 31, 2037
prior to, including and following January 1, 2000.
SECTION 3.21. OPINION OF THE FINANCIAL ADVISOR. The Company has
received an opinion of Gleacher, a copy of which has been delivered
contemporaneously with this Agreement to the Board of Directors of the Company
and to Purchaser, as to the transactions contemplated by this Agreement.
SECTION 3.22. BOOKS AND RECORDS. The books of account, minute books,
stock record books and other records of each of the Company and the
Subsidiaries, all of which have been made available to Parent, are complete and
correct in all material respects and have been maintained in accordance with
sound business practices, including the maintenance of adequate
42
systems of internal controls. The minute books of the Company and the
Subsidiaries contain accurate and complete records of all meetings held of, and
material corporate action taken by, the stockholders, the Board of Directors and
any committees of the Board of Directors of the Company and the Subsidiaries,
respectively.
SECTION 3.23. STATUS OF ASSETS. The assets currently owned and held
by the Company and the Subsidiaries comprise substantially all of the assets
used in or necessary for the conduct of the business of the Company.
Article IV.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING.
From the date of this Agreement to the Effective Time, except as expressly
contemplated by this Agreement, the Company shall, and shall cause each of the
Subsidiaries, to (i) carry on its respective businesses in the ordinary course,
(ii) use all reasonable best efforts to preserve intact its current business
organizations and keep available the services of its current officers and key
employees, (iii) use all reasonable best efforts to preserve its relationships
with customers, suppliers, distributors and other Persons with which it has
business dealings, (iv) comply in all material respects with all laws and
regulations applicable to it or any of its properties, assets or business and
(v) maintain in full force and effect all the Company Permits necessary for such
business. Without limiting the generality of the foregoing, without the prior
consent of Parent, except as (x) expressly contemplated by this Agreement or (y)
set forth in Schedule 4.1, the Company shall not, and shall cause each of the
Subsidiaries not to:
(a) amend or propose to amend its Certificate of Incorporation
or By-Laws or similar organizational documents or change the number of directors
constituting its entire board of directors;
(b) (i)(A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock, except that a wholly owned Subsidiary may declare and pay a dividend or
make advances to its parent or the Company or (B) redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or other securities;
(ii) authorize for issuance, commit to issue,
43
issue, sell, pledge, dispose of or encumber any (A) shares of its capital stock,
(B) securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its capital
stock, or (C) of its other securities, other than Shares issued upon the
exercise of Options or Warrants outstanding on the date hereof in accordance
with the Option Plans or Warrant Agreements as in effect on the date hereof; or
(iii) split, combine or reclassify any of its outstanding capital stock;
(c) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
(including entities which are Subsidiaries) or (B) any assets, including real
estate, except purchases in the ordinary course of business consistent with past
practice in an amount not involving more than $250,000;
(d) authorize or make capital expenditures in the
aggregate in excess of $250,000;
(e) except in the ordinary course of business, amend or
terminate any Company Material Contract, or waive, release or assign any
material rights or claims thereunder;
(f) transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any property or assets other than in the ordinary course of
business and consistent with past practice;
(g) (i) enter into any employment or severance agreement with
or, except in accordance with the existing policies of the Company, grant any
severance or termination pay to any officer, director or key employee of the
Company or any Subsidiary; or (ii) hire any new or additional key employees or
officers;
(h) except as required to comply with applicable law, existing
agreements or this Agreement, and other than in the ordinary course of business
consistent with past practice, (A) adopt, enter into, terminate, amend or
increase the amount or accelerate the payment or vesting of any benefit or award
or amount payable under any Company Employee Benefit Plan or other arrangement
for the current or future benefit or welfare of any director, officer or current
or former employee, (B) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee, (C) pay any
benefit not provided for under any Company Employee Benefit Plan, (D)
44
grant any awards under any bonus, incentive, performance or other compensation
plan or arrangement or Company Employee Benefit Plan (including the grant of
stock options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Company Employee Benefit Plans or agreements or awards made thereunder)
or (E) take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract or
arrangement or Company Employee Benefit Plan;
(i) except for actions taken from the date hereof in respect
of the redemption of the Notes, (i) incur or assume any long-term debt, or
except in the ordinary course of business in amounts consistent with past
practice, incur or assume any short-term indebtedness, in either case except
borrowings in the ordinary course of business under the Loan and Security
Agreement, dated as of September 13, 1996 (as amended), between the Company and
Foothill Capital Corporation (the "Credit Agreement"); (ii) incur or modify any
material indebtedness or other liability; (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, except in the ordinary
course of business and consistent with past practice; (iv) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than to wholly owned Subsidiaries or customary loans or advances to employees in
accordance with past practice); (v) settle any claims other than in the ordinary
course of business, in accordance with past practice, and without admission of
liability; or (vi) enter into any material commitment or transaction other than
in the ordinary course of business consistent with past practice;
(j) change the accounting methods used by it unless
required by GAAP;
(k) make, change or revoke any Tax election or settle or
compromise any Tax liability;
(l) (i) settle or compromise any claim, litigation or other
legal proceeding, other than in the ordinary course of business consistent with
past practice in an amount not involving more than $250,000 or (ii) pay,
discharge or satisfy any other claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of (A) any such other claims, liabilities or
obligations, in the ordinary course of business
45
and consistent with past practice, or (B) of any such other claims, liabilities
or obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company;
(m) except in the ordinary course of business consistent with
past practice, waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any
Subsidiary is a party;
(n) permit any insurance policy naming the Company or any
Subsidiary as a beneficiary or a loss payable payee to lapse or to be canceled
or terminated by the Company without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(o) take or omit to take any action which would make any of
the representations or warranties of the Company contained in this Agreement
untrue and incorrect in any material respect as of the date when made if such
action had then been taken or omitted, or would result in any of the conditions
set forth in Article VI hereof not being satisfied; or
(p) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
SECTION 4.2. NO SOLICITATION. During the period commencing on the
date hereof and ending on the earlier of (i) the Effective Time or (ii) the
termination of this Agreement, neither the Company nor any Subsidiary nor any
affiliate thereof, or any director, officer, financial advisor (including
without limitation Xxxxxxxx Inc. and Gleacher) or other person acting on behalf
of any of the foregoing and in accordance with the instructions of the Company
(each a "Covered Person") will solicit, initiate, encourage (including by way of
furnishing information), or take any other action designed to facilitate any
inquiries or the making of any proposal in respect of any Other Transaction (as
hereinafter defined), participate in any negotiations or discussions regarding
any Other Transaction, make any public announcement with respect to any Other
Transaction, or enter into any agreement with respect to any Other Transaction.
In this connection, the Company will give Parent notice of any inquiry or
proposal made by any third party to any Covered Person in respect of any Other
Transaction promptly upon such Covered Person receiving such inquiry or
proposal, and in no event later
46
than two business days following such Covered Person's receipt thereof. As used
herein, "Other Transaction" means any transaction other than the transactions
contemplated hereby which involves (i) any material recapitalization,
reorganization or other restructuring of the Company or any Subsidiary; (ii) the
making of any substantial investment by any person in the Company or any
Subsidiary; (iii) a merger or consolidation of the Company or any Subsidiary
with or into a third party; or (iv) any other substantial capital raising
transaction involving either a sale of assets or the issuance by the Company or
any Subsidiary of debt or equity securities.
Article V.
ADDITIONAL AGREEMENTS
SECTION 5.1. COMPLIANCE WITH LAW. Each of the Company, Parent,
Holdings and Purchaser will comply in all material respects with all applicable
laws and with all applicable rules and regulations of any Governmental Entity in
connection with its execution, delivery and performance of this Agreement and
the other Transaction Documents and the transactions contemplated hereby and
thereby.
SECTION 5.2. NOTIFICATION OF CERTAIN MATTERS. Each party to this
Agreement shall give prompt notice to the other parties hereto of (i) the
occurrence or non-occurrence of any event whose occurrence or non-occurrence has
caused or would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time and (ii) any failure of a party
hereto, or any of its officers, directors, employees or agents, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.2 shall not limit or otherwise affect the remedies available
hereunder to the parties hereto.
SECTION 5.3. ACCESS TO INFORMATION. (a) From the date hereof to
the Effective Time:
(i) the Company shall, and shall, upon reasonable notice from
Parent, Holdings or Purchaser, cause its Subsidiaries, officers, directors,
employees, auditors and agents to, afford the officers, employees and authorized
representatives (including its accountants, investment bankers, financial
advisors and legal counsel) of Parent, Holdings and Purchaser
47
reasonable access during normal business hours to its officers, employees,
agents, properties, offices and other facilities, Company Material Contracts,
Other Contracts, documents relating to Tax Returns of the Company and its
Subsidiaries and to all books and records, and shall, upon reasonable notice
from Parent, Holdings or Purchaser, promptly furnish or make available to
Parent, Holdings and Purchaser (a) all financial, operating and other data and
information (including, without limitation (but subject to professional
standards), access to auditors' workpapers) as Parent, Holdings or Purchaser,
through its officers, employees or authorized representatives, may reasonably
request, including access to outside legal counsel of the Company or any
Subsidiary in connection with the review of any claim, dispute, action,
proceeding, suit, appeal, investigation or inquiry pending or threatened against
the Company or any Subsidiary and (b) a copy of each report, schedule and other
document filed or received by the Company or any of the Subsidiaries during such
period pursuant to the requirements of applicable securities laws.
(ii) the Company shall afford Parent and its agents reasonable
access to the Real Property for purposes of conducting an environmental
assessment, including, but not limited to, subsurface investigation of soil and
groundwater; provided, that Parent shall provide the Company with reasonable
advance notice of its intent to enter the Real Property to perform any such
investigation.
(b) Notwithstanding any of the foregoing to the contrary, all data,
information, reports, schedules and other documentation provided by the Company
to Parent, Holdings and Purchaser shall be subject to the restrictions on
confidentiality set forth in the confidentiality agreement between the Company
and Parent, dated August 2, 1999.
SECTION 5.4. PUBLIC ANNOUNCEMENTS. The initial press release or
releases with respect to the transactions contemplated by this Agreement shall
be in the form agreed to by Parent and the Company. Thereafter, so long as this
Agreement is in effect, Parent and the Company and their respective subsidiaries
and affiliates shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the Merger, this
Agreement or the other transactions contemplated hereby and shall not issue, or
permit their affiliates to issue, any such press release or make any such public
statement before such consultation, except as may be required by law.
48
SECTION 5.5. REASONABLE BEST EFFORTS; COOPERATION .
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use all reasonable best efforts to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to use all reasonable best efforts to
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, (i) cooperating in responding to inquiries from,
and making presentations to, regulatory authorities, (ii) defending against and
responding to any action, suit, proceeding, or investigation, whether judicial
or administrative, challenging or relating to this Agreement, the other
Transaction Documents or the transactions contemplated hereby or thereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, (iii) effecting promptly
and prosecuting diligently (including responding to all reasonable requests for
supplemental information) all approvals, filings and/or notices required under
any applicable insurance laws for the consummation of the transactions
contemplated by this Agreement and (iv) fulfilling or causing the fulfillment of
the conditions to Closing set forth in Article VI. Notwithstanding anything
herein to the contrary, in connection with any filing or submission or other
action required to be made or taken by any party to effect the Merger and all
other transactions contemplated hereby, the Company shall not, without the prior
written consent of Parent, commit to any divestiture transaction, and Parent
shall not be required to divest or hold separate or otherwise take or commence
to take any action that, in the reasonable discretion of Parent, limits its
freedom of action with respect to, or its ability to retain, the Company or any
of the Company's affiliates or any material portion of the Company's assets.
Parent and its affiliates agree to use reasonable efforts to ensure that
Parent's proposed transaction with Cremascoli Ortho Group shall not impede or
unnecessarily delay the transactions contemplated hereby.
(b) Notwithstanding that it is not a condition precedent to
the obligations of Parent, Holdings or Purchaser that Parent, Holdings,
Purchaser or the Company obtain financing of any kind or nature, the Company
will assist Parent, Holdings and Purchaser in connection with: (i) the Surviving
Corporation obtaining a new credit facility with a (A) term loan facility of at
least $60,000,000 (the "Term Loan Facility") and (B) revolving
49
credit facility of at least $5,000,000, on terms reasonably acceptable to Parent
(the "New Credit Facility"); and (ii) the repayment concurrent with Closing of
all amounts due under the Credit Agreement, including, without limitation,
providing officers' certificates and such other documentation reasonably
requested by the lenders pursuant to (i) and (ii) above.
SECTION 5.6. REDEMPTION OF NOTES. The Company shall, on or prior to
Closing, give notice to all holders of Notes, in accordance with Sections
3.01-3.07 of the Indenture dated as of August 7, 1997, between the Company and
State Street Bank and Trust Company, as Trustee (the "Indenture"), of the
Company's intention to redeem all outstanding Notes at a redemption price equal
to 100% of the aggregate principal amount of such Notes plus accrued but unpaid
interest thereon.
SECTION 5.7. STATE TAKEOVER LAWS. If any state takeover statute or
other similar statute or regulation becomes or is deemed to become applicable to
the Merger, this Agreement or any of the transactions contemplated by this
Agreement, the Company shall promptly take all action necessary to render such
statute or regulation inapplicable to all of the foregoing.
SECTION 5.8. CERTAIN EMPLOYEE MATTERS.
The Company shall, at or prior to the Effective Time,
terminate all Company Employee Benefit Plans providing for the granting of
options or any securities of the Company to any employee, director or consultant
of the Company or any of its Subsidiaries. As soon as administratively feasible
following the Effective Time, the Company shall apply to the IRS for a
determination that the termination of the Company's Employee Retirement Stock
Plan does not adversely affect its qualification under Section 401(a) of the
Code.
SECTION 5.9. TITLE COMMITMENTS. The Company shall, promptly (and in
no event more than five (5) days) after the date hereof, order from a title
company reasonably acceptable to Purchaser and Parent (the "TITLE COMPANY") a
title insurance commitment or commitments with respect to (a) all of the Owned
Real Property and (b) all of the Leased Real Property. The Company shall use its
reasonable efforts to cause the Title Company to issue such title commitments as
promptly as feasible and, immediately upon receipt thereof, shall deliver the
same to Purchaser and Parent and, at Parent's request, to the surveyor or
engineer, if any, that has been engaged by Purchaser and Parent to prepare
surveys of the Real Property. Such Title commitment
50
shall not disclose any matters relating to the Owned Real Property or Leased
Real Property which make any of the representations or warranties contained
herein inaccurate in any material respect. To the extent Purchaser and Parent
reasonably object to any matter(s) reflected therein (in addition to any matter
that would make any representation made by the Company inaccurate) or requests
additional information with respect thereto, the Company shall use its
reasonable efforts to cause the Title Company to modify and/or supplement the
commitments accordingly. The Company shall, and shall cause any Subsidiary to,
reasonably cooperate with Purchaser and Parent in the event that Purchaser or
Parent elects to purchase title insurance and/or order surveys with respect to
any or all of the Owned Real Property and Leased Real Property.
SECTION 5.10. NON-IMPUTATION ENDORSEMENTS AND ESTOPPEL CERTIFICATES.
The Company shall, at the Company's expense, arrange at or prior to Closing for
the issuance of a non-imputation endorsement or similar title insurance coverage
in favor of Parent, Holdings and Purchaser with respect to each title insurance
policy with respect to any of the Owned Real Property or Leased Real Property.
The Company shall undertake such efforts, including the execution of any
affidavits or other documents, as reasonably required by each such title
company, in order to induce each such title company to issue such endorsements
or similar coverage. The Company shall, at the Company's expense, arrange at or
prior to Closing for the delivery of estoppel certificates for the benefit of
the Title Company and Purchaser, substantially in the form attached hereto as
EXHIBIT D, for all of those Company Leases which related to Leased Real Property
in the State of Tennessee.
SECTION 5.11. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) It is understood and agreed that, subject to the
limitations on indemnification contained in Delaware Law, the Company shall, to
the fullest extent permitted under applicable law and regardless of whether the
Merger becomes effective, indemnify and hold harmless, and after the Effective
Time, the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each director, officer, employee,
fiduciary and agent of the Company or any Subsidiary and their respective heirs,
estates, subsidiaries and affiliates including, without limitation, officers and
directors serving as such on the date hereof (collectively, the "Indemnified
Parties") against any costs or expenses (including
51
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to (A) acts or
omissions occurring prior to the Effective Time (regardless of when a claim in
respect thereof is asserted) that are based, in whole or in part, on the fact
that such person is or was a director, officer, employee, fiduciary or agent of
the Company or any Subsidiary or any third party or benefit plan at the request
of the Company and (B) any of the transactions contemplated hereby, and in the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Company or, after the
Effective Time, the Surviving Corporation, as applicable, shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Company or the Surviving
Corporation, as applicable, promptly as statements therefor are received, and
(ii) the Company and the Surviving Corporation will cooperate in the defense of
any such matter; PROVIDED, HOWEVER, that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed);
and PROVIDED FURTHER, that neither the Company nor the Surviving Corporation
shall be obliged pursuant to this Section 5.11 to pay the fees and disbursements
of more than one counsel for all Indemnified Parties in any single action except
to the extent that, in the opinion of counsel for the Indemnified Parties, two
or more of such Indemnified Parties have conflicting interests in the outcome of
such action. For six years after the Effective Time, the Surviving Corporation
shall be required to maintain or obtain officers' and directors' liability
insurance (which may be part of Parent's insurance policy or may be "tail"
coverage with respect to the Company's existing officers' and directors'
liability insurance coverage) covering the Indemnified Parties who are currently
covered by the Company's officers and directors liability insurance policy on
terms not less favorable than those in effect on the date hereof in terms of
coverage and amounts; PROVIDED, HOWEVER, that if the aggregate annual premiums
for such insurance at any time during such period exceed 200% of the per annum
rate of premium paid by the Company for such insurance as of the date of this
Agreement, then the Surviving Corporation shall provide the maximum coverage
that will then be available at an annual premium equal to 200% of such per annum
rate as of the date of this Agreement. The rights to indemnification under this
Section 5.11 shall not impair or limit the rights to indemnification currently
provided by the Certificate of Incorporation and By-Laws of the Company, which
52
shall continue in full force and effect for a period of not less than six years
following the Effective Time. This Section 5.11 shall survive the consummation
of the Merger. Notwithstanding anything in this Section 5.11 to the contrary,
neither the Company nor the Surviving Corporation shall have any obligation
under this Section 5.11 to indemnify any Indemnified Party against any cost,
expense, judgment, fine, loss, claim, damage, liability or settlement amount,
the indemnification for which is prohibited under Delaware Law. This covenant
shall survive any termination of this Agreement pursuant to Section 7.1 hereof.
Notwithstanding Section 8.7 hereof, this Section 5.11 is intended to be for the
benefit of and to grant third-party rights to Indemnified Parties whether or not
parties to this Agreement, and each of the Indemnified Parties shall be entitled
to enforce the covenants contained herein.
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.11.
SECTION 5.12. ADDITIONAL COVENANT OF PARENT, HOLDINGS AND PURCHASER.
Notwithstanding anything in this Agreement but subject to Section 6.2, Parent,
Holdings and Purchaser shall, or shall cause the Surviving Corporation, as
applicable to (a) make the payments contemplated by Section 1.6, 1.7, 1.8, 1.9
and 5.13 of this Agreement on (or, in the case of Sections 1.7 and 1.9, on or as
soon as practicable following) the Closing Date, (b) repay all outstanding loan
balances and accrued and unpaid interest under the Credit Agreement on and as of
the Closing Date, and pay any and all prepayment penalties payable in connection
therewith, and (c) redeem all outstanding Notes on the date fixed for the
redemption thereof pursuant to the notice contemplated by Section 5.6 of this
Agreement.
SECTION 5.13. MANAGEMENT OPTIONS. (a) The executive officers of the
Company identified in Schedule 5.13(a) shall at the Effective Time, subject to
such allocations as shall be agreed among CalPERS, Princes Gate and such
individuals prior to the Effective Time (i) be granted options, the material
terms of which are set forth in Exhibit E, to acquire up to in the aggregate,
(x) 160,000 shares of New Series A Preferred and (y) 9
53
shares of New Company Common Stock (the "Series A Options"), (ii) receive
$293,333 aggregate principal amount of Subordinated Notes and (iii) be granted,
in the aggregate, New Warrants to purchase 40,000 shares of New Company Common
Stock. Holdings shall reserve for issuance such number of shares of New Series A
Preferred and New Company Common Stock issuable upon exercise of such Series A
Options (and the subsequent conversion of New Series A Preferred into New
Company Common Stock) and New Warrants. Upon (i) receipt of notice from the
holder of such Series A Option (in accordance with the notice requirements set
forth in the Series A Option) of its intent to exercise such Series A Option in
full and (ii) payment of amounts due in respect of such exercise (in accordance
with the exercise procedures set forth in the Series A Option), Holdings shall
issue to such holder such number of shares of New Series A Preferred and New
Company Common Stock into which such Series A Options are exercisable.
(a)(b) In addition to the Series A Options, Subordinated Notes
and New Warrants issuable pursuant to Section 5.13(a), the executive officers of
the Company identified in Schedule 5.13(a) shall at the Effective Time receive
in the aggregate $800,000, such amount to be allocated as set forth in Schedule
5.13(b).
(c) It is understood and agreed that the receipt by the
executive officers of the Company identified in Schedule 5.13(a) of the Series A
Options, Subordinated Notes, New Warrants and cash referred to in Sections
5.13(a) and (b), respectively, shall be in lieu of (and in full satisfaction of)
any and all payments to which such executive officers may have been entitled
pursuant to that certain letter agreement, dated as of March 4, 1999, between
the Company and Xxxxxx X. Xxxxxx or any other agreement, written or oral, among
any of such executive officers and the Company.
SECTION 5.14. ISSUANCE TO PARENT AND CO-INVESTORS. (a) At the
Effective Time, and subject to the provisions of Article VI: (a) Parent and
certain of its affiliates shall be issued (i) 8,330,000 shares of New Series A
Preferred, (ii) 4,970,000 shares of New Series B Preferred, (iii) 786 shares of
New Company Common Stock, (iv) $24,386,141 aggregate principal amount of
Subordinated Notes and (v) New Warrants to purchase 475,000 shares of New
Company Common Stock; and (b) Vertical Fund Associates, L.P. shall be issued (i)
700,000 shares of New Series A Preferred, (ii) 38 shares of New Company Common
Stock, (iii) $1,283,481 aggregate principal amount of Subordinated Notes and
54
(iv) New Warrants to purchase 25,000 shares of New Company Common Stock.
(b) It is hereby agreed that all of the cash proceeds totaling
$24,386,141 received by Holdings from Parent and certain of its affiliates in
consideration for the issuance of the Subordinated Notes to Parent and such
affiliates shall be allocated by Holdings as follows: (i) at Closing,
approximately $14,000,000 of such amount shall be used to repay all outstanding
amounts, including principal and interest, due under the Company's existing Loan
and Security Agreement with Foothill Capital Corporation and any amendments
thereto and (ii) following Closing, the balance of such amount shall be used to
repay a portion of the Notes issued under the Indenture.
Article VI.
CONDITIONS OF MERGER
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver on or prior to the Effective Time of the
following conditions:
(a) No Legal Requirements shall have been promulgated,
enacted, entered or enforced, and no other action shall have been taken, by any
court or Governmental Entity that has the effect of making illegal or directly
or indirectly restraining, prohibiting or restricting the consummation of the
Merger;
(b) Any waiting period applicable to the Merger under the HSR
Act shall have expired or have been terminated and all approvals of and consents
to the Merger required under applicable foreign antitrust or competition laws
shall have been obtained and be in full force and effect; and
(c) (i) all consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity required in
connection with the execution, delivery and performance of this Agreement shall
have been obtained or made (as the case may be), except for filings in
connection with the Merger and any other documents required to be filed after
the Effective Time and (ii) such consents, authorizations, orders and approvals
shall be subject to no material conditions.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF PARENT, HOLDINGS AND
PURCHASER. The obligations of Parent, Holdings and
55
Purchaser to effect the Merger shall be further subject to the satisfaction or
waiver on or prior to the Effective Time of the additional conditions set forth
in paragraphs (a) through (s) below. It is understood and agreed that the
following shall be excluded from any determination as to whether (i) any
representation or warranty of the Company is true or correct as of the Effective
Time for purposes of Section 6.2(a) and (ii) an event, change or effect having
or that would be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the Company has occurred for purposes of Section
6.2(c): (A) changes (and the effects of changes) that are generally applicable
to the medical products industry, (B) defaults under the Credit Agreement or
with respect to the Notes and (C) any event, change, condition or effect
resulting from or attributable to the transactions contemplated by this
Agreement or the announcement or disclosure thereof.
(a) The representations and warranties of the Company set
forth in this Agreement that are qualified by reference to materiality or a
Material Adverse Effect shall be true and correct, and any such representations
and warranties that are not so qualified shall be true and correct in all
material respects (other than with respect to Section 3.15(z)), in each case as
if such representations and warranties were made at the Effective Time (except
to the extent that any such representation or warranty had by its terms been
made as of a specific date in which case such representation or warranty shall
have been true and correct as of such specific date);
(b) The Company shall have performed in all material respects
all obligations and complied in all material respects with all agreements and
covenants of the Company to be performed or complied with by it under this
Agreement at or prior to the Effective Time;
(c) Since the date of this Agreement, there shall not have
occurred any event, change or effect having, or that would be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Company;
(d) The Company shall have obtained the consents and approvals
of the Merger and the other transactions contemplated by this Agreement as set
forth on Schedule 6.2(d);
(e) Parent shall have received a certificate signed by an
executive officer of the Company to the effect of Sections 6.2(a) and (b);
56
(f) Parent shall have received from Weil, Gotshal & Xxxxxx,
LLP, legal counsel to the Company, an opinion, dated the Closing Date,
substantially in the form of Exhibit F hereto;
(g) Holdings, Parent and the other parties thereto shall have
executed the Registration Rights Agreement, substantially in the form of Exhibit
G hereto;
(h) Holdings, Parent and the other parties thereto shall have
executed the Stockholders Agreement, substantially in the form of Exhibit H
hereto;
(i) The Company's Board of Directors and Holdings' Board
of Directors shall, effective as of the Closing Date, be comprised of Xxxxx
X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxxxxxxx
X. Xxxxxxxxxx;
(j) The employment agreement between the Company and
Xxxxxx X. Xxxxxx, in the form previously approved by Parent, shall be in full
force and effect;
(k) All agreements identified on Schedule 6.2(k) shall have
been terminated by all parties thereto.
(l) The Company shall have caused the Warrant Agreements to
which Xxxx Xxxx, CalPERS and Princes Gate are parties to be terminated and all
outstanding Warrants and Other Rights thereunder shall have been canceled as
provided in Section 1.9 hereof, and Parent shall have received evidence,
reasonably acceptable to it, to such effect;
(m) No restraining order, injunction or other order or decree
restraining, enjoining or otherwise preventing the consummation of the Merger or
the transactions contemplated by this Agreement shall have been issued,
promulgated, declared or otherwise imposed;
(n) Parent shall have received executed counterparts of the
Releases, substantially in the form of Exhibit I hereto, from each of Xxxx Xxxx,
CalPERS and Princes Gate;
(o) The Company shall cause the Purchaser to have received
current surveys of all of the Owned Real Property and Leased Real Property
prepared by a surveyor or engineer licensed in the state in which the Owned Real
Property or Leased Real Property, as applicable, is located (each such survey
shall be prepared in accordance with the Minimum Standard Detail Requirements
for ALTA/ACSM Land Title Surveys adopted by the
57
American Land Title Association and the American Congress on Surveying & Mapping
in 1997, certified to the Purchaser's title insurance company (if any), the
Purchaser, any mortgagee of the Purchaser and such other parties as the
Purchaser may designate), which surveys do not disclose any matters relating to
the Company's (or the applicable Subsidiary's) title to the subject real
property which make any of the representations or warranties contained herein
inaccurate in any material respect; and
(p) The Company shall have caused the Purchaser to receive
title insurance policies reasonably acceptable in form and amount to Purchaser
from the Title Company; and
(q) CalPERS, Princes Gate and those executive officers of the
Company listed on Schedule 5.13(a) shall each have executed and delivered a
counterpart of the Escrow Agreement, substantially in the form of Exhibit J
hereto, in respect of the dispute between the Company and Xxxx X. Xxxxxxxxx (the
"Escrow Agreement").
SECTION 6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger shall be subject to the
satisfaction or waiver on or prior to the Effective Time of the following
additional conditions:
(a) the representations and warranties of Parent, Holdings and
Purchaser in this Agreement shall be true and correct in all material respects
on and as of the Effective Time as if made on and as of such date;
(b) Parent, Holdings and Purchaser shall have performed in all
material respects all obligations and complied in all material respects with all
agreements and covenants of Parent, Holdings and Purchaser to be performed or
complied with by them under this Agreement at or prior to the Effective Time;
(c) the Company shall have received a certificate signed by an
executive officer of each of Parent, Holdings and Purchaser to the effect of
Sections 6.3(a) and (b);
(d) Holdings, Parent and the other parties thereto shall have
executed the Stockholders Agreement, substantially in the form of Exhibit H
hereto;
(e) The Company's Board of Directors and Holdings' Board
of Directors shall, effective as of the Closing Date, be comprised of Xxxxx
X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxxxxxxx
X. Xxxxxxxxxx;
58
(f) The employment agreement between the Company and
Xxxxxx X. Xxxxxx, in the form previously approved by Parent, shall be in full
force and effect;
(g) No suit, action or other proceedings shall have been
instituted to restrain, enjoin or otherwise prevent the consummation of the
Merger or the transactions contemplated by this Agreement; and
(h) The Company shall have received from Xxxxxxx Xxxx &
Xxxxxxxxx, legal counsel to Parent and Purchaser, an opinion, dated the Closing
Date, substantially in the form of Exhibit K hereto.
Article VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time (except
as otherwise set forth in (e) below):
(a) By the mutual written consent of Parent, Holdings,
Purchaser and the Company;
(b) By Parent, Purchaser, Holdings or the Company if (i) any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling or other action each party hereto
shall use its reasonable best efforts to have vacated or reversed), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable; or (ii) the Effective Time shall not
have occurred on or before December 31, 1999 (the "Termination Date"); provided,
however, that (A) the Termination Date shall be extended to no later than
January 31, 2000 in the event that the sole reason for the nonoccurrence of the
Effective Time on or before December 31, 1999 is due to the nonfulfillment of
any part of Section 6.1(b) and the fulfillment of such part of Section 6.1(b) is
being pursued diligently and (B) the right to terminate this Agreement under
Section 7.1(b)(ii) shall not be available to any party whose failure to fulfill
materially any covenant or obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date;
59
(c) By Parent, Holdings or Purchaser, if the Company shall
have breached in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement which breach or
failure to perform is incapable of being cured or has not been cured within
twenty business days following written notice thereof to the Company from
Parent;
(d) by the Company, if Parent, Holdings or Purchaser shall
have breached in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement which breach or
failure to perform is incapable of being cured or has not been cured within
twenty business days following written notice thereof to Parent from the
Company; or
(e) by Parent, Holdings or Purchaser on or before December 15,
1999, if Parent, Holdings or Purchaser shall have received a final report from
an appropriately insured, nationally recognized environmental consultant of its
own choice containing findings and conclusions that, in Parent's reasonable
discretion, identify any past or present act(s), omission(s) or condition(s)
with respect to the Real Property located in Arlington, Tennessee, which would
be reasonably likely to result in liability under Environmental Law in excess of
$250,000.
SECTION 7.2. EFFECT OF TERMINATION.
In the event of termination of this Agreement by either the Company
or Parent, Holdings or Purchaser as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of Parent, Holdings, Purchaser or the Company, other than
the provisions of this Article VII and except that nothing herein shall relieve
any party for breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement occurring prior to such termination.
Article VIII.
GENERAL PROVISIONS
SECTION 8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement shall not
survive the Effective Time except for Article I, Section 5.9, Section 5.11,
Section 5.12, Section 5.13,
60
as provided in Section 7.2 or as otherwise provided in this Agreement.
SECTION 8.2. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third business day after deposit in
the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) if to Parent, Holdings or Purchaser:
Warburg, Xxxxxx Equity Partners, L.P. 000 Xxxxxxxxx
Xxxxxx Xxx Xxxx, XX 00000 Attention: Xxxxxxxxx X.
Xxxxxxxxxx Telecopier: (000) 000-0000
With a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
(b) if to the Company:
Xxxxxx Medical Technology, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier: (000) 000-0000
With a copy to:
Weil, Gotshal & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
61
SECTION 8.3. EXPENSES. (a) If the Closing occurs, all fees, costs
and expenses of the Company, Parent, Holdings and Purchaser incurred in
connection with this Agreement and the transactions contemplated hereby,
including the reasonable fees and expenses of counsel to Parent, Holdings and
Purchaser, shall be paid by the Surviving Company. Except as set forth in
Section 8.3(b), each party will pay its own fees, costs and expenses in the
event this Agreement is terminated pursuant to Article VII.
(b) If the Company fails to comply with Section 4.2 of this
Agreement, and this Agreement is terminated by either party as a result of or in
connection with such non-compliance by the Company with Section 4.2, the Company
shall pay all documented fees, costs and expenses of Parent, Holdings and
Purchaser, including without limitation reasonable fees of legal counsel to
Parent, Holdings and Purchaser, incurred in connection with this Agreement and
the transactions contemplated hereby subject to a maximum amount of $2,500,000.
SECTION 8.4. CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person;
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise; and
(c) "Person" means an individual, corporation, partnership,
association, joint venture, limited liability company, trust or any
unincorporated organization.
SECTION 8.5. HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
SECTION 8.6. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
62
in any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
maximum extent possible.
SECTION 8.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the other Transaction Documents constitute the entire agreement
and supersede any and all other prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, this Agreement is not
intended to confer upon any other Person any rights or remedies hereunder.
SECTION 8.8. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent, Holdings and Purchaser may
assign all or any of their rights hereunder to any affiliate of Parent provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.
SECTION 8.9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed entirely within that State.
SECTION 8.10. AMENDMENT. This Agreement may not be amended,
modified or supplemented except by an instrument in writing signed by the
parties hereto.
SECTION 8.11. WAIVER. At any time before the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other parties hereto with any of their agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only as against such party and only if
set forth in an instrument in writing signed by such party. The failure of any
party hereto to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
63
SECTION 8.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
shall constitute one and the same agreement.
64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
XXXXXX MEDICAL TECHNOLOGY, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Pres. & CEO
WARBURG, XXXXXX EQUITY PARTNERS, L.P.
By: Warburg, Xxxxxx & Co., its
General Partner
By: /s/ Xxxxxxxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxxx
Title:Partner
XXXXXX ACQUISITION HOLDINGS, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxxx
Title: President
XXXXXX ACQUISITION CORP., INC.
By: /s/ Xxxxxxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxxx
Title: President
