MERGER AGREEMENT
This Merger Agreement (hereinafter called this "Agreement"), dated as of
the 10th day of December, 1996 ("Closing Date") by and among Xxxxxxx Medical
Products, a Utah corporation ("Xxxxxxx"), Xxxxxxx Acquisition Corporation, a
Colorado corporation, all of whose capital stock is owned directly by Xxxxxxx
("Merger Sub"), and Cardiotronics Systems, Incorporated, aka Cardiotronics
Systems, Inc., a Colorado corporation ("Cardiotronics").
Stock Purchase Agreements have been executed by and among Xxxxxxx, Merger
Sub, and certain stockholders of Cardiotronics, whereby Merger Sub has purchased
over ninety percent (90%) of the outstanding shares of Cardiotronics ("Stock
Purchase Agreement").
The Boards of Directors of Xxxxxxx, Merger Sub and Cardiotronics deem it
advisable for the mutual benefit of Xxxxxxx, Merger Sub and Cardiotronics, and
their respective shareholders, that Xxxxxxx acquire Cardiotronics by the merger
of Merger Sub into Cardiotronics under the terms and conditions hereinafter set
forth (the "Merger"), and have adopted resolutions authorizing the transactions
contemplated by this Agreement.
Xxxxxxx, the sole shareholder of Merger Sub, deems it advisable and in its
best interest for Xxxxxxx to acquire Cardiotronics by the Merger, and has
adopted resolutions authorizing the transactions contemplated by this Agreement.
In consideration of the premises and of the mutual agreements,
representations, warranties and covenants contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Actions to be Taken. Subject to the terms and conditions of
this Agreement, including the fulfillment (or waiver) of all conditions to the
obligations of the parties contained herein, at the Effective Time (as
hereinafter defined) and pursuant to Title 7 of the Colorado Revised Statutes
(the "Colorado Statutes"), the following shall occur:
(a) Merger Sub shall be merged with and into Cardiotronics, which
shall be the surviving corporation (the "Surviving Corporation"). The
separate existence and corporate organization of Merger Sub shall cease at
the Effective Time, and thereupon Cardiotronics and Merger Sub shall be a
single corporation, the name of which shall be "Cardiotronics."
(b) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the Colorado Statutes. Without
limiting the generality of the foregoing, at the Effective Time, all the
property, right, privileges, powers and franchises of Cardiotronics and
Merger Sub shall vest in the Surviving Corporation and all debts,
liabilities, obligations, restrictions, disabilities and duties of
Cardiotronics and Merger Sub shall become
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the debts, liabilities, obligations, restrictions, disabilities and duties
of the Surviving Corporation.
(c) The Articles of Incorporation of Cardiotronics shall be and remain
the articles of incorporation of the Surviving Corporation until amended as
provided by law.
(d) The By-Laws of Cardiotronics shall be and remain the by-laws of
the Surviving Corporation until amended, as provided by law or by the
articles of incorporation or the by-laws of the Surviving Corporation.
(e) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors for the Surviving Corporation, each to
hold office in accordance with the Articles of Incorporation and By-laws of
the Surviving Corporation, and the officers of Cardiotronics immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
As soon as practicable after the execution of this Agreement, Articles of Merger
or such other documents as are necessary, properly approved and executed in
accordance with the Colorado Statutes (the "Articles of Merger"), shall be filed
with the Secretary of State of the State of Colorado. The Merger shall become
effective when the Articles of Merger are so filed. (The date and time when the
Merger becomes effective is referred to in this Agreement as the "Effective
Time".)
Section 1.2 Common Stock of Surviving Corporation. At the Effective Time,
each issued and outstanding share of common stock of Merger Sub shall be
converted into one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
Section 1.3 Conversion or Cancellation of Cardiotronics Common Stock and
Cardiotronics Preferred Stock. As of the Effective Time, by virtue of the Merger
and without any action on the part of any holder thereof:
(a) Any shares of Cardiotronics' common stock, par value $0.012 per
share ("Cardiotronics Common Stock"), and any shares of Cardiotronics Class
B Preferred Stock, par value $0.03 per share, Class C preferred stock, par
value $0.03 per share, Class D preferred stock, par value $0.03 per share
and Class E preferred stock, par value $0.03 per share (collectively, the
"Cardiotronics Preferred Stock"), (Cardiotronics Common Stock and
Cardiotronics Preferred Stock being sometimes collectively referred to
herein as "Cardiotronics Capital Stock") then held in the treasury of
Cardiotronics shall be canceled and retired.
(b) Any shares of Cardiotronics Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of
Cardiotronics Preferred
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Stock to be canceled pursuant to Section 1.3(a)) shall be converted into
the number of shares of Cardiotronics Common Stock into which they are
convertible according to their rights and preferences under the Articles of
Incorporation of Cardiotronics. There are outstanding no shares of
Cardiotronics Class B Preferred Stock, 2,764,622 shares of Class C
Convertible Preferred Stock, 2,119,828 shares of Class D Convertible
Preferred Stock and 6,680,172 shares of Class E Convertible Preferred
Stock. Each share of Cardiotronics Preferred Stock is convertible into .25
shares of Cardiotronics Common Stock for a total of 2,891,155 shares of
Cardiotronics Common Stock.
(c) Any shares of Cardiotronics Common Stock issued and outstanding
immediately prior to the Effective Time,
INCLUDING shares of Cardiotronics Common Stock resulting from the
conversion of Cardiotronics Preferred Stock pursuant to Section 1.3(b)
above;
BUT EXCLUDING any shares of Cardiotronics Common Stock to be canceled
pursuant to Section 1.3(a) above;
AND EXCLUDING any shares with respect to which the statutory right of
dissent has been perfected, as provided in Section 1.4 below;
shall be exchanged for Three Dollars and Seventy-Five Cents ($3.75) per
share ("Purchase Price").
Section 1.4 Dissenting Shares. Each holder of shares of Cardiotronics
Capital Stock who has complied with all requirements for perfecting shareholders
rights of dissent, as set forth in Article 113 of the Colorado Statutes, shall
be entitled to such dissenters' rights under the Colorado Statutes with respect
to such shares (the "Dissenting Shares").
Section 1.5 Cardiotronics Options. At the Closing Date, each then
outstanding option ("Cardiotronics Option") granted under the Cardiotronics 1993
Stock Option Plan, 1994 Stock Option Plan and 1995 Stock Option Plan
(collectively, the "Cardiotronics Stock Option Plans"), which has an exercise
price, regardless whether such option has vested or is exercisable, of less than
the Purchase Price shall be converted into the right to receive from Merger Sub
an amount equal to the difference between the Purchase Price and the exercise
price for such option; provided that such optionholder agrees to cancel in
writing any remaining options. All remaining outstanding Cardiotronics Options
granted under the Cardiotronics Stock Option Plans will remain outstanding.
Section 1.6 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Xxxxxxx shall deposit,
or shall cause to be deposited, with Corporate Stock Transfer or such other
bank or trust company
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as may be designated by Xxxxxxx and is reasonably satisfactory to
Cardiotronics (the "Exchange Agent"), for the benefit of the holders of
shares of Cardiotronics Capital Stock, for exchange in accordance with this
Article I through the Exchange Agent, cash sufficient to purchase all
outstanding shares of Cardiotronics Capital Stock purchasable pursuant to
Section 1.3.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Xxxxxxx shall cause the Exchange Agent to mail to each
holder of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Cardiotronics Capital
Stock (the "Certificates") (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent, and shall be in customary form) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
cash. Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly executed, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange
therefor cash equal to that number of shares of Cardiotronics Common Stock
formerly represented by such Certificate (after taking into account all
shares of Cardiotronics Common Stock then held by such holder) multiplied
by the Purchase Price. In the event of transfer of ownership of shares of
Cardiotronics Capital Stock which transfer is not registered in the
transfer records of Cardiotronics, cash equal to that number of shares of
Cardiotronics Common Stock multiplied by the Purchase Price may be paid to
a transferee if the Certificate representing such shares of Cardiotronics
Capital Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 1.6, each Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive
cash upon such surrender.
(c) Lost Certificates. Notwithstanding the requirements of any
provision of this Section 1.6 that Certificates be deposited with or
surrendered to the Exchange Agent, in the event Certificates have become
destroyed, lost or stolen, in lieu of such deposit or surrender registered
holders of such Certificates shall furnish to the Exchange Agent, evidence
satisfactory to the Exchange Agent, in its discretion, of the ownership of
and the destruction, loss or theft of such Certificates, and shall furnish
to the Exchange Agent, an indemnity satisfactory to it and to Xxxxxxx, in
their discretion, and shall comply with such other reasonable regulations
as the Exchange Agent may prescribe.
Section 1.7 Articles of Merger; Other Necessary Documents. The Board of
Directors of Cardiotronics shall take such actions as are necessary, as set
forth in Colorado Business Corporation Act Section 0-000-000, to effectuate the
Merger; including, but not limited to, causing the Articles of Merger to be
filed with the Secretary of State of the State of Colorado and taking such other
and
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further actions as may be required by the Colorado Statutes in connection with
such filing and in order to consummate the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF XXXXXXX AND MERGER SUB
Xxxxxxx and Merger Sub represent, warrant to, and agree with, Cardiotronics
as follows:
Section 2.1 Corporate Organization. Xxxxxxx is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Utah, Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado and each has all requisite
corporate power and authority to own, operate and lease its properties and to
conduct its business as it is now being conducted. Each of Xxxxxxx'x significant
subsidiaries (the term "significant subsidiary" being defined for purposes of
this Agreement in Section 8.7) is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation, and Xxxxxxx and each of its significant subsidiaries is duly
qualified or licensed as a foreign corporation in each other jurisdiction where
it owns or leases substantial properties, except where the failure to be so
qualified or licensed would not have a material adverse effect on the financial
condition, properties or businesses of Xxxxxxx and its subsidiaries taken as a
whole. Xxxxxxx has previously delivered to Cardiotronics a true and complete
copy of its Articles of Incorporation and By-Laws.
Section 2.2 Authorization, Execution and Delivery. Xxxxxxx and Merger Sub
each has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the other agreements and documents referred to herein to which
Xxxxxxx or Merger Sub is or will be a party or a signatory (the "Xxxxxxx
Ancillary Agreements") by Xxxxxxx and Merger Sub and the consummation of the
transactions contemplated hereby have been duly authorized by the respective
Board of Directors of Xxxxxxx and Merger Sub and no other corporate proceedings
on the part of Xxxxxxx are necessary to authorize the execution and delivery
Agreement and the transactions contemplated hereby or thereby. This Agreement
has been duly and validly executed and delivered by Xxxxxxx and Merger Sub and
constitutes, and upon execution and delivery thereof as contemplated by this
Agreement, the Xxxxxxx Ancillary Agreements will constitute, the legal, valid
and binding agreements of Xxxxxxx and Merger Sub, enforceable against Xxxxxxx
and Merger Sub in accordance with its and their respective terms, except to the
extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies ("Enforceability Exceptions"). Neither Xxxxxxx nor
Merger Sub is subject to or obligated under any charter, by-law or contract
provision or any note, mortgage, lease, agreement, bond, indenture, instrument,
license, franchise or permit, or subject to any order, judgment, injunction,
writ or decree, which would be breached or violated by its executing or carrying
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out of this Agreement, except for breaches or violations, if any, which
individually or in the aggregate would not have a material adverse effect on the
financial condition, properties or businesses of Xxxxxxx and its subsidiaries
taken as a whole. Other than in connection with or in compliance with the
provisions and requirements of the Colorado Statutes, the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the NYSE and the securities or blue sky laws of
the various states, no authorization, consent or approval of, or filing with,
any public body or governmental authority is necessary for the consummation by
Xxxxxxx or Merger Sub of the transactions contemplated by this Agreement, except
for such authorizations, consents, approvals or filings, the failure to obtain
or make which would not have a material adverse effect on the financial
condition, properties or businesses of Xxxxxxx and its subsidiaries taken as a
whole.
Section 2.3 Reports; Accuracy of Information. Xxxxxxx has previously
furnished to Cardiotronics true and complete copies of its Annual Reports on
Form 10-K (including all amendments thereto) filed with the SEC for each of its
fiscal years ended September 30, 1993 through September 30, 1996, inclusive, and
a true and complete copy of its Quarterly Reports (including all amendments
thereto) on Form 10-Q filed with the SEC for each of the fiscal quarters ended
December 31, 1995, March 31, 1996 and June 30, 1996 (the "Xxxxxxx Reports").
Each of the balance sheets included in the Xxxxxxx Reports, as finally amended
(including any related notes and schedules), fairly presents the consolidated
financial position of Xxxxxxx as of its date and the other financial statements
included in the Xxxxxxx Reports, as finally amended (including any related notes
and schedules), fairly present the consolidated results of operations or other
information included therein of Xxxxxxx for the periods or as of the dates
therein set forth, subject, where appropriate, to normal year-end adjustments,
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved (except as otherwise stated
therein). Xxxxxxx also has previously furnished to Cardiotronics a true and
complete copy of (i) each final prospectus and definitive proxy statement filed
by Xxxxxxx with the SEC since September 30, 1996 and (ii) each report other than
the Xxxxxxx Reports filed by Xxxxxxx with the SEC since September 30, 1996. None
of the documents referred to in this Section 2.3 contained, as of its date, any
untrue statement of a material fact or any omission to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 2.4 Absence of Changes. Except as described in any document
referred to in Section 2.3, since September 30, 1996, there has not been any
material adverse change in the financial condition, properties or businesses of
Xxxxxxx and its subsidiaries taken as a whole.
Section 2.5 Compliance with Laws. The businesses of Xxxxxxx and its
subsidiaries are not being conducted in violation of any applicable law,
ordinance, regulation, decree or order of any governmental entity ("Laws"),
except for violations which either singly or in the aggregate do not and are not
expected to have a material adverse effect on the financial condition,
properties or businesses of Xxxxxxx and its subsidiaries taken as a whole.
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Section 2.6 Legal Proceedings. Except for matters referred to in any of the
documents referred to in Section 2.3, (i) to the best of Xxxxxxx'x knowledge, no
material investigation or review by any governmental entity with respect to
Xxxxxxx or any of its subsidiaries is pending or threatened, nor has any
governmental entity indicated to Xxxxxxx an intention to conduct the same, and
(ii) there is no action, suit or proceeding, pending or, to the best of
Xxxxxxx'x knowledge, threatened against or affecting Xxxxxxx or its subsidiaries
at law or in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
which either singly or in the aggregate is likely to result in any material
adverse change in the financial condition, properties or businesses of Xxxxxxx
and its subsidiaries taken as a whole.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CARDIOTRONICS
Except as set forth in the Disclosure Memorandum to the Merger Agreement,
dated as of the Closing Date ("Cardiotronics Disclosure Memorandum"),
Cardiotronics represents, warrants to, and agrees with, Xxxxxxx and Merger Sub
as follows:
Section 3.1 Corporate Organization. Cardiotronics is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and is duly qualified or licensed as a foreign corporation in each
other jurisdiction where it owns or leases substantial properties, except where
the failure to be so qualified or licensed would not have a material adverse
effect on the financial condition, properties or businesses of Cardiotronics and
its subsidiaries taken as a whole ("Cardiotronics' Business"). Cardiotronics has
one subsidiary, R2 Medical Systems, Inc. ("R2"), which is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified or licensed as a foreign
corporation in each other jurisdiction where it owns or leases substantial
properties, except where the failure to be so qualified or licensed would not
have a material adverse effect on the financial condition, properties or
businesses of Cardiotronics and its subsidiary taken as a whole. Cardiotronics
has no subsidiaries other than R2. Cardiotronics has no interest, direct or
indirect, and has no commitment to purchase any interest, direct or indirect, in
any other corporation (except R2) or in any partnership, joint venture or other
business enterprise or entity. Cardiotronics and its subsidiary have the
requisite corporate power and authority to carry on their respective business as
it is now being conducted. Cardiotronics has previously delivered to Xxxxxxx a
true and complete copy of its Certificate of Incorporation and By-Laws.
Section 3.2 Capitalization. The authorized capital stock of Cardiotronics
consists of 100,000,000 shares of Cardiotronics Common Stock, of which 476,686
shares were outstanding on November 27, 1996, and 40,000,000 shares of Preferred
Stock, par value $0.03 per share ("Cardiotronics Preferred Stock"), of which 0
shares of Class B Preferred Stock ("Cardiotronics Class B Preferred Stock"),
2,764,622 shares of Class C Convertible Preferred Stock ("Cardiotronics
7
Class C Preferred Stock"), 2,119,828 shares of Class D Convertible Preferred
Stock ("Cardiotronics Class D Preferred Stock") and 6,680,172 shares of Class E
Convertible Preferred Stock ("Cardiotronics Class E Preferred Stock") were
outstanding on November 27, 1996. As of November 27, 1996, each share of
Cardiotronics Preferred Stock is convertible into .25 shares of Cardiotronics
Common Stock for a total of 2,891,155 shares of Cardiotronics Common Stock. All
of the outstanding shares of Cardiotronics Common Stock and Cardiotronics
Preferred Stock have been validly issued and are fully paid and nonassessable.
The issuance and sale of all Cardiotronics Capital Stock has been in full
compliance with all applicable federal and state securities laws. As of November
27, 1996, Cardiotronics had reserved up to 11,973,369 authorized but unissued
shares of Cardiotronics Common Stock for issuance: (i) pursuant to outstanding
options under the Cardiotronics 1993 Stock Option Plan, (ii) pursuant to
outstanding options under the Cardiotronics 1994 Stock Option Plan, (iii)
pursuant to outstanding options under the Cardiotronics 1995 Stock Option Plan,
(iv) pursuant to outstanding underwriter's warrants, (v) pursuant to options
granted to key employees under their employment agreements and (vi) upon
conversion of the Cardiotronics Preferred Stock. Except as set forth above,
Cardiotronics does not have any shares of its capital stock issued or
outstanding. Except for options to purchase and rights to acquire shares of
Cardiotronics Common Stock granted pursuant to the stock option plans referred
to above, outstanding warrants, options granted pursuant to employment
agreements and rights to acquire shares of Cardiotronics Common Stock upon
conversion of Cardiotronics Preferred Stock (all of the shares of Cardiotronics
Common Stock issuable pursuant to the foregoing being included in the aggregate
number of shares reserved for issuance as of November 27, 1996, as set forth
above), Cardiotronics does not have any outstanding subscriptions, options,
warrants, rights or other agreements or commitments obligating Cardiotronics to
issue shares of its capital stock and there is no authorized or outstanding
security of any kind convertible into or exchangeable for any Cardiotronics
capital stock or securities. All of the shares of Cardiotronics' subsidiary, R2,
have been validly issued, are fully paid and nonassessable and are owned free
and clear of all liens, charges, claims and encumbrances.
Section 3.3 Authorization, Execution and Delivery. Cardiotronics has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
other agreements and documents referred to herein to which Cardiotronics is or
will be a party or a signatory (the "Cardiotronics Ancillary Agreements") and
the consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and, no other corporate proceedings on the
part of Cardiotronics are necessary to authorize this Agreement and the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by Cardiotronics and constitutes, and upon
execution and delivery thereof as contemplated by this Agreement, the
Cardiotronics Ancillary Agreements will constitute, the legal, valid and binding
agreements of Cardiotronics, enforceable against Cardiotronics in accordance
with its and their respective terms, subject to the Enforceability Exceptions.
Cardiotronics is not subject to or obligated under any charter, by-law or
contract provision or any note, mortgage, lease, agreement, bond, indenture,
instrument, license, franchise or permit, or subject to any order, judgment,
injunction, writ or decree, which would be breached or violated by its
8
executing or carrying out this Agreement except for breaches or violations, if
any, which individually and in the aggregate would not have a material adverse
effect on Cardiotronics' Business. Other than in connection with or in
compliance with the provisions and requirements of the Colorado Statutes, the
Securities Act, the Exchange Act, the Nasdaq SmallCap Market and the securities
or blue sky laws of the various states, no authorization, consent or approval
of, or filing with, any public body or governmental authority is necessary for
the consummation by Cardiotronics of the transactions contemplated by this
Agreement, except for such authorizations, consents, approvals or filings, the
failure to obtain or make which would not have a material adverse effect on
Cardiotronics' Business.
Section 3.4 Report, Accuracy of Information. Cardiotronics has previously
furnished to Xxxxxxx true and complete copies of its Annual Reports on Form 10-K
(including all amendments thereto) filed with the SEC for each of its fiscal
years ended December 31, 1993 through December 31, 1995, inclusive, and a true
and complete copy of its Quarterly Reports (including all amendments thereto) on
Form 10-Q filed with the SEC for each of the fiscal quarters ended March 31,
1996, June 30, 1996, and September 30, 1996 (the "Cardiotronics Reports"). Each
of the balance sheets included in the Cardiotronics Reports, as finally amended
(including any related notes and schedules), fairly presents the consolidated
financial position of Cardiotronics as of its date and the other financial
statements included in the Cardiotronics Reports, as finally amended (including
any related notes and schedules), fairly present the consolidated results of
operations or other information included therein of Cardiotronics for the
periods or as of the dates therein set forth, subject, where appropriate, to
normal year-end adjustments, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved (except
as otherwise stated therein). Cardiotronics has also previously furnished to
Xxxxxxx a true and complete copy of (i) each final prospectus and definitive
proxy statement filed by Cardiotronics or any of its significant subsidiaries
with the SEC since December 31, 1995, and (ii) each report other than the
Cardiotronics Reports filed by Cardiotronics with the SEC since December 31,
1995. None of the documents referred to in this Section 3.4 contained, as of its
date, any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 3.5 Liabilities.
(a) As of September 30, 1996, Cardiotronics did not have any
liabilities or obligations of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become due), in
excess of $10,000 in any single instance and $25,000 in the aggregate
(including without limitation any tax liabilities or deferred tax
liabilities, or any other debts, liabilities, or obligations relating to or
arising out of any act, omission, transaction, circumstance, sale of goods
or services, state of facts, or other condition which occurred on or before
September 30, 1996, whether or not then known, due, or payable), which were
not accurately and fully reflected or reserved against in accordance with
generally accepted accounting principles in the September 30, 1996 Balance
Sheet included in Cardiotronics' Form 10-Q for the quarter ending September
30, 1996.
9
(b) As of December 31, 1995, Cardiotronics did not have any
liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due), in excess of
$10,000 in any single instance and $25,000 in the aggregate (including
without limitation any tax liabilities or deferred tax liabilities, or any
other debts, liabilities, or obligations relating to or arising out of any
act, omission, transaction, circumstance, sale of goods or services, state
of facts, or other condition which occurred on or before December 31, 1995,
whether or not then known, due, or payable), which were not accurately and
fully reflected or reserved against in the December 31, 1995 Balance Sheet
included in Cardiotronics' Form 10-K for the year ending December 31, 1995.
(c) All of Cardiotronics' liabilities and obligations of any nature
whatsoever (whether absolute, accrued, contingent, or otherwise and whether
due or to become due), arising after September 30, 1996 and in excess of
$10,000 in any single instance and $25,000 in the aggregate, as of October
31, 1996 are itemized in the Cardiotronics Disclosure Memorandum, including
the name, telephone number, and address of the creditor, the nature of the
obligation, and the balance owed.
Section 3.6 Certain Asset Listings and Descriptions.
(a) The Cardiotronics Disclosure Memorandum sets forth an accurate and
complete list and description, as of the Closing Date, of all real property
in which Cardiotronics has a leasehold or other interest or which is used
by Cardiotronics in connection with the operation of its business, together
with a description of each lease, sublease, license, or any other
instrument under which Cardiotronics claims or holds such leasehold or
other interest or right to the use thereof or pursuant to which
Cardiotronics has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof. Cardiotronics
has previously delivered to Xxxxxxx true and complete copies of all such
leases, subleases, licenses and other instruments.
(b) The Cardiotronics Disclosure Memorandum contains an accurate and
complete list and description, as of November 30, 1996, of all machinery,
tools, equipment, motor vehicles, rolling stock and other tangible personal
property (except for individual items having a book value of less than
$5,000 or which do not, in the aggregate, have a total book value of more
than $10,000), setting forth with respect to all such listed property a
summary description of all leases, liens, claims, encumbrances, charges,
restrictions, covenants and conditions relating thereto identifying the
parties thereto, the rental or other payment terms, expiration date and
cancellation and renewal terms thereof.
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(c) Cardiotronics has delivered to Xxxxxxx an accurate and complete
list and description, as of December 6, 1996, of Cardiotronics' inventory
of finished goods, semi- finished goods, work in process, and raw
materials.
Section 3.7 Absence of Changes or Events. Except as described in any
document referred to in Section 3.4, since December 31, 1995 Cardiotronics has
conducted its business only in the ordinary course, and there has not been:
(a) Any material adverse change in Cardiotronics' Business;
(b) Any material loss (whether by damage or destruction, in the nature
of a casualty loss or otherwise, and whether covered by insurance or not),
affecting any tangible property or asset or any intangible assets of
Cardiotronics;
(c) Any entering into of any collective bargaining or other labor
agreement, or any actual or, to the best knowledge of Cardiotronics, any
threatened strike or other labor trouble or dispute which materially
affects or might materially affect the condition (financial or otherwise),
properties, business, operations or prospects of Cardiotronics, nor has
there been any labor union organizing activity;
(d) Any loss or, to the best knowledge of Cardiotronics, any
threatened loss of any permit, license, qualification, special charter or
certificate of authority held or enjoyed or formerly held or enjoyed by
Cardiotronics which loss has had or upon occurrence would have a material
adverse effect on the condition (financial or otherwise), properties,
business, operations or prospects of Cardiotronics;
(e) The adoption or rescission of any statute, regulation, order,
ordinance or other law, which materially adversely affects the condition
(financial or otherwise), properties, business, operations or prospects of
Cardiotronics;
(f) Any material indebtedness, liability or obligation (whether
absolute, accrued, contingent or otherwise) incurred by Cardiotronics or
any transaction entered into by Cardiotronics, other than in the ordinary
course of business and consistent with past practice, or any guarantee by
Cardiotronics of any indebtedness, liability or obligation of any other
person;
(g) Any declaration, setting aside or payment of any dividend or other
distribution in respect of any of the capital stock or other securities of
Cardiotronics;
(h) Any material obligation, liability, lien or encumbrance paid,
discharged or satisfied by or on behalf of Cardiotronics other than current
liabilities reflected on the
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December 31, 1995 Balance Sheet and current liabilities incurred since
December 31, 1995 in the ordinary course of business and consistent with
past practices;
(i) Any material mortgage, lien, pledge, charge or encumbrance
affecting the properties of Cardiotronics (except liens for current
property taxes not yet due and payable) created, suffered or assumed by or
on behalf of Cardiotronics;
(j) Any sale, transfer or other disposition of any material tangible
asset of Cardiotronics or any cancellation or compromise of any debt to or
claim of Cardiotronics, except in the ordinary course of business and
consistent with past practice, nor has there been any disposition of any of
Cardiotronics' material intangible or intellectual properties, assets or
rights, nor has there been any waiver or cancellation of any right of
substantial value;
(k) Any loan made or increased by Cardiotronics, including any loan to
any officer, director, employee or agent of Cardiotronics or to any member
of any of their families;
(l) Any material capital expenditure, addition or improvement made or
committed to be made by or on behalf of Cardiotronics;
(m) Any material failure on the part of Cardiotronics to operate in
the ordinary course so as to preserve its Business organization intact, to
retain the services of its employees and to preserve its goodwill and
relationships with customers, suppliers, creditors and others having
business relationships with it;
(n) Any material write-off as uncollectible of any notes or accounts
receivable, or any portions thereof;
(o) Any material failure to maintain the financial books and records
of Cardiotronics in the usual, regular and ordinary manner and in
accordance with good business practice or any material change in any
accounting principle or practice of Cardiotronics;
(p) Any notice received by Cardiotronics of termination of any
material contract, lease, or other agreement;
(q) Any change by Cardiotronics in its banking or safe deposit
arrangements;
(r) Any institution, settlement, or agreement to settle, any
litigation, action, or proceeding before any court or governmental body
relating to Cardiotronics' Business or assets which would have a material
adverse effect on the business, operations or financial condition of
Cardiotronics;
12
(s) Any material failure to replenish Cardiotronics' inventories and
supplies in a normal and customary manner consistent with its prior
practice and prudent business practices; nor has there been any purchase
commitment in excess of the normal, ordinary, and usual requirements of
Cardiotronics' Business; nor has there been any change in Cardiotronics'
selling, pricing, advertising, or personnel practices inconsistent with
prior practice and prudent business practices; or
(t) Any agreement or commitment by Cardiotronics to do any of the
foregoing items set forth in paragraphs (c), (f), (g), (h), (i), (j), (k),
(l), (n), (q), (r) or (s).
Section 3.8 Title to Assets and Properties; Condition.
(a) Cardiotronics owns or leases or otherwise has the right to use all
of its assets and properties, which are presently being used in or are
reasonably necessary to carry on its business and operations as presently
conducted, and such assets, properties and agreements are all of the
assets, properties and agreements which are used in or are reasonably
necessary to carry on its business and operations as presently conducted.
All assets and properties leased or owned are located in Cardiotronics'
offices in Carlsbad, California.
(b) Each lease or agreement under which Cardiotronics is a lessee of
any property, real or personal, owned by a third party is a valid and
continuing agreement without any default of Cardiotronics thereunder or, to
the best knowledge of Cardiotronics, of the other party thereto, and this
Agreement and the consummation of the transactions contemplated hereby will
not cause any default under any such lease or agreement.
(c) Cardiotronics has good and marketable title to all property and
assets which it owns, free and clear of all mortgages, liens, pledges,
charges, claims, encumbrances or restrictions of any kind whatsoever
(whether accrued, absolute, contingent, or otherwise), except liens for
current property taxes not yet due and payable and liens that do not
materially interfere with the ability of Cardiotronics to conduct its
business or qualify as "material" liens.
(d) Cardiotronics has not received any notice of violation of any
regulation, ordinance, law, order or other requirement relating to the
property, real or personal, or Cardiotronics' Business. Cardiotronics is
unaware of any changes in any such regulation, ordinance, law, order or
other requirement affecting any such property or any condemnation
proceeding, pending or threatened, which might prohibit Cardiotronics from
continuing its present use of such property or from using such property for
the purpose for which it was acquired, or which might curtail or interfere
with the present or proposed use of such property.
(e) The furniture, fixtures, leaseholds, equipment and other personal
property of Cardiotronics are in good operating condition and repair.
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Section 3.9 Accounts Receivables. The Cardiotronics Disclosure Memorandum
contains an accurate and complete list of all receivables of Cardiotronics as of
December 6, 1996. All receivables of Cardiotronics (including accounts
receivable, loans receivable, and advances) have arisen from and represent
arms-length, bona fide transactions made in the ordinary course of business. The
receivables of Cardiotronics are good and collectible (net of applicable reserve
for bad debts).
Section 3.10 Taxes. Cardiotronics has filed all federal Tax returns and all
state and foreign tax returns required to be filed, and has paid, or has made
adequate provision or set up an adequate accrual or reserve for the payment of,
all Taxes required to be paid in respect of all periods for which returns have
been made or are due, and has established an adequate accrual or reserve for the
payment of all Taxes payable in respect of the period subsequent to the last of
said periods required to be so accrued or reserved (except in either case in an
amount not material), and in its opinion it has no material liability for Taxes
in excess of the amount so paid or accruals or reserves so established.
Cardiotronics is not delinquent in the payment of any material Tax and is not
delinquent in the filing of any Tax returns, and no material deficiencies for
any Tax have been threatened, claimed, proposed or assessed. The Cardiotronics
U.S., state and foreign income tax returns, respectively, have never been
audited by the Internal Revenue Service or comparable state or foreign agencies.
For the purposes of this Agreement (except for purposes of the preceding
sentence), the term "Tax" shall include all federal, state, local, foreign,
income, gains, franchise, excise, property, sales, use, license, payroll,
occupation, recording, value added or transfer taxes, governmental charges,
fees, levies or assessments (whether payable directly or by withholding), and
includes, with respect to such taxes, any estimated tax, interest and penalties
or additions to tax and interest on such penalties and additions to tax.
Section 3.11 Compliance with Laws.
(a) The Business of Cardiotronics and its subsidiary are not being
conducted in violation of any applicable Laws, except for violations which
either singly or in the aggregate do not and are not expected to have a
material adverse effect on Cardiotronics' Business.
(b) Cardiotronics is in material compliance with all Federal, state
and local laws and regulations regarding the release of toxic or hazardous
materials or other pollutants or contaminants (together "Hazardous
Substances") into the atmosphere or the generation, storage or treatment of
Hazardous Substances, and there are no Hazardous Substances in the
buildings or soil on, or in the ground water under, any properties which
are owned or leased by Cardiotronics which could result in an obligation of
Cardiotronics to remedy the condition. There is no other liability of
Cardiotronics under any Federal, state or local law or regulation relating
to the environment.
Section 3.12 Legal Proceedings. Except for matters referred to in any of
the documents referred to in Section 3.4, (i) no material investigation or
review by any governmental entity with
14
respect to Cardiotronics or any of its subsidiaries is pending or, to the best
knowledge of Cardiotronics, threatened, nor has any governmental entity
indicated to Cardiotronics an intention to conduct the same, and (ii) there is
no action, suit or proceeding pending or, to the best knowledge of
Cardiotronics, threatened against or affecting Cardiotronics or its subsidiaries
at law or in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
which either singly or in the aggregate is likely to result in any material
adverse change in Cardiotronics' Business.
Section 3.13 Agreements with Employees.
(a) The Cardiotronics Disclosure Memorandum contains a list of (i) all
written employment agreements, commission plans, bonus plans and all
material unwritten employment agreements with any employee or agent of
Cardiotronics, and the total compensation (separately stating salary and
bonus or other compensation) payable to each of them, including the fringe
benefits (other than those made available to employees generally) provided
to each of them, (ii) all officers and directors of Cardiotronics and the
total compensation (separately stating salary and bonus) paid to each of
them in 1995 and payable to each of them in 1996, including the fringe
benefits (other than those made available to employees generally) provided
to each of them, (iii) a list of each present and former employee of
Cardiotronics paid in excess of $30,000 during the year ended December 31,
1995; and any employee of Cardiotronics paid in excess of $30,000 on an
annualized basis after December 31, 1995, and the job description or title
and the total compensation of each such employee, and (iv) all employee
handbooks, brochures or booklets setting forth the employment policies or
practices of Cardiotronics.
(b) Cardiotronics is not in default in any material respect with
respect to its payment or benefit obligations to its employees.
(c) A listing of departments of Cardiotronics, including employee job
classifications, numbers of employees and compensation ranges is referenced
in the Cardiotronics Disclosure Memorandum.
(d) Cardiotronics has no contract or collective bargaining agreement
with any union. None of the employees of Cardiotronics are members of any
union.
(e) There is no employee of Cardiotronics who cannot be dismissed upon
receiving reasonable notice of termination.
(f) Cardiotronics has withheld from payments to employees all Taxes
(as defined in Section 3.10) and other deductions required to be withheld
under federal, state, and local law, and has timely paid and remitted such
amounts (together with required employer contributions in respect thereof)
to the appropriate authorities.
15
Section 3.14 Employee Benefit Plans.
(a) For purposes of this Section 3.14, the term "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended, and the terms
"employee welfare benefit plan" and "employee pension benefit plan" have
the meanings set forth in ERISA Section 3(1) and 3(2), respectively.
(b) Cardiotronics has never maintained or participated in any profit
sharing (defined contribution) plan or in any employee welfare benefit plan
or employee pension benefit plan.
(c) No employee of Cardiotronics participates in, and Cardiotronics
does not participate in or contribute to, a multi-employer plan (as defined
in Section 3(37) of ERISA).
(d) Cardiotronics is not a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) or under common
control (as defined in Section 414(c) of the Code) with any other trade or
business (whether or not incorporated).
Section 3.15 Licenses, Patents, Trademarks, Etc.
(a) The Cardiotronics Disclosure Memorandum sets forth an accurate and
complete list, as of the Closing Date, of all permits, franchises,
approvals, authorizations, consents, licenses, identification numbers,
accreditations and registrations ("Licenses"), if any, issued or granted
to, or held by Cardiotronics or any affiliate of Cardiotronics, and
indicating the person or entity to which any such License was issued. All
such Licenses are valid and in full force and effect, no proceedings or
actions with respect to the suspension, cancellation or any other aspect of
any of them is pending or, to the best knowledge of Cardiotronics,
threatened, and no basis exists therefor and the transactions contemplated
hereby will not affect such Licenses.
(b) The Cardiotronics Disclosure Memorandum sets forth an accurate and
complete list, as of the Closing Date, of all domestic and foreign patents,
patent and know- how licenses, trade names, trademark and service xxxx
registrations, common law trademarks, copyright registrations, copyrights,
and applications for any of the foregoing ("Intellectual Properties"),
owned or used in the conduct of the Business of Cardiotronics, specifying
the jurisdiction in or by which such Intellectual Properties have been
registered, filed or issued. All Intellectual Properties are valid.
(c) Cardiotronics has all Licenses and owns, or possesses adequate
rights to use, all Intellectual Properties and all inventions, technology,
processes, products, designs, computer programs, know-how, trade secrets
and formulae necessary to conduct its Business
16
and there are no actual or, to the best knowledge of Cardiotronics,
threatened claims, assertions or litigation (nor to the best knowledge of
Cardiotronics is there any basis therefor) relating to Cardiotronics'
ability to use the foregoing. There are no pending, and to the best of
knowledge of Cardiotronics knowledge, no threatened interferences or
oppositions involving any patents or patent applications of Cardiotronics.
Cardiotronics is not infringing upon or otherwise violating the rights of
any third party with respect to any of Cardiotronics' products.
Cardiotronics has not received any written claim or notice alleging any
such infringement or violation. No proceedings have been instituted against
Cardiotronics, nor, to the best knowledge of Cardiotronics, are any
proceedings threatened alleging any such infringement or violation.
Cardiotronics does not know of any basis for any such proceeding or claim.
There is no infringement claim or other adverse judgment or order against
Cardiotronics with respect to any of the foregoing. There are no material
infringements of any Cardiotronics Intellectual Properties.
(d) Cardiotronics has not received any claim that any employee
affiliated with Cardiotronics has, in respect of his or her activities to
date, violated any of the terms or conditions of an employment contract
with any third party, or disclosed or utilized any trade secrets or
proprietary information or documentation of any third party, or interfered
in the employment relationship between any third party and any of its
employees.
(e) Cardiotronics has taken reasonable measures to maintain the
confidentiality of its processes and formulas, research and development
results, and other know-how, the value of which is dependent upon the
maintenance of the confidentiality thereof.
(f) Cardiotronics owns all of the technology, patents, trade secrets,
and other intellectual properties and assets it received in the merger
transaction with R2, and R2 owns all of its technology, patents, trade
secrets, and other intellectual properties and assets, free and clear of
any liens, valid claims, encumbrances, or title defects whatsoever.
Section 3.16 Contracts, Agreements, Etc.
(a) Except as set forth and briefly described in the Cardiotronics
Disclosure Memorandum, Cardiotronics is not a party to, or bound by, any
material contract, agreement, understanding, commitment or engagement.
Other than purchase and sales orders entered into in the ordinary course of
business, the Cardiotronics Disclosure Memorandum lists and describes any
and all contracts, agreements, commitments and engagements material to
Cardiotronics (the "Contracts"), as of the Closing Date, including without
limitation all (i) supply and service contracts to which Cardiotronics is a
party as vendor or vendee, (ii) contracts for the purchase or lease of
capital equipment, (iii) consulting contracts and agreements, (iv) OEM
contracts, (v) employee health and welfare, pension, bonus, life,
hospitalization or other insurance, medical, deferred or incentive
compensation, profit sharing, loan and other employee benefit plans or
arrangements, (vi) contracts or agreements
17
regarding credit or borrowed money, (vii) guaranties, (viii) letters of
credit, (ix) surety and indemnification agreements, (x) confidentiality
agreements, (xi) covenants not to compete, (xii) leases of real property,
as lessor or lessee, (xiii) leases of personal property, as lessor or
lessee, (xiv) all contracts and agreements regarding Licenses and
Intellectual Properties, (xv) all agreements or commitments regarding debts
and equity securities of Cardiotronics and any interest therein, (xvi) all
contracts and agreements regarding the distribution or payment of profits
or dividends, (xvii) all contracts and agreements regarding the allocation
or sharing of Taxes or otherwise with respect to Taxes, (xviii) all
agreements regarding financial, Cardiotronics or advisory services to be
rendered by or for Cardiotronics, (xix) all contracts regarding product
distribution, (xx) all contracts and agreements involving more than
$20,000, and (xxi) any contract or agreement not entered into in the
ordinary course of business.
(b) All such Contracts are valid and binding obligations of
Cardiotronics and in full force and effect as of the Closing Date, and no
breach or default (or event or condition, which after notice or lapse of
time, or both would constitute a breach or default) by Cardiotronics or, to
the best knowledge of Cardiotronics, any other party thereto exists with
respect thereto, and this Agreement and the transactions contemplated
hereby will not cause any breach or default thereof.
Section 3.17 Customers. The Cardiotronics Disclosure Memorandum contains an
accurate and complete list of the fifty largest customers of Cardiotronics for
the calendar year 1995 and through the first ten months of 1996, including the
revenues from such customers for those reporting periods.
Section 3.18 Insurance. The Cardiotronics Disclosure Memorandum contains an
accurate and complete list and brief description (including policy number,
nature of coverage, limits, deductibles, premiums, carriers and effective and
termination dates) of all policies of insurance in effect as of the Closing Date
with respect to Cardiotronics. All such policies are in full force and effect.
Cardiotronics has not been denied any insurance or indemnity bond and no
insurance carrier has canceled or reduced any insurance coverage of
Cardiotronics. Cardiotronics has not received any written notice from any
insurer or agent of any intent to cancel or reduce any insurance coverage or
that any substantial improvement or other expenditure with respect to any
insured property is necessary in order to continue such insurance.
Section 3.19 Fees or Commissions. Except for the obligation to Xxxxxx Read
& Co., Inc. ("Xxxxxx Read") previously disclosed by Cardiotronics to Xxxxxxx,
Cardiotronics, (including its officers, directors and employees), has not
employed any broker, agent or finder or incurred any liability for any brokerage
fees, agent's commissions or finder's fees or other similar obligations in
connection with the transactions contemplated hereby.
18
Section 3.20 Illegal Payments. Neither Cardiotronics nor any officer,
director, employee or agent of Cardiotronics, or any other person or entity on
behalf of Cardiotronics, has made or authorized any payment of funds of, or
relating to, Cardiotronics which is prohibited by law, and no funds of
Cardiotronics have been set aside to be used for any payment prohibited by law.
Section 3.21 Powers of Attorney. Except for powers of attorney granted to
its Intellectual Property counsel, neither Cardiotronics nor R2 have granted any
powers of attorney to any entity or person.
Section 3.22 Bank Accounts. The Cardiotronics Disclosure Memorandum
contains a correct and complete list and description of all bank accounts, the
balances thereof as of October 31, 1996, the persons authorized to access such
accounts and to incur indebtedness on behalf of Cardiotronics and a correct and
complete list of all safe deposit boxes of Cardiotronics has previously been
provided to Xxxxxxx.
Section 3.23 No Conflict of Interest. No present (or, to the best knowledge
of Cardiotronics, former) officer or director, and no shareholder, subsidiary,
affiliate or related entity thereof, has or claims to have (a) any interest in
the property, real or personal, tangible or intangible, including without
limitation, Intellectual Properties, Licenses, inventions, technology,
processes, designs, computer programs, knowhow and formulae used in or
pertaining to the Business of Cardiotronics, or (b) any contract, commitment,
arrangement or understanding regarding any of the foregoing. No present officer
or director of Cardiotronics, and no subsidiary has any ownership or stock
interest in any other enterprise, firm, corporation, trust or any other entity
which is engaged in any line or lines of business which are the same as, or
similar to, or competitive with, the line or lines of business of Cardiotronics.
For purposes of this representation, ownership of not more than five percent of
the voting stock of any publicly held corporation whose stock is listed on any
recognized securities exchange or traded over the counter shall be disregarded.
Section 3.24 Fairness Opinion. Cardiotronics' Board of Directors has
received from its financial advisors, Xxxxxx Read, a written opinion addressed
to it to the effect that the Purchase Price is fair to the holders of
Cardiotronics Capital Stock from a financial point of view.
ARTICLE IV
COVENANTS OF CARDIOTRONICS
Section 4.1 Consents, Approvals and Filings. Cardiotronics will use
commercially reasonable efforts to comply as promptly as practicable with the
governmental requirements specified in Section 3.3 which are applicable to the
Merger, if any, and to obtain all applicable orders of governmental and
regulatory authorities referred to in Section 3.3.
19
Section 4.2 Access to Records and Properties. Xxxxxxx may, prior to the
Effective Time, through its employees, agents and representatives, make or cause
to be made a detailed review of the business and financial condition of
Cardiotronics, and make or cause to be made such investigation as it deems
necessary or advisable of the properties, assets, businesses, books and records
of Cardiotronics. Cardiotronics agrees to furnish such assistance as Xxxxxxx may
reasonably request in conducting such review and investigation and will provide,
and will cause its independent public accountants to provide, Xxxxxxx and its
employees, agents and representatives full access to all books, records
(including tax returns filed or in preparation), personnel and premises of
Cardiotronics and the audit work papers and other records of its independent
public accountants and shall provide to Xxxxxxx such other information
concerning the business of Cardiotronics and its subsidiary as Xxxxxxx may
reasonably request.
Section 4.3 Brokerage. Cardiotronics will indemnify and hold Xxxxxxx
harmless from any claim for brokerage or finder's or investment advisor's fees
or commissions arising out of the transactions contemplated hereby by any person
claiming to have been engaged by Cardiotronics.
Section 4.4 Payment of Taxes. Cardiotronics shall pay all Taxes and other
charges, incurred prior to the Effective Time, upon or against its assets, or
sales or income of Cardiotronics' Business, before such Taxes or other charges
become delinquent, except such Taxes or other charges incurred that result from
the Merger and the summation of the transactions contemplated under this
Agreement, and shall pay when due all current liabilities relating to its
assets, except those Taxes, charges and liabilities being contested in good
faith and for which proper reserves are being maintained, or which are not
material in amount.
Section 4.5 Notification of Litigation, Changes. Cardiotronics shall
promptly notify Xxxxxxx in writing of the filing of any litigation, arbitration,
or similar proceeding or the commencement of any dispute which could materially
affect Cardiotronics or its assets or Business.
Section 4.6 Insurance. Cardiotronics shall maintain insurance with good and
responsible companies, including, but not limited to, general liability, product
liability, workers compensation, directors and officers liability, and property
damage insurance, to the extent as is customarily retained by it with respect to
its assets prior to the date of this Agreement, until the Merger has been fully
consummated.
ARTICLE V
COVENANTS OF XXXXXXX
Section 5.1 Brokerage. Xxxxxxx will indemnify and hold Cardiotronics
harmless from any claim for brokerage or finder's or investment advisor's fees
or commissions arising out of the transactions contemplated hereby by any person
claiming to have been engaged by Xxxxxxx.
20
Section 5.2 Conduct of Business of Merger Sub. From the date of this
Agreement to the Effective Time, Merger Sub shall not engage in any activities
of any nature except as contemplated by this Agreement.
Section 5.3 Guarantee of Merger Sub Obligations. Xxxxxxx shall cause Merger
Sub to perform in a timely manner all its obligations, and to comply with all
its agreements, in this Agreement and the Articles of Merger.
Section 5.4 Employee Benefit Plans.
(a) Benefit Plans. After the Effective Time, Xxxxxxx shall arrange for
each employee participating in any of the Benefit Plans of Cardiotronics or
its subsidiary as are in effect on the date hereof to participate in any
counterpart Benefit Plans of Xxxxxxx in accordance with the eligibility
criteria thereof, provided that (i) such participants shall receive full
credit for years of service with Cardiotronics or its subsidiary prior to
the Merger for all purposes for which such service was recognized under the
Benefit Plan of Cardiotronics or its subsidiary including, but not limited
to, recognition of service for eligibility, vesting, and, to the extent not
duplicative of benefits received under such Benefit Plan of Cardiotronics
or its subsidiary, the amount of benefits, (ii) such participants shall
participate in the Benefit Plans of Xxxxxxx on terms no less favorable than
those offered by Xxxxxxx to similarly situated employees of Xxxxxxx; and
(iii) Xxxxxxx shall cause any and all pre-existing condition limitation and
eligibility waiting periods under any group health plans to be waived with
respect to such participants and their eligible dependents to the extent
they are already satisfied or waived.
(b) Change in Control Provisions. Xxxxxxx and Cardiotronics hereby
acknowledge that the Merger and the consummation of the transactions
contemplated under this Agreement will be treated as a "Change in Control"
for purposes of each of the applicable Cardiotronics Benefit Plans and each
applicable employment, severance or similar agreement applicable to any
employee of Cardiotronics or its subsidiary (collectively, "Change in
Control Agreements") and agree to abide by the provisions of any Benefit
Plans and Change in Control Agreements which relate to a Change in Control,
including, but not limited to, the accelerated vesting and/or payment of
equity-based awards.
ARTICLE VI
MUTUAL COVENANTS
Section 6.1 Confidentiality. Xxxxxxx, Merger Sub and Cardiotronics will use
their best efforts to keep confidential any and all information furnished to one
of them by the other or such other's subsidiaries or independent public
accountants in connection with the transactions contemplated by this Agreement,
and the business and financial review and investigation referred to in Section
4.2, except to the extent any such information may be generally available to the
public, and Xxxxxxx,
21
Merger Sub and Cardiotronics have instructed their respective officers,
employees and other representatives having access to such information to comply
with the obligation of confidentiality.
Section 6.2 Expenses. Whether or not the Merger is consummated, Xxxxxxx,
Merger Sub and Cardiotronics each will bear separately its own expenses incurred
in connection with this Agreement or any transaction contemplated by this
Agreement.
Section 6.3 Public Announcements. Cardiotronics and Xxxxxxx agree that,
recognizing that each has independent obligations with respect to the
dissemination of material information to the public and to its shareholders,
they will, to the maximum extent feasible, advise and confer with each other
prior to the issuance of any reports, statements or releases (including reports,
statements or releases to their respective employees) pertaining to this
Agreement and any transaction contemplated by this Agreement.
Section 6.4 Further Assurances. Each party hereto agrees to execute and
deliver such instruments and take such other actions as any other party may
reasonably require in order to carry out the intent of this Agreement.
ARTICLE VII
CLOSING
A closing is being held at the offices of Xxxx, Forward, Xxxxxxxx & Scripps
LLP, 000 Xxxx Xxxxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000, or such other
place as may be mutually satisfactory to the parties. On the Closing Date such
closing documents as agreed to by the parties will be executed and delivered by
the parties.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Amendment and Modification. This Agreement may not be amended,
modified and supplemented with respect to any of the terms contained herein;
provided, however, that this Agreement may be amended, pursuant to an amendment
approved in writing by all of the parties to this Agreement and Xxxxxx X. Xxxxxx
or any subsequent independent director of Cardiotronics, with respect to any of
the terms contained herein.
Section 8.2 Assignment; Binding Upon Successors and Assigns. Neither party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
22
Section 8.3 Survival of Provisions. The respective representations,
warranties, covenants and agreements of each of the parties to this Agreement
shall survive the Closing Date and the consummation of the transactions
contemplated by this Agreement.
Section 8.4 Indemnification. After the Effective Time, Xxxxxxx and Merger
Sub shall indemnify and hold harmless any person who was a director or officer
of Cardiotronics at any time prior to the Effective Time and the heirs,
executors and administrators of any such person, to the extent authorized or
permitted by Cardiotronics' certificate of incorporation or by-laws or provided
pursuant to the Colorado Revised Statutes in effect immediately prior to the
Effective Time, against any liabilities, costs or expenses (including attorneys'
fees) imposed upon or reasonably incurred by him or her in his or her capacity
as, or arising out of his or her status as, or because of his or her having been
a director or officer of Cardiotronics or any of its subsidiaries at any time
prior to the Effective Time, provided that in each such case, such director or
officer reasonably believed that he or she acted in the interest of
Cardiotronics and did not violate his or her fiduciary duty to Cardiotronics.
Such obligations shall apply to any action, suit or proceeding commenced or
threatened before or after the Effective Time. To the extent available, Xxxxxxx
agrees to cause the Surviving Corporation to maintain in effect for not less
than three years after the Closing Date policies of directors' and officers'
liability insurance comparable to those maintained by Cardiotronics with
carriers comparable to Cardiotronics' existing carriers and containing terms and
conditions which are no less advantageous in any material respect to the
officers, directors and employees of Cardiotronics; provided, however, that the
Surviving Corporation shall not be required to pay an annual premium for such
insurance in excess of two times the last annual premium paid prior to the date
hereof, but in such case shall purchase as much coverage as possible for such
amount. Notwithstanding the above, neither Xxxxxxx nor Merger Sub will have any
indemnity liability under this Section 8.4 with respect to any claim, lawsuit or
proceeding brought or commenced by or on behalf of any "affiliates" of
Cardiotronics within the meaning of Rule 145 promulgated by the SEC under the
Securities Act, including, but not limited to, all officers and directors of
Cardiotronics.
Section 8.5 Counterparts; Facsimile Signature. This Agreement may be
executed in one or more counterparts, any of which counterparts may be executed
by facsimile signatures, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 8.6 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered by hand or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which so
hand-delivered or on the third business day following the date on which so
mailed:
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If to Xxxxxxx or Merger Sub:
Xxxxxxx Medical Products
00000 Xxxx Xxxx Xxxxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxx X. Xxxxxxx, President
with a copy to:
Xxxx Xxxx, Esq.
General Counsel
Xxxxxxx Medical Products
00000 Xxxx Xxxx Xxxxxxx
Xxxxxx, Xxxx 00000
If to Cardiotronics:
Cardiotronics Systems, Inc.
0000 Xx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, President and CEO
with a copy to:
Xxxx, Forward, Xxxxxxxx & Scripps LLP
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 0000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Section 8.7 Subsidiaries. When a reference is made in this Agreement to
subsidiaries of Xxxxxxx, the word "subsidiaries" means any corporations of which
more than 50% of their outstanding voting securities are directly or indirectly
owned by Xxxxxxx (as the case may be). When a reference is made in this
Agreement to significant subsidiaries of Xxxxxxx, the words "significant
subsidiaries" shall refer to subsidiaries (as defined above) which constitute
"significant subsidiaries" under Rule 405 promulgated by the SEC under the
Securities Act. Notwithstanding anything contained herein, Cardiotronics shall
not be considered a "subsidiary" or a "significant subsidiary" of Xxxxxxx.
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