AGREEMENT AND PLAN OF MERGER
Dated November 7, 1995
among
UNITED STATES SURGICAL CORPORATION
USSC ACQUISITION CORPORATION
SURGICAL DYNAMICS INC.
and
E-Z-EM, INC. and CALMED LABORATORIES, INC. and
E-Z-SUB, INC.
This Agreement and Plan of Merger ("Agreement") is made and entered
into November 7, 1995 by and among United States Surgical Corporation, a
Delaware corporation ("USSC"), USSC Acquisition Corporation, a Delaware
corporation ("USSC Transitory Sub"), Surgical Dynamics Inc., a Delaware
corporation ("SDI"), and E-Z-EM, INC., a Delaware corporation ("E- Z-M"), CalMed
Laboratories, Inc., a Nevada corporation ("CalMed") and E-Z-SUB, Inc., a
Delaware corporation ("E-Z-SUB").
Whereas, it is the intention of the parties that USSC should acquire
SDI in a transaction qualifying for U.S. Federal income tax purposes as a
taxable purchase by USSC of the Shares (as defined herein).
Now Therefore, intending to be legally bound, and in consideration of
the premises and mutual covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. As used in this Agreement, the following
terms have the meanings set forth in this Article I. All references to "it"
shall also refer to "him" or "her" as appropriate to refer to individuals as
well as entities.
"Acquisition Proposal" means any proposal by any Person(s) for the
acquisition of, or merger or other business combination involving, SDI or the
sale of any securities or a substantial portion of the assets of SDI, or any
right, title or interest in the Two Products other than the transactions
contemplated by this Agreement.
"Action" means any court action, suit or proceeding, whether civil or
criminal or in law or in equity.
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"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of t he power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities, by contract or otherwise.
"Bankruptcy Event" means any of the following: (i) filing by SDI of a
petition in bankruptcy, or of reorganization, or for an arrangement pursuant to
the U.S. Bankruptcy Code, or any similar federal or state or foreign law, or an
adjudication by a court or tribunal of competent jurisdiction that SDI is
bankrupt or insolvent, or an assignment by SDI for the benefit of creditors, or
an admission in writing by SDI of its inability to pay its debts generally as
they become due, or the dissolution of SDI, whether voluntary or otherwise, or
the suspension by SDI of the payment of any of its obligations, or any corporate
action take by SDI in furtherance of any of the foregoing; (ii) a petition or
answer proposing the adjudication of SDI as a bankrupt, or its reorganization
under the U.S. Bankruptcy Code, or any similar federal or state or foreign law,
is filed in any court, and (aa) SDI shall consent to such filing, or (bb) such
petition or answer is not discharged or denied within sixty (60) days after such
filing; or (iii) a receiver, trustee or liquidator (or other similar official)
is appointed for or takes possession or charge of SDI or substantially all of
SDI's assets.
"Bonus Payment" means the amount set forth in Section 3.04(b) of the
SDI Disclosure Schedule payable to each Person listed in such Section.
"Business Condition" means with respect to a Person and its
subsidiaries, taken as a whole, their business or properties or financial
condition including, in the case of SDI, the Two Products.
"Business Day" means any day other than Saturday, Sunday or a federal
legal holiday.
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"CalMed Merger Consideration" means $27,021,519.00.
"CalMed Shares" means 215,600 shares of SDI Series A Common Stock and
1,548,400 shares of SDI Class B Stock.
"Closing" means the consummation of the Merger.
"Code" means the Internal Revenue Code of 1986, as amended.
"Damages" means any and all claims, damages, losses, liabilities,
payments, costs or expenses of any nature whatsoever and expenses including,
without limitation, reasonable out of pocket expenses of investigation and
outside counsel fees and expenses.
"Deposit Escrow Agreement" means the escrow agreement by and among the
Escrow Agent, USSC, USSC Transitory Sub and the Shareholders substantially in
the form of Exhibit A.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Chase Manhattan Bank N.A. and it successors.
"E-Z-SUB Merger Consideration" means $28,124,438.00.
"E-Z-SUB Shares" means 224,400 shares of SDI Series A Common Stock and
1,611,600 shares of SDI Class B Stock.
"FDA" means the U.S. Food and Drug Administration and any successor
Governmental Body performing its functions.
"FDA Approvals" means approvals obtained from the FDA, including
without limitation, 510(k)s, NDAs and PMAs, necessary to the operation of the
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business of SDI as it relates to the Two Products.
"Fusion Cage" means SDI's proprietary threaded spinal fusion cage
technology for interbody fusion and the treatment of lower back pain.
"Governmental Approvals" means permits, licenses, consents,
authorizations, approvals and registrations from Governmental Bodies including,
without limitation, the FDA and the U.S. Environmental Protection Agency and
foreign Governmental Bodies with equivalent or similar authority.
"Governmental Body" means any agency, bureau, commission, court,
department, political subdivision, tribunal, or other instrumentality of any
government, whether federal, state, or local, domestic or foreign.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Interim Balance Sheet" means the interim consolidated balance sheet of
SDI as of the last day of the month immediately preceding the Closing Date,
delivered to USSC pursuant to Section 5.02.
"Laws" means statutes, laws, regulations, rules, ordinances,
guidelines, judgments, orders, decisions or interpretations of any Governmental
Body.
"Lien" means, with respect to any asset or property, any mortgage,
lien, (voluntary or involuntary) pledge, hypothecation, charge, preference,
priority, security interest, claim, right or encumbrance of any kind in respect
of such asset or property, and for the purposes of this Agreement, SDI shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of another Person under any conditional sale agreement, capital
lease or any financing lease having substantially the same economic effect as
the foregoing or other title retention agreement relating to such asset.
"Material Adverse Effect" means a material adverse effect on a Person's
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Business Condition. [CONFIDENTIAL MATERIAL OMITTED]
"Merger" means the merger whereby USSC Transitory Sub is merged with
and into SDI and SDI is the surviving corporation. It is understood and intended
by the parties that USSC Transitory Sub is a newly-formed transitory subsidiary,
the sole function of which is to facilitate the acquisition by USSC of the
Shares in a transaction qualifying for U.S. Federal income tax purposes as a
taxable purchase of the Shares by USSC.
"Nucleotome" means SDI's proprietary technology for open and endoscopic
lumbar discectomy.
"Optionee" means a Person holding an SDI Option who is listed in
Section 3.02 of the SDI Disclosure Schedule.
"Option Share Payment" means $13.42 for each share of SDI Series A
Common Stock with respect to which an Optionee holds an SDI Option.
"Outside Date" means the date which is four (4) months from the date of
this Agreement.
"Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a governmental or political sub
division or any agency or instrumentality thereof.
"SDI Capital Stock" means all of the capital stock of SDI including all
SDI Series A Common Stock and SDI Class B Stock.
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"SDI Options" means options or warrants to acquire shares of SDI
Capital Stock granted prior to the date hereof which are set forth in the SDI
Disclosure Schedule.
"SDI Series A Common Stock" means all of the issued and outstanding
shares of Series A Common Stock, par value $.01, of SDI.
"SDI Class B Stock" means all of the issued and outstanding shares of
Class B Stock, par value $.01, of SDI
"SDI's Knowledge" means only and is limited to the actual knowledge of
Xxxxx X. Xxxxx, SDI's chief executive officer, of the relevant particular facts,
without further inquiry or investigation on his part.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders" means E-Z-SUB and CalMed.
"Shares" means all of the E-Z-SUB Shares and CalMed shares.
"Subsidiary" means, with respect to an entity, any corporation or other
organization (a) of which securities or other ownership interest having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are directly or indirectly owned by such entity,
(b) of which such entity is a partner or is, directly or indirectly, the
beneficial owner of fifty percent (50%) or more of any class of equity
securities or equivalent profit participation interest, or (c) with respect to
which such entity possesses the ability to substantially influence the
management or policies of any other corporation or other organization by means
of a management contract or otherwise.
"Surviving Corporation" means SDI, after consummation of the Merger.
"Tax" along with the correlative "Taxes" and "Taxable" has the
following meaning (i) any net income, alternative or add-on minimum tax, gross
income,
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gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, escheat, abandonment,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or any penalty, addition to
tax or additional amount imposed by any Taxing Authority responsible for the
imposition of any such tax (domestic or foreign), and (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period prior to the Closing Date.
"Taxing Authority" means any Governmental Body responsible for imposing
any Tax.
"Total Bonus Amount" means $571,658.00, the aggregate of all Bonus
Payments to all Persons.
"Total Option Payments" means $3,982,385.00, the aggregate of all
Option Share Payments to all Optionees.
"Total Merger Consideration" means $59,700,000.
"Two Products" means the Fusion Cage and the Nucleotome.
Section 1.02 Other Terms. In addition to the foregoing defined terms,
the following terms shall have the meanings set forth in the referenced
Articles, Sections and Schedules of this Agreement. All Article, Section and
Schedule numbers used herein refer to Articles and Sections of this Agreement
and Exhibits and Schedules attached hereto or delivered simultaneously herewith,
unless otherwise specifically described.
Term Section
Accredited Investor 4.04
Audited Balance Sheet 3.10
Benefit Arrangement 3.23
By-Laws 3.01
CERCLA 3.09
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Certificate of Incorporation 3.01
Certificate of Merger 2.01
Claim 9.02
Closing Date 2.03
COBRA 3.24
Contracts 3.19
Deposit 2.05
Distributorship Agreements 3.26
Effective Time 2.01
Employee Plans 3.23
Environmental Laws 3.09
Equipment 3.14
GAAP 3.10
GCLD 2.01
Harbor Bay Lease Claim 5.03
Hazardous substances 3.09
Escrow Fund 2.04
Hold Back Claim Period 10.02
Hold Back Funds 2.04
Hold Back Period 10.01
Indemnified Party 9.02
Indemnitees 9.02
Intellectual Property 3.17
Inventories 3.14
JAMS 13.03
Notified Party 5.12
Notifying Party 5.12
Professionals 3.15
Qualified Plan 3.23
Release 3.09
Reserve 5.03
Rules 13.03
Scheduled Closing Date 2.03
SDI Claims 9.02
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SDI Disclosure Schedule Article III Preamble
SDI Indemnitees 9.02
SDI Post-Closing Returns 5.15
SDI Returns 3.27
SDI Subsidiary Securities 3.02
Shareholders' Financial Basket 9.02
Shareholders' Non Financial Basket 9.02
Surviving Corporation Shares 2.02
Termination 8.03
Underground Storage Tank 3.09
USSC Basket 9.02
USSC Claims 9.02
USSC Indemnitees 9.02
Vendors 3.26
ARTICLE II
THE MERGER AND SHAREHOLDER LOAN FORGIVENESS
Section 2.01 The Merger.
(a) Subject to the provisions of this Agreement, at
the Effective Time (as hereinafter defined) and in accordance with the General
Corporation Law of the State of Delaware (the "GCLD"), USSC Transitory Sub shall
be merged with and into SDI, the separate existence of USSC Transitory Sub shall
cease, and SDI shall continue as the Surviving Corporation under the laws of the
State of Delaware as a wholly-owned subsidiary of USSC; it being understood,
agreed and intended by the parties that the Merger be treated for U.S. Federal
income tax purposes as a taxable purchase of the Shares by USSC pursuant to the
principles enunciated in Revenue Ruling 73-427.
(b) The Merger shall become effective at the time of
filing of a Certificate of Merger in substantially the form attached hereto as
Exhibit B (the "Certificate of Merger") with the Secretary of State of the State
of Delaware in accordance with the provisions of Section 251 of the GCLD. The
Certificate of Merger shall be filed at the time of the Closing. The date and
time when the Merger
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shall become effective is hereinafter referred to as the "Effective Time".
(c) At the Effective Time, (i) the separate existence
of USSC Transitory Sub shall cease and USSC Transitory Sub shall be merged with
and into SDI, (ii) the Certificate of Incorporation of the Surviving Corporation
shall be amended as set forth on Annex A to the Certificate of Merger, (iii) the
By-laws of USSC Transitory Sub as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation, (iv) the officers of
USSC Transitory Sub holding such positions immediately prior to the Effective
Time shall be the officers of the Surviving Corporation and (v) the directors of
USSC Transitory Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation.
(d) From and after the Effective Time, the Merger
shall have all the effects provided by applicable Law.
Section 2.02 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of SDI or USSC Transitory Sub
or the holder of any of the following securities:
(a) The E-Z-SUB Shares shall be converted into and
represent the right to receive, and be exchangeable for, as provided in Section
2.03 hereof, the E-Z-SUB Merger Consideration, in cash, without any interest
thereon.
(b) The CalMed Shares shall be converted into and
represent the right to receive, and shall be exchangeable for, as provided in
Section 2.03 hereof, the CalMed Merger Consideration, in cash, without any
interest thereon.
(c) Each share of common stock, $.01 par value per
share, of USSC Transitory Sub then issued and outstanding shall be converted
into, and become one fully paid and nonassessable share of common stock par
value $.01 per share, of the Surviving Corporation (all such shares, the
"Surviving Corporation Shares").
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(d) Each outstanding SDI Option set forth in Section
3.02 of the SDI Disclosure Schedule, which Section 3.02 also sets forth the name
of the Optionee thereof, shall be canceled and converted into and represent the
right to receive, and shall be exchangeable for, cash in an amount equal to the
Option Share Payment multiplied by the number of shares of SDI Series A Common
underlying such SDI Option, without any interest thereon.
Section 2.03 Closing Date and Effective Time.
(a) The Closing shall occur within three (3) Business
Days after the applicable period of time necessary under the HSR Act before such
transaction can be consummated has expired (the "Scheduled Closing Date"),
provided that the other conditions to Closing set forth in Article VII of this
Agreement shall have been satisfied or waived ; and provided, further, that if
all such conditions have been so satisfied or waived, but the Closing does not
occur on the Scheduled Closing Date other than as the result of any action or
inaction of SDI or the Shareholders, then the condition set forth in Section
7.01(g) shall be deemed satisfied at all times thereafter and USSC and USSC
Transitory Subsidiary shall not be entitled to terminate this Agreement pursuant
to Section 8.01(ii). The day on which the Closing occurs is the "Closing Date".
(b) At the Closing:
(i) the E-Z-SUB Merger Consideration and the CalMed
Merger Consideration shall be paid by USSC to E-Z-SUB and CalMed, respectively,
in accordance with payment instructions received from each prior to the Closing,
after the Deposit is applied thereto as provided in the Deposit Escrow
Agreement;
(ii) an Option Share Payment due each Optionee, net
of applicable withholding taxes, shall be paid by USSC to such Optionee, in
accordance with payment instructions received from such Optionee at least two
(2) Business Days prior to the Closing, failing which such payment shall be made
by check to such Optionee's last known address on SDI's records; and
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(iii) a Bonus Payment, net of applicable withholding
taxes, shall be paid by USSC to each Person entitled thereto, in accordance with
payment instructions received from such person at least two (2) Business Days
prior to the Closing, failing which such payment shall be made by check to the
last known address of such Person on SDI's records.
(iv) SDI will pay One Hundred Thousand Dollars
($100,000) to each of the Shareholders in full satisfaction and liquidation of
all outstanding unpaid principal and interest on all loans due or to become due
by SDI or any SDI Subsidiary to the Shareholders or any Affiliate of the
Shareholders existing on the Closing Date. Simultaneously, the Shareholders will
deliver to USSC any promissory notes respecting such loans and xxxx them
canceled. USSC shall make such payments to the Shareholders on behalf of SDI at
the Closing.
Section 2.04 Holdback Funds. Notwithstanding the provisions of Section
2.03(b)(i), Five Hundred Ten Thousand Dollars ($510,000) of the E-Z-SUB Merger
Consideration and Four Hundred Ninety Thousand Dollars ($490,000) of the CalMed
Merger Consideration (collectively, the "Holdback Funds") shall not be paid to
the Shareholders at Closing, but instead shall be withheld by USSC in accordance
with Article X of this Agreement.
Section 2.05 Deposit. Upon execution of this Agreement by all parties,
USSC shall deposit Four Million Seven Hundred Thousand Dollars ($4,700,000.00)
(the "Deposit") with the Escrow Agent, pursuant to the Deposit Escrow Agreement.
The Deposit shall be held by the Escrow Agent and invested in a money market
account or other investment in accordance with the Deposit Escrow Agreement. The
regular fees and expenses of the Escrow Agent shall be borne equally by USSC, on
the one hand, and by the Shareholders, on the other hand. The Deposit will be
held and applied by the Escrow Agent as follows:
(a) If there is a Closing, the Deposit (with accrued interest) shall be
applied to the payments due from USSC to the Shareholders on Closing.
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(b) The Deposit shall be paid to USSC in accordance with the Deposit
Escrow Agreement (1) if USSC terminates this Agreement pursuant to Section
8.01(ii), (iii) or (iv), (2) if the Shareholders terminate this Agreement
pursuant to Section 8.01(iii), or (3) if (i) the conditions to Closing set forth
in Section 7.02 are satisfied in all material respects on or before the
Scheduled Closing Date, (ii) the conditions to Closing set forth in Section 7.03
are satisfied on or before the Scheduled Closing Date, and (iii) any one or more
of SDI and either Shareholder fails to proceed with the Closing on the Scheduled
Closing Date.
(c) The Deposit shall be paid to the Shareholders in accordance with
the Deposit Escrow Agreement (1) if the Shareholders terminate this Agreement
pursuant to Section 8.01(v) or (2) if (i) the conditions to Closing set forth in
Section 7.01 are satisfied in all material respects on or before the Scheduled
Closing Date, (ii) the conditions to Closing set forth in Section 7.03 are
satisfied on or before the Scheduled Closing Date , and (iii) USSC or USSC
Transitory Sub fails to proceed with the Closing. Such payments to the
Shareholders shall be deemed liquidated damages sustained by the Shareholders
and shall not be deemed a penalty or forfeiture, the parties having agreed that
the exact amount of damages sustained by the Shareholders are difficult,
impractical and speculative to determine. The Shareholders acknowledge and agree
that the provisions of this Section 2.05(c) shall provide the sole and exclusive
recourse of the Shareholders with respect to any claims or rights against USSC
because of USSC's or USSC Transitory Sub's failure or inability for any reason
to proceed with the Closing on or before the Outside Date. USSC acknowledges and
agrees that the liquidated damages amount is reasonably proportionate to the
damages to the Shareholders which would be caused by a failure to consummate the
transactions contemplated hereby due to such termination or failure by USSC or
USSC Transitory Sub to proceed and are reasonable under the circumstances
existing as of the date of this Agreement.
(d) If this Agreement is terminated pursuant to Section 8.01(i), the
Deposit (with accrued interest) shall be refunded to USSC or paid to the
Shareholders, or in part to each, as USSC and the Shareholders determine.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SDI AND THE
SHAREHOLDERS
SDI and each Shareholder hereby severally and not jointly represent and
warrant to USSC and USSC Transitory Sub, except (i) with respect to Sections
3.03 and 3.05 and (ii) as disclosed in the Disclosure Schedule attached hereto
(the "SDI Disclosure Schedule") as an exception to a representation and warranty
in this Agreement (any matter or information described in the SDI Disclosure
Schedule with respect to any representation or warranty in any Section shall be
deemed an exception with respect to all representations and warranties in this
Article III), as follows:
Section 3.01 Organization; Authority and Approval.
(a) SDI is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. SDI has the corporate
power to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement constitutes the valid and
binding agreement of SDI, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and to general equitable principles, including the discretion
of a court to grant equitable relief. SDI has the corporate power and authority
to own and lease the properties and assets it now owns and leases and to carry
on its business as and where such properties and assets are now owned or leased
and such business is now conducted. SDI has heretofore delivered to USSC true,
correct and complete copies of its restated certificate of incorporation and
by-laws or equivalent governing instruments, each as amended to the date hereof
(respectively, the "Certificate of Incorporation" and "By-Laws"). SDI is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the character of the property and assets
now owned or leased by it or the nature of the business now conducted by it
requires it to be so licensed or qualified, except where the failure to be so
licensed or qualified or to be in good standing, would not have a Material
Adverse Effect on SDI's
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Business Condition.
(b) The SDI Disclosure Schedule sets forth the name and respective
jurisdiction of incorporation or organization of all SDI Subsidiaries. Each of
SDI's Subsidiaries is a corporation or other entity duly incorporated or
otherwise organized, validly existing and in good standing (or local law
equivalent) under the Laws of its jurisdiction of organization. Each of SDI's
Subsidiaries has the corporate power and authority to own or lease its
properties and assets to carry on its business in the manner in which such
business is now conducted. SDI has heretofore delivered to USSC true, correct
and complete copies of the certificate of incorporation, by-laws, or equivalent
governing instruments, each as amended to the date hereof for each such
Subsidiary. Each of SDI's Subsidiaries is duly licensed or qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the character of the property and assets now owned or leased by it or
the nature of the business now conducted by it requires it to be so licensed or
qualified, except where the failure to be so licensed or qualified or to be in
good standing, would not have a Material Adverse Effect on SDI's Business
Condition.
Section 3.02 Capitalization.
(a) The authorized capital stock of SDI consists of 16,000,000 shares
of COMMON STOCK, divided into two classes, 12,840,000 shares of SDI Common
Stock, par value $0.01, of which 4,000,000 shares of "Series A Common Stock"
have been designated, and 3,160,000 shares of SDI Class B Stock, par value
$0.01. As of the date hereof, there are 440,000 shares of SDI Series A Common
Stock outstanding and 3,160,000 shares of SDI Class B Stock outstanding. As of
the date hereof, no SDI Capital Stock is held by SDI in its treasury. All of the
issued and outstanding shares of SDI Capital Stock have been duly authorized and
are validly issued and outstanding, fully paid and non-assessable. All of the
outstanding capital stock of, or other ownership interests (the "SDI Subsidiary
Securities") in each SDI Subsidiary is owned by SDI, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock
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or other ownership interests). There are outstanding no subscriptions, options,
warrants or other agreements, or conversion, exchange or other rights of any
kind other than this Agreement entitling any Person to purchase or otherwise
acquire any SDI Capital Stock or any SDI Subsidiary Securities and no SDI
Capital Stock or any SDI Subsidiary Securities is reserved for issuance for any
purpose. There are no agreements, commitments or restrictions relating to
ownership or voting of SDI Capital Stock or other securities of SDI or any SDI
Subsidiary Securities, other than any shareholders' agreements which shall be
terminated in accordance with Section 5.09 hereof. The SDI Disclosure Schedule
contains a complete and correct list of the name, address and shareholdings of
each Shareholder.
Section 3.03 Control Shares. Each Shareholder severally and not jointly
represents and warrants to USSC that (a) it is the record and beneficial owner
of the SDI Capital Stock set forth in the SDI Disclosure Schedule, free and
clear of any Liens, other than any shareholders' agreements to be terminated
prior to the Closing Date in accordance with Section 5.09 hereof; (b) it will
have on the Closing Date full legal power, right and authority and all
authorizations and approvals required to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby and to
surrender the certificates to its Shares free and clear of all Liens; (c) this
Agreement has been duly and validly executed and delivered by such Shareholder
and, this Agreement constitutes a valid and binding agreement of such
Shareholder enforceable against such Shareholder in accordance with its terms,
subject to bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and to general equitable principles, including the discretion
of a court to grant equitable relief; (d) upon the consummation of the
transactions contemplated hereby in accordance with the terms hereof, USSC will
own one hundred percent (100%) of the issued and outstanding capital stock of
the Surviving Corporation and, (e) such Shareholder is duly organized and
validly existing in good standing under the laws of the state of its
incorporation.
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Section 3.04 Certain Interests.
(a) Except for liabilities arising under this Agreement, neither SDI
nor any SDI Subsidiary owns any note, bond, debenture or other indebtedness and
is not a creditor, of any Shareholder or any Affiliate of any Shareholder, and
no Shareholder or any Affiliate of any Shareholder or any employee of SDI or an
SDI Subsidiary is holder of any note, bond, debenture or other evidence of
indebtedness, or is otherwise a creditor, of SDI or any SDI Subsidiary.
(b) No officer or director of either SDI or any SDI Subsidiary,
Shareholder, or any immediate relative of any such officer, director or
Shareholder residing at the same address as such officer, director or
Shareholder, is a party to or has any interest with respect to any material
contract, agreement or arrangement which relates to or affects in any material
respect the business of SDI or any SDI Subsidiary or has any material interest
in any property, real or personal, tangible or intangible, material to the
business of SDI or any SDI Subsidiary as currently conducted.
Section 3.05 No Conflict or Restrictions. Each Shareholder severally
and not jointly represents and warrants to USSC that the execution, delivery and
performance of this Agreement by such Shareholder does not, and the consummation
by such Shareholder of the transactions contemplated hereby will not: (i)
violate or conflict with its articles of incorporation or by-laws or the
articles of incorporation or by-laws of SDI or any SDI Subsidiary; (ii) assuming
satisfaction of the matters referred to in clause (iii) of this Section 3.05,
violate or conflict with any Law currently applicable to such Shareholder, SDI
or any SDI Subsidiary; (iii) require any filing, approval, consent,
authorization or other action with respect to SDI, any SDI Subsidiary or such
Shareholder other than pursuant to the HSR Act; (iv) violate or conflict with,
result in a breach of, constitute a default under (whether with notice or the
lapse of time or both), or give rise to a right of termination or to accelerate
or permit the acceleration of the performance required by, any material Lien,
loan arrangement, lease or other agreement or instrument to which SDI, any SDI
Subsidiary or such Shareholder is a party or by which SDI, any SDI Subsidiary or
such Shareholder or any of their
18
respective assets is bound; or (v) result in the creation of any Lien upon the
assets of SDI or any SDI Subsidiary under any such Lien, loan arrangement,
lease, agreement or instrument, which violation, conflict, failure to take
action or obtain consent, approval or authorization, breach, termination,
acceleration, default or Lien specified in the foregoing clauses (ii) through
(v) would have a Material Adverse Effect on SDI's Business Condition.
Section 3.06 Litigation. There are no Actions pending (which for
purposes of this Section require that SDI or the SDI Subsidiary have been
personally served with process) against SDI, any SDI Subsidiary or any of its
assets, or, in connection with the business of SDI, any SDI Subsidiary or either
Shareholder relating to the business of SDI or any SDI Subsidiary or any of the
officers, directors or employees of SDI or any SDI Subsidiary which would have a
Material Adverse Effect on SDI's Business Condition. Neither SDI nor any SDI
Subsidiary has been charged in writing by any Governmental Body with a violation
of any Laws which would have a Material Adverse Effect on SDI's Business
Condition.
Section 3.07 No Default. Neither SDI nor any SDI Subsidiary is in
default under, and no condition exists that with notice or lapse of time or both
would constitute a default under, (i) any material Lien, loan arrangement, lease
or agreement or instrument of any nature to which SDI or any SDI Subsidiary is a
party or by which any of the assets of SDI or any SDI Subsidiary is bound which
would have a Material Adverse Effect on SDI's Business Condition, or (ii) any
judgment, order, or injunction of any Governmental Body which would have a
Material Adverse Effect on SDI's Business Condition.
Section 3.08 Compliance.
(a) Except where failure to be in compliance would not have a Material
Adverse Effect on SDI's Business Condition, to SDI's knowledge, SDI and each SDI
Subsidiary is in material compliance with all Laws of any Governmental Bodies
applicable to the business and operations of SDI and each SDI Subsidiary,
provided that, no representation or warranty is made in this Section 3.08 with
respect to any matter with respect to which a specific representation and
warranty
19
is made by SDI or a Shareholder in this Agreement.
(b) All of the issued and outstanding shares of SDI Capital Stock and
the SDI Options were issued in compliance with, and SDI and each SDI Subsidiary
is in material compliance with, and has filed all reports or notices required to
be filed under, all applicable Laws of any Governmental Bodies involving or
relating to the registration and issuance by them of securities.
Section 3.09 Environmental Matters.
(a) Neither SDI nor any SDI Subsidiary has (i) transported, stored,
treated or disposed, nor has any of them allowed or arranged for any third
parties to transport, store, treat or dispose of Hazardous substances or other
waste to or at any location other than a site lawfully permitted to receive such
Hazardous substances or other waste for such purposes, nor has any of them
performed, arranged for or allowed by any method or procedure such
transportation, storage, treatment or disposal in contravention of any Laws; or
(ii) disposed, or allowed or arranged for any third parties to dispose of
Hazardous substances or other waste upon real property currently or previously
owned or leased by any of them during the period of occupation by SDI or any SDI
Subsidiary, except as permitted by Law. For purposes of this Section 3.09, (x)
"Hazardous substance" or "Hazardous substances" shall mean any substance or
substances that are hazardous, and shall include, without limitation: (A) those
substances included within the definitions of "Hazardous substances," "Hazardous
materials", "toxic substances," or "solid waste" in any of the Environmental
Laws, or so designated in accordance with any Environmental Laws; and (B) any
material, waste or substance which contains (1) any asbestos (friable or
non-friable), (2) any polychlorinated biphenyls in any concentration, (3) any
petroleum or petroleum product, (4) any explosives, (5) any radioactive
materials, (6) any infectious wastes, or (7) any material which must be removed
from real property currently or previously owned or leased by SDI or any SDI
Subsidiary during the period of occupation by SDI or any SDI Subsidiary pursuant
to any administrative order or enforcement proceeding, and (y) "Environmental
Laws" shall mean all Federal, state and local environmental statutes and
ordinances, and any rule or
20
regulation promulgated thereunder, and any order, standard, interim regulations,
moratorium, policy or guideline of any Governmental Body, and all state and
local counterparts of related statutes, laws, regulations, and orders and
treaties of the United States (with any reference to any such Environmental Law
or provision thereof, either in this Section or elsewhere in this Agreement,
being deemed to include any amendment, extension or successor thereof).
(b) Neither SDI nor any SDI Subsidiary has Released any Hazardous
substance on, into or beneath the surface of any parcel of real property
currently or previously owned or leased by SDI or any SDI Subsidiary during the
period of occupation by SDI or any SDI Subsidiary. For purposes of this Section
3.09, the term "Release" shall mean releasing, spilling, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping.
(c) Neither SDI nor any SDI Subsidiary has received any written notice
that SDI or any SDI Subsidiary is a potentially responsible party for a Federal
or state environmental cleanup site or for corrective action under the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA") or any other applicable Law. Neither SDI nor any SDI
Subsidiary has submitted nor has any of them been required to submit any notice
pursuant to Section 103(c) of CERCLA with respect to real property currently or
previously owned or leased by SDI or any SDI Subsidiary. Neither SDI nor any SDI
Subsidiary has received any written request for information in connection with
any Federal or state environmental cleanup site. Neither SDI nor any SDI
Subsidiary has been requested in writing to nor has any of them undertaken any
response or remedial actions or clean-up actions of any kind at the written
request of any Governmental Body, or at the request of any other Person.
(d) Neither SDI nor any SDI Subsidiary uses, and none of them have ever
used, any Underground Storage Tank. There have not been any Underground Storage
Tanks installed by SDI or any SDI Subsidiary on real property currently or
previously owned or leased by SDI or any SDI Subsidiary . For purposes of this
21
Section 3.09, the term "Underground Storage Tank" shall have the meaning given
it in the Resource Conservation and Recovery Act, as amended.
(e) There are no laws, regulations, ordinances, licenses, permits or
orders relating to environmental or worker safety matters requiring any work,
repairs, construction or capital expenditures with respect to the assets or
properties owned or leased by SDI and any SDI Subsidiary. The SDI Disclosure
Schedule identifies for the period SDI or any SDI Subsidiary occupied real
property leased or owned (i) all environmental audits, assessments or
occupational health studies undertaken by governmental agencies or SDI, any SDI
Subsidiary or any agents of any of them; (ii) the results of any ground, water,
soil, air or asbestos monitoring undertaken; (iii) all written communications
between SDI or any SDI Subsidiary and environmental agencies within the past
five years; and (iv) all written citations to SDI or any SDI Subsidiary issued
within the past five years under the United States Occupational Safety and
Health Act, as amended.
Section 3.10 Financial Information.
(a) SDI has delivered to USSC prior to the date hereof a copy of the
consolidated balance sheet of SDI as of May 31, 1993, as of May 31, 1994 and as
of May 31, 1995 (the consolidated balance sheet as of May 31, 1995, herein the
"Audited Balance Sheet") and the related consolidated statements of operations,
shareholders' equity and cash flows for the fiscal years then ended, including
the notes thereto, the 1995 financial statements being certified by Xxxxx
Xxxxxxxx L. L. P. and the 1994 and 1993 financial statements being certified by
Price Waterhouse.
(b) The Audited Balance Sheet is complete and correct according to the
books and records of SDI and prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied and fairly presents the
financial position of SDI as of May 31, 1995.
Section 3.11 Undisclosed Liabilities. Except for (i) liabilities set
forth, reflected in or reserved against in the Interim Balance Sheet, (ii)
professional fees
22
which are incurred by SDI subsequent to the date of the Interim Balance Sheet,
(iii) liabilities and obligations incurred in the ordinary course of business
consistent with past practice, (iv) liabilities and loss contingencies disclosed
on the SDI Disclosure Schedule, and (v) Taxes with respect to the period from
the date of the Interim Balance Sheet to the Closing Date that are accrued or
reflected on SDI's financial records as of the Closing Date, SDI has and will
have on the Closing Date no liabilities or loss contingencies (whether accrued,
unmatured, contingent or otherwise or whether due or to become due).
Section 3.12 Title to Properties. Subject to Section 3.17, SDI and each
SDI Subsidiary has good title to or, in the case of leases, valid leasehold
interests in, all its tangible properties and assets (real, personal or mixed)
set forth in the Audited Balance Sheet (other than those tangible assets or
properties disposed of in the ordinary course of business).
Section 3.13 Real Property. Neither SDI nor any SDI Subsidiary has ever
owned any real property. No SDI Subsidiary has ever leased any real property has
any liability in respect of any real property lease. SDI currently occupies only
the real property pursuant to the lease set forth in the SDI Disclosure
Schedule.
Section 3.14 Inventories and Equipment.
(a) The raw materials, work in process and finished goods in the
inventories (the "Inventories") of SDI and each SDI Subsidiary shown on the
Audited Balance Sheet were valued at the lower of cost or market determined on a
first-in first-out basis with proper allowance for obsolescence, in accordance
with GAAP.
(b) The machinery, equipment, tools, dies and fixtures (collectively,
"Equipment") used in the conduct of SDI's business is in operating condition.
Section 3.15 Professional Fees. The SDI Disclosure Schedule sets forth
a complete and correct list containing the names of all current providers of
financial, legal and accounting services to SDI and each SDI Subsidiary
23
(hereinafter "Professionals"), which SDI Disclosure Schedule shall be updated by
SDI for additional Professionals, if any, between the period commencing on the
date hereof and ending immediately prior to the Closing.
Section 3.16 Receivables. On or prior to the Closing Date, SDI and each
SDI Subsidiary will have collected all amounts, if any, loaned or advanced to or
otherwise receivable from consultants, directors, officers, employees, the
Shareholders and their Affiliates, including the amounts thereof, if any, set
forth in the SDI Disclosure Schedule.
Section 3.17 Intellectual Property. [CONFIDENTIAL MATERIAL OMITTED]
24
Section 3.18 Absence of Certain Changes. Except as expressly permitted
by the terms of this Agreement, since May 31, 1995, there has not been:
(a) any Material Adverse Effect on SDI's Business Condition;
(b) any material and adverse change in the nature of the businesses or
in the manner of conducting the businesses of SDI or any SDI Subsidiary;
(c) any change in the accounting methods or principles of SDI or any
SDI Subsidiary;
25
(d) any declaration, setting aside or payment of dividend on, or any
other distribution with respect to, any SDI Capital Stock or SDI Subsidiary
Securities or any repurchase, redemption or other acquisition of any SDI Capital
Stock or any SDI Subsidiary Securities;
(e) other than in the ordinary course of business, any payment by SDI
to either Shareholder or an Affiliate of either Shareholder, any services or
charges by either Shareholder, or any Affiliate of either Shareholder, to SDI or
any SDI Subsidiary or any other transaction (in any such case, not of a type
described in subsection (d) of this Section 3.18) between either Shareholder or
an Affiliate of either Shareholder and any one or more of SDI and any SDI
Subsidiary;
(f) any subscription, option or warrant to purchase, or other right to
purchase or otherwise acquire, SDI capital stock, any security or other
instrument convertible into any class of SDI Capital Stock or any SDI Subsidiary
Security, granted to any Person;
(g) any issuance of shares of SDI Capital Stock (including, without
limitation, treasury shares) or SDI Subsidiary Securities other than upon the
exercise of the SDI Options;
(h) any transaction made by SDI or any SDI Subsidiary relating to any
of their respective assets or business (including, without limitation, the
acquisition or disposition of assets) other than in the ordinary course of
business, as set forth or as otherwise permitted or contemplated by this
Agreement;
(i) except in the ordinary course of business or to the Shareholders,
any incurrence, assumption or guarantee by SDI or any SDI Subsidiary of any
indebtedness or liability for or in respect of borrowed money or any commitment
to do the same;
(j) except in the ordinary course of business, any Lien created or
assumed by SDI or any SDI Subsidiary on any of their respective assets to secure
26
indebtedness for borrowed money;
(k) except in the ordinary course of business, any grant of any
severance or termination pay to any present or former employee or director of
SDI or any SDI Subsidiary or any compensation or benefits payable by SDI or any
SDI Subsidiary under any employment agreements or severance or termination pay
policies to any of their respective present or former employees;
(l) except in the ordinary course of business, any hiring of any
employee or any employment, bonus or deferred compensation agreement entered
into between either SDI or any SDI Subsidiary, on the one hand, and any of their
directors, officers, employees or former employees, on the other hand;
(m) any material labor disputes or labor negotiations involving SDI or
any SDI Subsidiary; or
(n) any amendment of the Certificate of Incorporation or By-laws or the
articles of incorporation or by-laws of any SDI Subsidiary.
Section 3.19 Contracts. (a) The SDI Disclosure Schedule contains a list
complete and correct in all material respects of all of the following to which
SDI or any SDI Subsidiary is a party or by which any of them or any amount of
any of their respective assets is bound, whether written or oral involving or
which may involve in any one case any amount in excess of Fifty Thousand Dollars
($50,000) per annum (the "Contracts"):
(i) any management or employment contract or other contract
for personal services with any officer, consultant, director, employee or any
other Person;
(ii) any plan, contract or arrangement providing for bonuses,
pensions, deferred compensation, retirement plan payments, profit sharing,
incentive pay, or for any other uninsured employee benefit plans;
27
(iii) any plan, contract or arrangement providing for
insurance (other than group insurance or which is described in clause (ii)) for
any officer, consultant, director, or employee of SDI or any SDI Subsidiary or
members of their families (other than directors and officers liability
policies);
(iv) any labor contracts or employment agreements providing
for liability for severance pay;
(v) any lease, option, or agreement relating to real property
to which SDI or any SDI Subsidiary is a party;
(vi) any secrecy, non-competition or other agreement that
could have a Material Adverse Effect on SDI's Business Condition;
(vii) any license, sublicense or other agreement to which SDI
or any SDI Subsidiary is a party (whether as licensor or licensee) involving or
relating to the Intellectual Property;
(viii) any contract not in the ordinary course of business
that involves or relates to (A) capital expenditures by SDI or any SDI
Subsidiary, or (B) disposition of any amount of assets of SDI or any SDI
Subsidiary;
(ix) any non-recurring contract between any Shareholder or any
Affiliate of any Shareholder, on the one hand, and SDI or any SDI Subsidiary, on
the other hand, that is not cancelable without cause on thirty (30) days or less
notice;
(x) any contract relating to the rental or use of equipment,
other than personal property or fixtures by SDI or any SDI Subsidiary involving
payment of fixed or contingent annual rentals;
(xi) any license or franchise agreement involving SDI or any
SDI Subsidiary, either as licensor or licensee or as franchiser or franchisee;
28
(xii) any loan agreements, guaranties, bonding arrangements,
repurchase agreements, agency agreements, manufacturers' representative
agreements, commission agreements, financing agreements, and security agreements
that are material to SDI's Business Condition;
(xiii) any joint venture contract, including those currently
under negotiation;
(xiv) any contract or agreement for the purchase of materials,
supplies or services, including individual purchase orders not made in the
ordinary course of business; and
(xv) any other contract not of a type covered by or
specifically excluded from the coverage of any of the other items of this
Section 3.19 and not cancelable on thirty (30) days or less notice without
penalty or other financial obligation or, if not so cancelable, involving future
payment by or to SDI or any SDI Subsidiary.
(b) SDI has delivered to USSC true and correct copies of all Contracts
described in this Section 3.19 or listed on any other schedule that are in
writing, and complete and correct (in all material respects) descriptions of all
contracts that are not in writing. Each of such Contracts is valid and in full
force and effect and neither SDI nor any SDI Subsidiary is in default in any
material respect under the terms thereof.
Section 3.20 Powers of Attorney. Other than powers of attorney given
its counsel and those given in the ordinary course of business, neither SDI nor
any SDI Subsidiary has any powers of attorney or comparable delegations of
authority outstanding in connection with its business, and none of such
delegations of authority would not be revocable by SDI or any SDI Subsidiary
following the Closing Date.
29
Section 3.21 Bank Accounts; Deposits. Neither SDI nor any SDI
Subsidiary has any bank accounts or safe deposit boxes or credit arrangements,
and as of the date specified in the SDI Disclosure Schedule, there are no
Persons presently authorized to draw thereon, to have access thereto or to
obtain credit therewith.
Section 3.22 [CONFIDENTIAL MATERIAL OMITTED]
30
Section 3.23 Employee Benefit Plans.
(a) The SDI Disclosure Schedule sets forth a complete and correct list
of each Employee Pension Benefit Plan, as defined in Section 3(2) of ERISA,
which (i) is subject to any provision of ERISA, and (ii) was at any time
maintained, administered or contributed to by SDI or any SDI Subsidiaries and
covered any employee or former employee of SDI or any SDI Subsidiaries or under
which SDI or any SDI Subsidiaries has any liability. Complete and correct copies
of such plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof have been furnished to USSC together
with the three most recent annual reports (Form 5500 including, if applicable,
Schedule B thereto) prepared in connection with any such plan. Such plans are
hereinafter referred to collectively as the "Employee Plans."
(b) Neither SDI nor any SDI Subsidiary contributes to or otherwise
participates in and has never contributed to or otherwise participated in any
Employee Plan that is or has been subject to Title IV of ERISA. Neither SDI nor
any SDI Subsidiary has engaged in any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code, nor has a "prohibited
transaction" occurred with respect to any Employee Plan or any other employee
benefit plan or arrangement contributed to by SDI or any SDI Subsidiary which is
covered by Title I of ERISA. Neither SDI nor any SDI Subsidiary has incurred any
liability under Title IV of ERISA which could become a liability of USSC after
the Effective Date.
(c) Each of the Employee Plans which is intended to be qualified under
Section 401(a) of the Code (a "Qualified Plan") is so qualified and has been so
qualified during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code. USSC has
been furnished with copies of Internal Revenue Service determination letters
with respect to each such Employee Plan. Such determination letters cover the
requirements of all federal income tax laws, including the Tax Reform Act of
1986, the Unemployment Compensation Amendments Act of 1992, and the Omnibus
Budget Reconciliation Act of 1993. Each of the Employee Plans has
31
been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Employee Plans
and nothing has occurred since the adoption of the Qualified Plans which
resulted or, after due inquiry, could result in the imposition of any penalties
on such Qualified Plans or the sponsors, fiduciaries or administrators thereof,
including any actions taken pursuant to this Agreement.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of SDI or any SDI Subsidiary that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by reason of Section 280G or Section 162(a)(1) of the Code.
(e) The SDI Disclosure Schedule sets forth a complete and correct list
of each employment, severance or other similar contract, arrangement or policy
and each written plan or binding arrangement providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, medical benefits, dental benefits,
vacation benefits, retirement benefits or for deferred compensation, profit
sharing, bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (i) is
not an Employee Plan, (ii) is entered into, maintained or contributed to, as the
case may be, by SDI, or any SDI Subsidiary and (iii) covers any employee or
former employee of SDI, any SDI Subsidiary or any predecessor of any of them.
Such contracts, plans and arrangements are hereinafter referred to collectively
as the "Benefit Arrangements." Each of the Benefit Arrangements has been
maintained in material compliance with its terms and comply in all material
respects with the requirements prescribed by any and all Laws which are
applicable to such Benefit Arrangements.
(f) There is no liability in respect of post-retirement health and
medical benefits for any retired employees of SDI or any SDI Subsidiary.
(g) (i) SDI and any SDI Subsidiaries have made or accrued all payments
32
required by each Employee Plan and Benefit Arrangement, any related trusts, any
collective bargaining agreement or by Law to be made to each Employee Plan and
Benefit Arrangement (including all insurance premiums or intercompany charges
with respect to each Employee Plan and Benefit Arrangement) with respect to all
periods through the Effective Date, including, without limitation, payments for
a pro rata share with respect to any period including the Effective Date, based
on the number of days in such period to the total number of days in the plan
year, and all amounts properly accrued to date as liabilities of SDI, and any
SDI Subsidiaries under or with respect to each Employee Plan or Benefit
Arrangement for the current plan years have been recorded on the books of SDI,
and any SDI Subsidiaries; (ii) there are no Actions, arbitrations or claims
pending (other than routine claims for benefits) or threatened, against any
Employee Plan or Benefit Arrangement, its administrators, trustees or other
fiduciaries, or against the Shareholder, SDI or any SDI Subsidiaries or against
the assets of any Employee Plan or Benefit Arrangement; (iii) no Employee Plan
providing retirement benefits for employees or former employees of SDI and any
SDI Subsidiary has been terminated; (iv) no Employee Plan is under audit by
either the Internal Revenue Service or the U.S. Department of Labor; and (v)
consummation of the transactions contemplated by this Agreement will not give
rise to any liability of SDI or any SDI Subsidiary for severance pay or
termination pay solely by reason of such transactions.
(h) There has not been, and prior to or on the Closing Date there will
not be, any amendment to, written interpretation or announcement (whether or not
written) by SDI or any SDI Subsidiaries relating to, or change in employee
participation or coverage under, any Employee Plans or Benefit Arrangements
which would increase materially the expense of maintaining such Employee Plans
or Benefit Arrangements above the level of the expense incurred in respect
thereof for the period ending on the date hereof.
Section 3.24 Employees.
(a) The SDI Disclosure Schedule lists each salaried employee and sales
representative of SDI and each SDI Subsidiary, his or her current position,
33
current salary, commission and any other compensation arrangement. Except for
agreements, complete and accurate copies of which have been delivered to USSC,
neither SDI nor any SDI Subsidiary is a party to any consulting or employment
agreement (other than at will employment agreements or agreements with the
principal purpose of providing for the confidentiality of SDI's and each SDI
Subsidiary's proprietary information and prosecution of patent claims), with
individual consultants or employees (including officers and directors).
(b) There are no compensation, pension or benefit arrangements, whether
written or oral, between SDI or any SDI Subsidiary, on the one hand, and any
former employees of any of them, on the other hand. Prior to the Closing Date,
USSC shall have received a list of the names and addresses of each former
employee of SDI and every SDI Subsidiary and each other person currently covered
with respect to any of them under any Benefit Arrangement under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") together with the expiration date of
all COBRA rights for each such covered person.
Section 3.25 Labor Matters. There is no union or collective bargaining
agreement to which SDI or any SDI Subsidiary is a party. SDI and each SDI
Subsidiary is not engaged in any unfair labor practice.
Section 3.26 Distributors and Vendors.
(a) SDI has delivered to USSC prior to the date of this Agreement a
true and correct copy (if in SDI's possession or control), and the SDI
Disclosure Schedule contains a true and correct list of each distributorship,
agency or similar agreement currently in force and effect involving or related
to past, present or future products of SDI or to which SDI is a party or by
which it is otherwise bound ("Distributorship Agreements"). Other than the
Distributorship Agreements, there is no agreement, option, right or binding
understanding under which any person has an option or other right to enter into
a distribution, agency or similar agreement with SDI or involving or related to
any of SDI's past, present or future products or to extend the term of any of
the Distributorship Agreements.
34
(b) SDI has heretofore delivered to USSC a list true and complete in
all material respects of the names and addresses of vendors who have supplied
SDI with material products, parts, components and subassemblies in the three (3)
years preceding the date hereof (collectively, the "Vendors").
Section 3.27 Taxes.
(a) All Tax returns, statements, reports and forms (including estimated
Tax returns and reports and information returns and reports) required to be
filed with any Taxing Authority on or prior to the Closing Date with respect to
any Taxable period ending before the Closing Date, by or on behalf of SDI and
any SDI Subsidiary (collectively, the "SDI Returns"), have been filed when due
(including any extensions of such due date), and all amounts shown as due
thereon on or before the Closing Date have been paid on or before such date. The
Interim Balance Sheet will reflect all actual and contingent liabilities for
Taxes with respect to all periods through the date thereof, and neither SDI nor
any SDI Subsidiary has and none of them will incur any Tax liability in excess
of the amount reflected on the Interim Balance Sheet with respect to the period
ended the date thereof.
(b) Adequate provision has been and will be made on SDI's financial
records for all Tax liabilities existing on or before the Closing Date with
respect to any taxable period ending before the Closing Date. SDI and each SDI
Subsidiary has withheld and paid when due to the applicable financial
institution or Taxing Authority all amounts required to be withheld. No SDI
federal income tax returns have been examined. SDI has not granted any extension
or waiver of the limitation period applicable to any SDI Returns.
(c) There is no claim, audit or Action now pending, against or with
respect to SDI or any SDI Subsidiary in respect of any Tax or assessment. No
notice of deficiency or similar document of any Taxing Authority has been
received by SDI or any SDI Subsidiary. Neither SDI, any SDI Subsidiary nor any
other Person on behalf of SDI or any SDI Subsidiary has entered into nor will
any of them enter
35
into any agreement or consent pursuant to Section 341(f) of the Code. There are
no Liens for Taxes upon the assets of SDI or any SDI Subsidiary except liens for
current Taxes not yet due. Neither SDI nor any SDI Subsidiary is subject to
withholding of any "United States real property interest" with respect to any
transaction contemplated hereby and neither SDI nor any SDI Subsidiary owns any
interest in real property except as disclosed.
(d) Other than pursuant to this Agreement, neither SDI nor any SDI
Subsidiary is a party to or bound by (or will prior to the Closing Date become a
party to or bound by) any Tax sharing agreement.
(e) It is understood, agreed and intended by the parties that the
Merger will be treated for U.S. Federal income tax purposes as a taxable
purchase of the Shares by USSC, pursuant to the principles enunciated in Revenue
Ruling 73-427, and the parties agree to take no positions, inconsistent with the
treatment of the Merger as a taxable stock purchase by USSC of the Shares for
Federal income tax purposes.
Section 3.28 Permits and Licenses. SDI has delivered to USSC prior to
the date of this Agreement a true and correct copy, and the SDI Disclosure
Schedule contains a list of (i) each pending application or registration for FDA
Approval with respect to the Two Products and each FDA Approval held by SDI with
respect to the Two Products to import, export and sell the Two Products and any
similar applications or registrations with any foreign Governmental Body and
(ii) the most recent report by or on behalf of the FDA or any other Governmental
Body involving or relating to any FDA, OSHA or EPA related facility inspection
of SDI facilities. SDI and each SDI Subsidiary possess such Governmental
Approvals from all Governmental Bodies including, without limitation, all FDA
Approvals, that are material to (aa) the operation of their businesses in the
manner as the same are currently conducted, and (bb) operate or occupy their
respective properties. There have been no product recalls, field corrective
activity, medical device reports or warning letters by the FDA or any other
Governmental Body relating to the Two Products, and (iii) to SDI's Knowledge
there is no administrative action pending for the revocation of any such FDA
36
Approval.
Section 3.29 Minute Books. The minute book of SDI delivered to USSC at
Closing, is, in all material respects, a complete and accurate record of all
meetings and accurately reflects all other material corporate action of the
shareholders and board of directors of SDI.
Section 3.30 Brokers. Except for Eckvest Equity, Inc., neither SDI nor
any SDI Subsidiary nor either of the Shareholders has employed any investment
banker, broker or finder which might be entitled to a fee or other remuneration
upon consummation of the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF USSC and USSC SUB
USSC and USSC Transitory Sub hereby jointly and severally represent and
warrant to each of SDI and the Shareholders, except as disclosed in the
Disclosure Schedule attached hereto (the "USSC Disclosure Schedule") as an
exception to a representation and warranty in this Agreement (any matter or
information described in the USSC Disclosure Schedule with respect to any
representation or warranty in any Section shall be deemed an exception with
respect to all representations and warranties in this Article IV) as follows:
Section 4.01 Organization; Authority and Approval. USSC and USSC
Transitory SUB are corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware. USSC and USSC Transitory Sub
each have the corporate power to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement constitutes
the valid and binding agreement of USSC and USSC Transitory Sub, enforceable
against each of them in accordance with its terms subject to bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and to
general equitable principles including the discretion of a court to grant
equitable relief.
37
Section 4.02 No Conflict. The execution, delivery and performance of
this Agreement by USSC and USSC Transitory Sub does not, and the consummation by
USSC and USSC Transitory Sub of the transactions contemplated hereby will not,
(i) violate or conflict with their respective certificates of incorporation or
by-laws, (ii) assuming satisfaction of the matters referred to in the following
clause (iii) of this Section 4.02, violate or conflict with any Law currently
applicable to USSC or USSC Transitory Sub or any agreement or instrument, or
currently applicable award, judgment or decree, to which USSC or USSC Transitory
Sub is a party or by which either is bound, or (iii) require any filing by USSC
or USSC Transitory Sub with, or authorization, approval, consent or other action
by any Governmental Body other than in accordance with the HSR Act, (iv) violate
or conflict with, result in a breach of, constitute a default under (whether
with notice or the lapse of time or both), or give rise to a right of
termination or to accelerate or permit the acceleration of the performance
required by, any indenture, mortgage, Lien, loan arrangement, lease or other
agreement or instrument to which USSC or USSC Transitory Sub is a party or by
which USSC or USSC Transitory Sub or any of their respective assets are bound;
or (v) result in the creation of any Lien upon the assets of USSC or USSC
Transitory Sub under any such indenture, mortgage, Lien, loan arrangement,
lease, agreement or instrument, which violation, conflict, failure to take
action or obtain consent, approval or authorization, breach, termination,
acceleration, default or Lien specified in the foregoing clauses (ii) through
(v) could have a Material Adverse Effect on USSC's Business Condition.
Section 4.03 Brokers. Neither USSC nor USSC Transitory Sub has employed
any investment banker, broker or finder which might be entitled to a fee or
other remuneration upon consummation of the transactions contemplated hereby.
Section 4.04 Securities Representation. USSC is an "Accredited
Investor" as defined in Rule 501 promulgated pursuant to the Securities Act and
is capable of evaluating the risks and merits of the acquisition of the Shares
and the Surviving Corporation Shares and is acquiring the Shares and the
Surviving
38
Corporation Shares for investment and not with a view or intent to distribute or
resell them. The foregoing representation shall not be deemed to limit any of
SDI's or the Shareholders' representations or warranties set forth in this
Agreement.
ARTICLE V
COVENANTS OF SDI AND THE SHAREHOLDERS
Section 5.01 Conduct of Business.
(a) Except (i) as may be necessary or appropriate to consummate the
transactions contemplated by this Agreement from the date hereof until and
including the Closing Date, (ii) to conduct its business in the ordinary course,
(iii) as disclosed in the SDI Disclosure Schedule, or (iv) as consented to
(which consent shall not be unreasonably withheld) by USSC, SDI will not, and
will cause each of SDI's Subsidiaries not to:
(1) commence any litigation or other proceeding in which SDI is a
party;
(2) enter into or amend in any respect any plan, contract, license,
lease or agreement of a type required to be disclosed pursuant to this
Agreement;
(3) issue any of its capital stock, declare or pay any dividend on, or
make any other distribution with respect to, its capital stock, or repurchase,
redeem or otherwise acquire any of its capital stock;
(4) merge or consolidate with any other corporation or acquire the
business of any Person;
(5) other than an amendment to the By-laws relating to indemnification
described in Section 3.18 of the SDI Disclosure Schedule, make any material
change in its Restated Certificate of Incorporation or Bylaws;
39
(6) sell, lease or otherwise dispose of any assets, inventory or
property relating to the Intellectual Property technology;
(7) incur, or perform, pay or otherwise discharge, any obligation or
liability (absolute or contingent);
(8) hire any employee or pay any fees to any director or officer;
(9) take any other action which would result in a Material Adverse
Effect on SDI's Business Condition including, without limitation, a Bankruptcy
Event;
(10) conduct any clinical trials, protocols or tests, animal or other
pre clinical trials, protocols or tests or any other type of testing involving
any Fusion Cage prototype, provided that (a) SDI shall have the right to
continue existing testing and in-house research and development, and (b) SDI may
conduct new tests which USSC may permit or agree to fund in a separate written
agreement; or
(11) commit itself to do any of the foregoing.
Notwithstanding anything set forth above in Section 5.01 or otherwise in this
Agreement, neither SDI nor any SDI Subsidiary shall prior to the Closing Date
(i) enter into any financing, or commit itself to enter into any financing, with
any Person other than with the Shareholders and their Affiliates, except as
consented to by USSC in its sole and absolute discretion, (ii) incur any
liability for borrowed moneys to any Shareholder or any Affiliate of any
Shareholder which shall not be canceled on the Closing Date without cost or
expense to SDI, any SDI Subsidiary, USSC and USSC Transitory Sub; (iii) other
than in the ordinary course of business, effect any other transaction with any
Shareholder or any Affiliate of any Shareholder, (iv) make any payment to the
Shareholders, directly or indirectly, or (v) make any payment to Eckvest
Equities, Inc. with respect to any fees or expenses.
Section 5.02. Financial Statements. Within fifteen (15) Business Days
after
40
the last day of each month during the period commencing with the date hereof and
ending on the last day of the month preceding the Closing Date (but not later
than the Closing Date), SDI shall deliver to USSC monthly an unaudited
consolidated balance sheet of SDI, the related consolidated statements of income
and changes in shareholders' equity and cash flows for each monthly period from
October 1, 1995, through the month end immediately preceding the Closing Date,
in the form as previously prepared by SDI for its own internal use.
Section 5.03 [CONFIDENTIAL MATERIAL OMITTED]
41
Section 5.04 Access. SDI will (a) afford promptly to USSC and its
authorized representatives full access from the date hereof until the Closing
Date, during normal business hours, to its properties, books, records and
auditors (and their work papers), (b) cause each SDI Subsidiary to afford
promptly to USSC and its authorized representatives full access from the date
hereof until the Closing Date, during normal business hours, to each SDI
Subsidiary's respective properties, books, records and auditors (and their work
papers), and (c) furnish to USSC such additional financial and data and other
information relating to SDI and any SDI Subsidiary as it may reasonably request
that SDI or any SDI Subsidiary has in its possession.
Section 5.05 No Liens. To the Closing Date, except in the ordinary
course of business, and other than with respect to the Two Products and any
Intellectual Property involving or related thereto, neither SDI nor any SDI
Subsidiary will encumber or grant or permit to be taken any Lien on any asset or
property of SDI or any SDI Subsidiary or enter into any transaction or make any
commitment to do so.
Section 5.06 Consents; Regulatory Approval. To the Closing Date, SDI
will take all such commercially reasonable actions as may be necessary to obtain
all approvals or consents from third parties or regulatory or governmental
agencies necessary or advisable in order to permit the consummation of the
transactions contemplated in this Agreement without impairing the validity or
effectiveness of any lease or other contract to which SDI or any SDI Subsidiary
is a party or by which any of their respective assets are bound. Without
limiting the foregoing, SDI will cooperate with USSC in connection with any
filing required by the HSR Act.
Section 5.07 Commercially Reasonable Efforts. SDI will use commercially
reasonable efforts to cause the conditions set forth in Section 7.01 to be
satisfied as soon as practicable after the date hereof.
Section 5.08 Confidentiality. The Shareholders will not use, or
disclose to
42
third parties, any confidential information concerning SDI. The Shareholders
will hold, and cause SDI to hold, all information provided to SDI or the
Shareholders by or on behalf of USSC (and any information derived therefrom, or
reflecting any such information, prepared by or on behalf of the Shareholders)
relating to USSC in confidence and will not disclose any such information other
than to directors, officers, employees and agents of the Shareholders or SDI who
need to know such information. Upon any termination of this Agreement, the
Shareholders shall promptly return and shall cause SDI to promptly return to
USSC all such information and will destroy any such information prepared by any
of them or on their behalf, including any copies of such information. This
Section 5.08 shall not apply to: (i) information now or hereafter in the public
domain through no fault of SDI or the Shareholders, (ii) information which the
Shareholders or any Affiliate of the Shareholders knew (and was not restricted
from disclosing or using) and was in documentary form before USSC first
contacted the Shareholders or SDI in connection with the transactions
contemplated herein, (iii) information obtained from a source other than USSC,
provided such source was not at the time it furnished such information bound by
confidentiality obligations for the benefit of USSC and had authorization to
disclose same, and (iv) compliance with any applicable Law by the Shareholders,
SDI or any SDI Subsidiary, providing that USSC is given reasonable time and
opportunity to contest such disclosure.
Section 5.09 Shareholders' Agreements. On or prior to the Closing Date,
any shareholder agreement to which SDI, any SDI Subsidiary or either Shareholder
is a party governing the voting or acquisition of any SDI Capital Stock or any
SDI Subsidiary Securities or the making of corporate policy decisions will be
terminated and become null and void.
Section 5.10 Inconsistent Activities.
Unless and until this Agreement has been terminated pursuant to the
terms hereof, (i) the Shareholders will not entertain any Acquisition Proposal
and will not dispose of or agree to dispose of any of the Shares and (ii) each
of SDI and the Shareholders will not (aa) directly or indirectly take any action
to seek,
43
initiate or encourage any offer from, or negotiate or enter into any agreement
or understanding with, any Person to acquire all or any portion of the business
or any SDI Capital Stock or any right, title or interest in the Two Products
whether by merger, purchase, purchase of assets, license or other similar
transaction, or (bb) disclose (other than to USSC or its agents) any information
not customarily disclosed in the ordinary course of business or legally required
to be disclosed concerning the business, properties or assets of SDI.
Section 5.11 Stock Transfer Tax; Transfer Taxes. Prior to the Closing
Date, SDI shall cause each Person to pay, or reimburse SDI for, any and all
stock transfer taxes and any other transfer taxes imposed upon SDI as a result
of the transactions contemplated hereby and due in connection with the
transactions contemplated by this Agreement.
Section 5.12 Advice of Changes. Between the date hereof and the Closing
Date, SDI and the Shareholders, on the one hand, and USSC, on the other hand (a
"Notifying Party") will notify the other parties to this Agreement (the
"Notified Party") promptly in writing of the occurrence of any condition or
event that would cause any representation or warranty of the Notifying Party
contained herein to be untrue in any material respect at any time between the
date hereof and the Closing Date. The Notified Party shall have the right to
terminate this Agreement to the extent permitted under Section 8.01. In the
event that the transactions contemplated hereby are consummated the
representations and warranties of the Notifying Party contained herein and the
Notifying Party's Disclosure Schedule shall be deemed to have been amended by
such notification as of the date of the Notifying Party's notice.
Section 5.13 Professional Fees. Without limiting the generality of
Section 12.02, the Shareholders shall pay and discharge all fees, costs and
expenses for legal, accounting and financial services rendered by all Persons
(A) to the Shareholders, and (B) to SDI (i) in the preparation, negotiation and
consummation of this Agreement, any other agreement to be executed between or
among USSC, USSC Transitory Sub, SDI and the Shareholders relating to the
transactions contemplated hereby and (ii) in the preparation, updating,
44
completion or finalization of their respective corporate books and records (i.e.
"housekeeping" work) so that such books and records would be reasonably complete
and up to date during the past six (6) months to enable SDI and the SDI
Subsidiaries to commence or proceed with preparation and negotiation of this
Agreement.
Section 5.14 Dissolution of Subsidiaries. SDI shall use reasonable
efforts to dissolve, prior to the Closing Date, Surgical Dynamics Ltd., Inc., a
United States Virgin Islands corporation and Surgical Dynamics Puerto Rico,
Inc., a Delaware corporation.
Section 5.15 Tax Returns. Prior to the Closing, the Shareholders shall
engage Xxxxx Xxxxxxxx L.L.P. to prepare promptly following the Closing all
income Tax returns required to be filed with any Taxing Authority after the
Closing Date with respect to any Taxable period ending on or prior to the
Closing Date, by or on behalf of SDI and any SDI Subsidiary (collectively, the
"SDI Post Closing Returns"). The Shareholders shall cause the SDI Post Closing
Returns to be signed on behalf of SDI and the SDI Subsidiaries by Xxxxx Xxxxx
(or if he is unable to act for any reason, another individual designated by the
Shareholders), provided that USSC shall have appointed Xxxxx Xxxxx or such other
individual an officer of SDI or the applicable SDI Subsidiary for this purpose
and, thereafter, SDI will file the SDI Post Closing Returns; provided further
and on condition that USSC shall cause SDI to provide reasonable cooperation to
the Shareholders in connection therewith. To the extent that no accrual, reserve
or other provision has been made for the Taxes due thereon on SDI's or such
SDI's Subsidiary's financial records as of the Closing Date or on the Interim
Balance Sheet, the deficiency shall be paid by the Shareholders and the
Shareholders hereby agree to indemnify, defend and hold USSC harmless from and
against any and all such deficiencies. USSC, or at its discretion, SDI shall
reimburse the Shareholders for the amount of Xxxxx Xxxxxxxx L.L.P.'s fees and
expenses to prepare the SDI Post Closing Returns up to an aggregate of Twenty
Thousand Dollars ($20,000), provided (i) the SDI Post Closing Returns shall have
been signed, as herein provided, and (ii) USSC shall have been provided with
appropriate
45
documentation concerning such fees and expenses. Otherwise, the Shareholders
shall be responsible for such fees and expenses.
ARTICLE VI
COVENANTS OF USSC
USSC agrees as follows:
Section 6.01 Confidentiality. USSC and USSC Transitory Sub will each
hold in confidence all information provided to it by or on behalf of the
Shareholders or SDI relating to SDI or any SDI Subsidiaries (and any information
derived therefrom, or reflecting any such information, prepared by or on behalf
of USSC or USSC Transitory Sub) in confidence and will not (a) disclose any such
information other than to directors, officers, employees and agents of USSC or
USSC Transitory Sub who need to know such information for the purposes of the
transactions contemplated by this Agreement and as required in connection with
making any regulatory application or complying with any other applicable Law; or
(b) use such information for any purpose other than to evaluate the transactions
contemplated by this Agreement. Upon any termination of this Agreement, USSC and
USSC Transitory Sub will promptly return to SDI and the Shareholders all such
information and will destroy any such information prepared by USSC or USSC
Transitory Sub or on its behalf, including any copies of such information. This
Section 6.01 shall not apply to: (i) information now or hereafter in the public
domain through no fault of USSC or USSC Transitory Sub; (ii) information which
USSC and USSC Transitory Sub knew (and was not restricted from disclosing or
using) and was in documentary form before USSC or USSC Transitory Sub first
contacted SDI or the Shareholders, or their representatives in connection with
the transactions contemplated herein; (iii) information obtained from a source
other than SDI or the Shareholders or their accountants, provided that such
source was not at the time it furnished such information bound by
confidentiality obligations for the benefit of SDI or the Shareholders in
respect thereof and had authorization to disclose same; and (iv) compliance with
any applicable Law or the regulation or rule of any stock
46
exchange, by USSC, USSC Transitory Sub or any of their Affiliates, provided that
the Shareholders are given reasonable time and opportunity to contest such
disclosure.
Section 6.02 Commercially Reasonable Efforts. USSC will use
commercially reasonable efforts to cause the conditions set forth in Section
7.02 to be satisfied as soon as practicable after the date hereof.
Section 6.03 [CONFIDENTIAL MATERIAL OMITTED]
Section 6.04 Consents; Regulatory Approval. USSC will take all such
commercially reasonable actions as may be necessary to obtain all approvals or
consents from third parties or regulatory or governmental agencies necessary or
advisable in order to permit the consummation of the transactions contemplated
in this Agreement. Without limiting the foregoing, USSC will cooperate with SDI
or either Shareholder in connection with the preparation of any filing required
by the HSR Act.
Section 6.05 Securities Covenant. USSC and USSC Transitory Sub each
hereby confirms its understanding and agreement that the Shares and Surviving
Corporation Shares have not been, nor will they be, registered under the
Securities Act or any state securities law. USSC and USSC Transitory Sub each
further acknowledges that it has been afforded the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from, the
47
Shareholders concerning the Shares and Surviving Corporation Shares and SDI. The
foregoing shall not be deemed to limit the representations and warranties of SDI
and the Shareholders in this Agreement.
Section 6.06 Other Post-Closing Actions. USSC shall not cause or permit
(a) any distribution on the Closing Date or for a period of two (2) years after
the Closing by the Surviving Corporation with respect to the stock of the
Surviving Corporation, including without limitation, a dividend distribution and
a distribution in partial or complete liquidation of the Surviving Corporation
or (b) the filing of an election pursuant to Section 338 of the Code with
respect to the Merger.
Section 6.07 [CONFIDENTIAL MATERIAL OMITTED]
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.01 Conditions to the Obligations of USSC. The obligations of
USSC and USSC Transitory Sub to proceed with the Closing contemplated hereby are
subject to the satisfaction at or prior to the Closing Date of all of the
following conditions in all material respects, any one or more of which may be
waived, in whole or in part, by USSC:
(a) Compliance. SDI and the Shareholders shall have complied in all
material respects with each of their respective covenants and agreements
48
contained herein and, except as affected by any action contemplated by or
permitted under this Agreement, or as consented to in writing by USSC, each of
the representations and warranties of the Shareholders contained herein shall be
true and correct in all material respects at and as of the Closing Date as if
made as of the Closing Date, except (i) those representations and warranties
that relate to a date prior to the Closing Date or (ii) where such
non-compliance or failure to be true and correct does not have a Material
Adverse Effect on SDI's Business Condition.
(b) Officer's Certificate. USSC shall have received a certificate from
the President of SDI that, to his knowledge and belief, the conditions set forth
in Section 7.01 have been fulfilled and accomplished.
(c) Legal Opinions. USSC shall have received opinions of Greene,
Radovsky, Xxxxxxx & Share, counsel to SDI; Xxxxxxx Xxxxxxxx & Xxxxxxxx, counsel
to E-Z-SUB and E-Z-M and Bogatin P. L. C., counsel to CalMed dated the Closing
Date, respectively, substantially in the form(s) of Exhibits C, D and E attached
hereto.
(d) Consents, Approvals, etc. Obtained. SDI shall have given any and
all required notices of the transactions contemplated by this Agreement, and
shall have obtained any and all written consents required for the transactions
contemplated by this Agreement, pursuant to its Certificate of Incorporation and
Bylaws and pursuant to each material contract, loan, or agreement, plan, policy,
lease, permit, license and other document or instrument specified in any Exhibit
or Schedule hereto as requiring such notice or consent, except (i) to the extent
the consent or approval is covered by Section 7.03, or (ii) where the failure to
do so would not have a Material Adverse Effect on SDI's Business Condition. No
terminations or defaults shall have occurred, by reason of this Agreement or the
transactions contemplated hereby, pursuant to any material contract, loan,
agreement, plan, policy, lease, permit, license or any other document or
instrument specified in any Exhibit or Schedule attached hereto that would have
a Material Adverse Effect on SDI's Business Condition.
49
(e) Professionals. On or prior to the Closing Date, all existing
agreements between SDI and any SDI Subsidiary, on the one hand, and Green,
Radovsky, Xxxxxx & Share and Xxxxxxx Xxxxxxxx & Xxxxxxxx shall have been
terminated. The Shareholders shall provide to USSC on the Closing Date evidence
of same (reasonably satisfactory to USSC), including, without limitation,
invoices from all Professionals as of the month end immediately preceding the
Closing Date to the extent SDI can obtain them with reasonable commercial
efforts, and releases signed by Greene, Radovsky, Xxxxxx & Share and Xxxxxxx
Xxxxxxxx & Xxxxxxxx.
(f) Interim Balance Sheet and Other Documents. USSC shall have received
(i) the Interim Balance Sheet with a certificate from the President of SDI that,
to his knowledge and belief and except for footnote disclosures and period end
adjustments, the Interim Balance Sheet was prepared in accordance with GAAP
consistently applied and fairly presents the financial position of SDI as of the
date thereof, and (ii) SDI's corporate minute and stock record books.
(g) Change in Condition. There shall have been no Material Adverse
Effect on SDI's Business Condition since the date of this Agreement.
(h) Eckvest Release. USSC shall have received a written release from
Eckvest Equity, Inc. with respect to any fees or expenses due from SDI as a
result of the transactions contemplated hereunder, or any other claim of any
kind or amount.
(i) Resignations. SDI shall have delivered to USSC the resignations
(including a waiver of any claim as a director for directors fees or other
claims against SDI) effective as of the Closing Date, of each director and
officer of SDI.
Section 7.02 Conditions to the Obligations of the Shareholders. The
obligations of SDI and the Shareholders to proceed with the transactions
contemplated hereby are subject to the satisfaction at or prior to the Closing
Date of all of the following conditions in all material respects any one or more
of which may be waived, in whole or in part, by SDI and the Shareholders:
50
(a) Compliance. USSC and USSC Transitory Sub shall each have complied
in all material respects with each of its covenants and agreements contained
herein (including, without limitation, the payment provided in Section
2.03(b)(iv)) and, except as affected by any action contemplated by or permitted
under this Agreement, or as consented to in writing by the Shareholders, each of
the representations and warranties of USSC and USSC Transitory Sub contained in
Article IV hereof shall be true and correct in all material respects at and as
of the Closing Date as if made at and as of the Closing Date, except those
representations and warranties that relate to a date prior to the Closing Date.
(b) Officer's Certificate. The Shareholders shall have received a
certificate, dated the Closing Date, signed by a Senior Vice President of USSC
certifying that, to the best of his knowledge and belief, all of the conditions
set forth in Section 7.02 have been fulfilled and accomplished.
(c) Legal Opinion. The Shareholders shall have received an opinion of
Xxxxxx X. Xxxxxx, Esq., Senior Vice President and General Counsel to USSC, dated
the Closing Date, substantially in the form of Exhibit F attached hereto.
(d) Consents, Approvals, etc. Obtained. USSC and USSC Transitory Sub
shall have given any and all required notices of the transactions contemplated
by this Agreement, and shall have obtained any and all written consents required
for the transactions contemplated by this Agreement, pursuant to its certificate
of incorporation and by-laws and pursuant to each material contract, loan, or
agreement, plan, policy, lease, permit, license and other document or instrument
specified in any Exhibit or Schedule hereto as requiring such notice or consent
except (i) to the extent the consent or approval is covered by Section 7.03, or
(ii) where the failure to do so would not have a Material Adverse Effect on
USSC's Business Condition. No terminations or defaults shall have occurred, by
reason of this Agreement or the transactions contemplated hereby, pursuant to
any material contract, loan, agreement, plan, policy, lease, permit, license or
any other document or instrument specified in any Exhibit or Schedule attached
hereto.
51
Section 7.03 Conditions to Each Party's Obligations. The respective
obligations of each party to proceed with the Closing are subject to the
condition that on or prior to the Closing Date (a) any Governmental Body having
jurisdiction, to the extent required by Law, shall have consented to or approved
the consummation of the transactions contemplated by this Agreement and the
applicable period of time necessary under the HSR Act before such transaction
can be consummated shall have expired, and (b) there shall not be in effect (i)
any Action, judgment, decree or order issued by, or pending before any Federal
or state court or Governmental Body having jurisdiction or (ii) any Law, enacted
or promulgated by any Governmental Body having jurisdiction, that in either case
of (i) or (ii) restrains, prohibits the consummation of the transactions
contemplated by this Agreement or makes such consummation illegal, provided,
that, any party hereto may contest or appeal any such judgment, decree, order or
the applicability of any such Law, at its own expense, and upon notice from such
party to the other parties of such contest or appeal, the Outside Date shall be
automatically extended from day-to-day (for a period not to exceed sixty (60)
days) until the final disposition of such contest or appeal.
ARTICLE VIII
TERMINATION
Section 8.01 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing Date:
(i) by the mutual written agreement of all of the parties
hereto;
(ii) by USSC if a Material Adverse Effect on SDI's Business
Condition has occurred.
(iii) by any party, if the conditions set forth in Section
7.03 are not satisfied on or before the Outside Date or as extended in
accordance with such Section;
52
(iv) by USSC if the conditions in Section 7.01 are not
satisfied or waived on or before the Scheduled Closing Date;
(v) by the Shareholders, if the conditions in Section 7.02 are
not satisfied or waived on or before the Scheduled Closing Date;
Termination of this Agreement pursuant to any of the foregoing clauses (ii)
through (v) shall be effective upon notice of such termination from the party
terminating this Agreement to each of the other parties.
Section 8.02 Termination Circumstances. If any party becomes aware of
facts or circumstances that would entitle such party to terminate this Agreement
pursuant to Section 8.01, such party shall give immediate notice of such facts
or circumstances to the other party or parties, who, notwithstanding any other
provision in this Agreement (including, without limitation, the requirement that
the Closing occur on or before the Outside Date), shall have ten (10) Business
Days in which to rectify such facts or circumstances and the notifying party
shall not be entitled to terminate this Agreement, if such facts or
circumstances are so rectified. In the event that such notice is given less than
ten (10) Business Days prior to the Outside Date, the Outside Date shall be
extended to a date which is fourteen (14) Business Days after the date of such
notice.
Section 8.03 Effect of Termination
(a) If this Agreement is terminated as permitted by Section
8.01 (a "Termination"), except as provided in Section 2.05, such Termination
shall be without liability of any party (or any shareholders, director, officer,
employee, agent, consultant or representative of any party) to the other parties
to this Agreement; provided that if such Termination shall result from
deliberate and intentional failure of a party to (i) fulfill a condition to the
performance of the obligations of one of the other parties or (ii) to perform
any covenants of such party under this Agreement, such party shall be fully
liable for any and all costs and expenses sustained or incurred by the other
party or parties as a result of
53
such failure. For greater certainty, the inaccuracy of any representation or
breach of any warranty by a party shall not result in such party being liable
for any damages, costs or expenses sustained or incurred by any other parties as
a result thereof.
(b) Notwithstanding any other provision hereof, if there is a
Termination neither SDI, nor any Affiliate of SDI, nor either Shareholder nor
any such Shareholder's Affiliate shall have any liability to USSC or USSC
Transitory Sub and neither USSC Transitory Sub nor USSC shall pursue any remedy
against SDI, such Shareholder or any Affiliate thereof, for any breach of any
representations, warranties or covenants, or the failure to perform a condition
by or of SDI or any Shareholder hereunder except (i) to the extent provided in
this Section (a) of this Section 8.03 or (ii) any breach of Section 5.08 hereof.
Nothing hereinabove in this Section 8.03 is intended to limit USSC's or USSC
Transitory Sub's rights under this Agreement to the return of the Deposit.
ARTICLE IX
EXTENT AND SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS; INDEMNIFICATION
Section 9.01 [CONFIDENTIAL MATERIAL OMITTED]
54
Section 9.02 [CONFIDENTIAL MATERIAL OMITTED]
55
ARTICLE X
[CONFIDENTIAL MATERIAL OMITTED]
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ARTICLE XI
Non-Compete/Tax Matters
Section 11.01 Non Compete.
(a) Each of the Shareholders hereby covenants and agrees that for a
period of two (2) years from the Closing Date, or if shorter, for as long as
will legally be allowed from the Closing Date, not to, directly or indirectly,
become engaged, or render services, or have any interest (whether as a partner,
stockholder, joint venturer or owner) directly or indirectly, to or in any
Person other than USSC, engaged, or about to become engaged, to the knowledge of
such Shareholder, anywhere in the world, or, if less, in any parts thereof as
will be legally enforceable, in the business of development, manufacture,
marketing or sale of (i) spinal fusion cages or for interlocking fusions or the
treatment of lower back pain, or (ii) devices for or endoscopic lumbar
discectomy.
(b) If any covenant set forth in Section 11.01 is construed by a court
of competent jurisdiction to be unenforceable because of its scope or duration,
the affected parties agree that such court shall have the power to modify such
scope or duration and, as so modified, said covenant shall be given full force
and effect. If any of such covenant or a portion thereof is otherwise construed
to be invalid or unenforceable, the same shall not affect the remaining covenant
or remaining portion, which shall be given full force and effect without regard
to the invalid covenant or portion, and without regard to the invalid covenant
or portion.
(c) Each Shareholder acknowledges and agrees that any breach of this
Section 11.01 by such Shareholder would likely cause irreparable injury to USSC
and that USSC's remedy at law for any such breach would be inadequate.
Accordingly, each Shareholder agrees that in addition to any other remedies
provided for herein temporary and permanent injunctive relief may be granted in
any proceeding which may be brought by USSC to enforce any violation of this
Section 11.01 by such Shareholder from its willful misconduct.
(d) The parties acknowledge and agree that the covenants contained in
this
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Section 11.01 are materially significant and essential to the transactions
contemplated by this Agreement.
11.02 Taxable Purchases. It is understood, agreed and intended by the
parties that the Merger will be treated for U.S. Federal income tax purposes as
taxable purchase of the Shares by USSC, pursuant to the principles enunciated in
revenue ruling 73-427, and the parties agree to take no positions inconsistent
with the treatment of the Merger as a taxable stock purchase by USSC of the
Shares for Federal income tax purposes.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices. All notices, consents, waivers, approvals or
other communications required or permitted hereunder shall be in writing and
shall be sufficiently given if delivered by messenger, sent by recognized
overnight courier service, prepaid, or by registered or certified mail return
receipt requested, postage paid as follows, and any such notice or communication
shall be deemed to have been given: (a) if delivered by messenger on the day of
delivery, if a Business Day and if not, on the first Business Day thereafter (b)
if sent via courier on the next Business Day, or (c) if sent by mail, on the
third Business Day after mailing:
To USSC and USSC Transitory Sub: United States Surgical Corporation
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Senior Vice President and
General Counsel
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To E-Z-M AND E-Z-SUB:
E-Z-EM, Inc.
000 Xxxx
Xxxxxxxx, XX 00000-0000
Attention: Xx. Xxxxxx X. Xxxxxx
President & CEO
Copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
To CalMed: CalMed Laboratories, Inc.
c/o Xxxxx Xxxxx
000 Xxxxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Copy to: Xxxxx Xxxxxxxx, Esq.
Greene, Radovsky, Xxxxxxx & Share
Xxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
To Surgical Dynamics: 0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx,
Attention: Chief Executive Officer
Section 12.02 Certain Expenses and Costs. All legal and other expenses
incurred in connection with the transactions contemplated by this Agreement,
shall be paid by the party incurring such expenses.
Section 12.03 Binding Effect; Successors and Assigns; No Third Party
Benefit. This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns; provided, however, that
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neither this Agreement nor any right hereunder may be assigned by any party
without the consent of the other parties. Except as otherwise set forth herein,
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and valid
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement.
Section 12.04 Entire Agreement; Amendment. This Agreement, including
the Schedules and Exhibits hereto, embodies the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect thereto, except for
the Confidential Disclosure Agreement dated April 3, 1995 and the Evaluation
Agreement dated August 3, 1995 which shall continue in full force and effect.
This Agreement may be amended, and any provision hereof waived, but only in
writing signed by all the parties hereto. In addition, the inclusion in an
Exhibit, Schedule, certificate or other document of information that is not,
pursuant to this Agreement, required to be included therein, shall not have the
effect of changing any threshold or otherwise modifying any requirement(s) of
disclosure.
Section 12.05 Further Assurances. SDI, the Shareholders and USSC each
agree, prior to and after the Closing Date, to cooperate with the other and to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to implement expeditiously the transactions contemplated by this
Agreement.
Section 12.06 Governing Law. This Agreement shall be governed by and
construed under and in accordance with the internal laws of the State of New
York without giving effect to its principle of conflict of law.
Section 12.07 Consent to Jurisdiction. USSC, USSC Transitory Sub , SDI
and each of the Shareholders hereby irrevocably agree that any Action arising
out of this Agreement may be brought against all or any of them in any competent
court of the State of New York or in any competent court of the United States
65
located within the State of New York. Service of process with respect to any
such Action may be made upon it by certified first class mail, postage pre-paid,
sent to the addressees set forth in Section 12.01 above, and that any such
service of process shall be taken as valid personal service upon it being
effective five (5) Business Days after mailing as aforesaid, whether or not
USSC, USSC Transitory Sub, SDI or such Shareholder shall then be doing, or any
time shall have done, business within New York.
Section 12.08 Specific Performance. The Shareholders acknowledge that
because the Shares are unique, USSC and USSC Transitory Sub will have no
adequate remedy at law if the Shareholders fail to perform any of their
obligations hereunder, and that in such event, USSC and USSC Transitory Sub will
have the right, in addition to any other remedies it may have, to specific
performance of this Agreement.
Section 12.09 Public Announcements. SDI and the Shareholders shall
cooperate with USSC in the preparation and the timing of the release of a USSC
press release concerning this transaction. Neither SDI or the Shareholders shall
issue a press release, or make any public announcement, comment or statement
concerning this transaction or any aspects of this Agreement without first
advising and receiving the written consent of USSC in advance; provided that
E-Z-M may make any public announcement or statement it deems appropriate, in its
sole discretion, to comply with applicable Law or the rules of any exchange on
which its shares are listed, provided that E-Z-M provide a copy of the proposed
public announcement or statement as far in advance as is reasonably possible.
Section 12.10 Waiver. No waiver by either party, express or implied, of
any breach of any term, condition, or obligation of this Agreement shall be
construed as a waiver of any subsequent breach of any term, condition, or
obligation of this Agreement, whether of the same or different nature.
Section 12.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
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each of the parties and delivered to the other parties.
Section 12.12 Captions. The captions and headings used herein and in
the Exhibits and Schedules hereto are intended and shall for all purposes be
deemed to be for convenience of reference only and shall be of no force or
effect whatsoever in the construction or interpretation of this Agreement.
Section 12.13 Priority. Where the same matter falls within both
specific as well as general provisions of this Agreement, the specific
provisions shall be controlling and take priority over the general provisions.
Section 12.14 Attorneys' Fees. If any Action (other than an arbitration
proceeding) is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions hereof, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in
connection with that Action, in addition to any other relief to which it or they
may be entitled.
Section 12.15 E-Z-M/E-Z-SUB. E-Z-M and E-Z-SUB hereby jointly and
severally represent and warrant to USSC that E-Z-SUB is a wholly-owned
subsidiary of E-Z-M. E-Z- M and E-Z-SUB jointly and severally covenant and agree
with USSC that (a) representations and warranties made by E-Z-SUB in this
Agreement and any documents executed in connection with this Agreement are
hereby adopted as and shall be deemed representations and warranties made by
E-Z-M, which shall be jointly and severally liable in all respects with E-Z-SUB
with respect thereto and that (b) all covenants and agreements on the part of
E-Z- SUB to be performed, observed and complied with hereunder are adopted and
are covenants and agreements of E-Z-M as if it were the party obliged to
perform, observe and comply with such covenants and agreements, it being the
intent hereof that E-Z-M shall be jointly and severally liable to USSC for the
performance, observance and compliance by E-Z-SUB for all of E-Z-SUB's covenants
and agreement hereunder and for the correctness of all E-Z- SUB's
representations and warranties hereunder.
67
Section 12.16 USSC/USSC Transitory Sub. USSC and USSC Transitory Sub
hereby jointly and severally represent and warrant to SDI and the Shareholders
that USSC Transitory Sub is a wholly-owned subsidiary of USSC. USSC and USSC
Transitory Sub jointly and severally covenant and agree with SDI and the
Shareholders that (a) representations and warranties made by USSC Transitory Sub
in this Agreement and any documents executed in connection with this Agreement
are hereby adopted as and shall be deemed representations and warranties made by
USSC, which shall be jointly and severally liable in all respects with USSC
Transitory Sub with respect thereto and that (b) all covenants and agreements on
the part of USSC Transitory Sub to be performed, observed and complied with
hereunder are adopted and are covenants and agreements of USSC as if it were the
party obliged to perform, observe and comply with such covenants and agreements,
it being the intent hereof that USSC shall be jointly and severally liable to
SDI and the Shareholders for the performance, observance and compliance by USSC
Transitory Sub for all of USSC Transitory Sub's covenants and agreements
hereunder and for the correctness of all USSC Transitory Sub's representations
and warranties hereunder.
ARTICLE XIII
ARBITRATION OF CERTAIN CLAIMS
Section 13.01 Arbitration of Certain Claims.
(a) With respect to disputes between the parties (i) as to which of the
parties has the right to receive the Deposit under Section 2.05, or (ii) arising
under Section 10.02 or 10.03 , either USSC or a Shareholder may, by notice to
the other, demand arbitration of the matter which shall be settled by final and
binding arbitration conducted by a panel of three arbitrators. Within fifteen
(15) days after such notice is sent, USSC and the Shareholder shall each select
one arbitrator, and the two arbitrators so selected shall select a third
arbitrator. The decision of the arbitrators as to the validity and amount of any
claim shall be binding and conclusive upon the affected parties, and the parties
shall be entitled to act in accordance with such
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decision. Judgment upon any award rendered by the arbitrators may be entered in
any court having jurisdiction.
(b) Any such arbitration shall be held in New York, New York under the
Rules of Practice and Procedure (the "Rules") of Judicial Arbitration &
Mediation Services, Inc. ("JAMS"). The parties shall have the same discovery
rights as parties to a civil action in the Supreme Court of New York would have.
Such arbitration shall be governed by the laws of the State of New York, In any
such arbitration hereunder, each party shall pay its own expenses, including the
expenses of the arbitrator it selects plus one-half of the expenses of the third
arbitrator, unless the award made by the arbitrator provides for a party to pay
such expenses.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
UNITED STATES SURGICAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President and
General Counsel
USSC ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: President
SURGICAL DYNAMICS INC.
By: /s/ Xxxxx Xxxxx
---------------
Name: Xxxxx Xxxxx
Title: President
E-Z-EM INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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CALMED LABORATORIES, INC.
By: /s/ Xxxxx Xxxxx
---------------
Name: Xxxxx Xxxxx
Title: President
E-Z-SUB, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title: Treasurer and Secretary
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