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EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
BETWEEN
MATRIA HEALTHCARE, INC., PURCHASER,
AND
XXXXXX MEDICAL MANAGEMENT, L.L.C., SELLER
DATED AS OF DECEMBER 21, 1998
*** Indicates information deleted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2.
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TABLE OF CONTENTS
ARTICLE 1 SALE AND PURCHASE OF STOCK , MEMBERSHIP INTERESTS AND OTHER
ASSETS.............................................................................................................2
1.1 Sale of Stock, Membership Interests and Other Assets at the Closing........................................2
1.2 Purchase Price.............................................................................................5
1.3 Allocation of Purchase Price...............................................................................5
1.4 Payment of Purchase Price..................................................................................5
1.5 Additional Purchase Price Payments.........................................................................6
1.6 Cash Adjustment............................................................................................9
ARTICLE 2 CLOSING.................................................................................................10
2.1 Closing Date..............................................................................................10
2.2 Deliveries of the Seller..................................................................................10
2.3 Deliveries of Purchaser...................................................................................12
ARTICLE 3 ADDITIONAL AGREEMENTS...................................................................................14
3.1 Confidentiality...........................................................................................14
3.2 Access to Premises, Records, Properties, Customers and Employees..........................................14
3.3 Publicity.................................................................................................15
3.4 Acquisition Proposals.....................................................................................15
3.5 Approvals and Consents; Reasonable Efforts................................................................15
3.6 Cooperation of the Parties; Regulatory Approvals..........................................................16
3.7 Expenses..................................................................................................16
3.8 Corporate Names...........................................................................................16
3.9 Xxxx-Xxxxx-Xxxxxx Filings.................................................................................17
3.10 Standstill and Restrictive Covenant Agreements............................................................17
3.11 Lucor Management Agreement................................................................................17
3.12 Tax Matters...............................................................................................17
3.13 Break-Up Fee..............................................................................................18
3.14 Seller and Subsidiary Permits.............................................................................18
3.15 Bulk Sales Law............................................................................................18
3.16 Discharge of Liabilities..................................................................................18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER................................................................19
4.1 Validity..................................................................................................19
4.2 Definition of Material Adverse Effect.....................................................................19
4.3 Corporate and Financial...................................................................................19
4.3.1 Corporate Status......................................................................................19
4.3.2 Authority; No Violation; Consents.....................................................................20
4.3.3 Ownership and Capitalization..........................................................................21
4.3.4 Title to Interest and Assets..........................................................................22
4.3.5 Corporate or Other Books and Records..................................................................22
4.3.6 Taxes.................................................................................................23
4.3.7 Financial Statements..................................................................................24
4.3.8 Accounts..............................................................................................25
4.3.9 Notes Receivable; Accounts Receivable; Accounts Payable...............................................25
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4.3.10 Liabilities.........................................................................................25
4.3.11 Ordinary Course of Business and Absence of Changes..................................................26
4.3.12 Litigation and Proceedings..........................................................................28
4.3.13 RESERVED............................................................................................28
4.3.14 Inventory...........................................................................................28
4.4 Business Operations.......................................................................................28
4.4.1 Customers and Accounts..............................................................................28
4.4.2 Suppliers...........................................................................................29
4.4.3 Environmental.......................................................................................29
4.4.4 Insurance...........................................................................................29
4.4.5 Powers of Attorney..................................................................................30
4.5 Contracts; Properties and Assets..........................................................................30
4.5.1 Contracts...........................................................................................30
4.5.2 Licenses; Intellectual Property.....................................................................31
4.5.3 Title to Assets.....................................................................................32
4.5.4 Conditions of Properties............................................................................33
4.5.5 Real Property and Leases............................................................................33
4.6 Employees and Benefits....................................................................................34
4.6.1 Directors, Officers and Managers....................................................................34
4.6.2 Employees...........................................................................................34
4.6.3 Compensation Structure - Independent Contractors....................................................35
4.6.4 Employee Benefits...................................................................................36
4.6.5 Labor-Related Matters...............................................................................37
4.6.6 Transactions With Management........................................................................38
4.7 Other.....................................................................................................38
4.7.1 Approvals and Consents..............................................................................38
4.7.2 Fraud and Abuse.....................................................................................38
4.7.3 Medicare, Medicaid, and Other Third-Party Payor Payment Liabilities.................................38
4.7.4 Billing Practices and Referral Sources..............................................................39
4.7.5 Contributions, Payments or Gifts....................................................................39
4.7.6 Physician Self-Referrals............................................................................39
4.7.7 Compliance with Laws................................................................................39
4.7.8 Permits.............................................................................................40
4.7.9 Investment Representations..........................................................................41
4.7.10 Brokers.............................................................................................42
4.7.11 Limitation on Warranties............................................................................42
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................................42
5.1 Organization and Good Standing...........................................................................42
5.2 Power and Authority......................................................................................43
5.3 Binding Effect...........................................................................................43
5.4 No Violation; Consents...................................................................................43
5.5 Capitalization...........................................................................................43
5.6 Exchange Act Reports and Financial Statements............................................................44
5.7 Absence of Certain Changes or Events.....................................................................45
5.8 No Shareholder Vote Required.............................................................................46
5.9 Reporting Company; Form S-3..............................................................................46
5.10 Trading on Nasdaq........................................................................................46
5.11 Brokers..................................................................................................46
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5.12 Absence of Litigation; Compliance........................................................................46
5.13 Takeover Status..........................................................................................47
5.14 Corporate Action.........................................................................................47
5.15 Investment Representations...............................................................................47
5.16 Limitation on Warranties.................................................................................48
5.17 Compliance with Securities Laws..........................................................................48
ARTICLE 6 CONDUCT OF BUSINESS OF COMPANY PENDING CLOSING.........................................................48
6.1 Conduct of Business......................................................................................48
6.2 Maintenance of Properties................................................................................49
6.3 Insurance................................................................................................49
6.4 Issuance of Securities...................................................................................49
6.5 Dividends................................................................................................49
6.6 Amendment of Charter.....................................................................................49
6.7 No Acquisitions..........................................................................................49
6.8 Disposition of Assets....................................................................................49
6.9 Compensation.............................................................................................50
6.10 Banking Arrangements.....................................................................................50
6.11 Indebtedness.............................................................................................50
6.12 Payment of Debt..........................................................................................50
6.13 Benefit Plans............................................................................................50
6.14 Contracts................................................................................................50
6.15 Books and Records........................................................................................50
6.16 Other Actions............................................................................................50
6.17 Seller to Advise Purchaser of Changes....................................................................51
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE PURCHASER.............................................................51
7.1 Representations and Warranties...........................................................................51
7.2 Performance of Agreements................................................................................51
7.3 Deliveries...............................................................................................51
7.4 Approvals................................................................................................51
7.5 Financing Obtained by the Purchaser......................................................................51
7.6 No Injunctions...........................................................................................51
7.7 Consents and Approvals of Third Parties..................................................................52
7.8 Resignations.............................................................................................52
7.9 Opinions of Seller's and SZI's Counsel...................................................................52
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER................................................................52
8.1 Representations and Warranties...........................................................................52
8.2 Performance of Agreements................................................................................52
8.3 Deliveries...............................................................................................52
8.4 Approvals................................................................................................53
8.5 No Injunctions...........................................................................................53
8.6 Actions of Purchaser.....................................................................................53
8.7 Certificates of Designation..............................................................................53
8.8 Opinion of Purchaser's Counsel...........................................................................53
ARTICLE 9 INDEMNIFICATION........................................................................................54
9.1 Survival of Representations..............................................................................54
9.2 Indemnification..........................................................................................55
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ARTICLE 10 TERMINATION...........................................................................................60
10.1 Material Adverse Change - Subsidiaries..................................................................60
10.2 Material Adverse Change - Purchaser.....................................................................60
10.3 Noncompliance of Seller.................................................................................60
10.4 Noncompliance of Purchaser..............................................................................60
10.5 Failure to Disclose - Seller............................................................................60
10.6 Failure to Disclose - Purchaser.........................................................................60
10.7 Adverse Proceedings.....................................................................................60
10.8 Termination Date........................................................................................61
10.9 Effect of Termination...................................................................................61
ARTICLE 11 [RESERVED]............................................................................................61
ARTICLE 12 MISCELLANEOUS.........................................................................................61
12.1 Notices.................................................................................................61
12.2 Entire Agreement........................................................................................63
12.3 Waiver; Amendment.......................................................................................63
12.4 Counterparts, Faxed Signatures, Headings, Etc...........................................................63
12.5 Successors and Assigns..................................................................................63
12.6 Governing Law...........................................................................................63
12.7 Remedies, Damages, Injunctions and Specific Performance.................................................64
12.8 Severability, Interpretation............................................................................64
12.9 Further Assurances......................................................................................64
12.10 Law and GAAP Applicable to Foreign Subsidiaries.........................................................64
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SCHEDULES
Schedule 1.1(a)(iv) Permitted Liens
Schedule 1.1(c) Excluded Assets
Schedule 1(e) Excluded Contracts
Schedule 1.3 Allocation of Purchase Price
Schedule 1.4(b) Convertible Preferred Stock
Schedule 1.4(c) Redeemable Preferred Stock
Schedule 4.3.1 Subsidiaries and Foreign Qualifications
Schedule 4.3.3 Stock, Equity Interests, Options, Warrants
Schedule 4.3.4 Seller's Exception to Title
Schedule 4.3.6 Tax Matters
Schedule 4.3.7 Financial Statements
Schedule 4.3.8 Accounts
Schedule 4.3.9 Accounts Receivable
Schedule 4.3.10 Liabilities
Schedule 4.3.11 Changes
Schedule 4.3.12 Litigation and Proceedings
Schedule 4.4.1 Customers and Accounts
Schedule 4.4.2 Suppliers and Managed Care Providers
Schedule 4.4.3 Environmental
Schedule 4.4.4 Insurance
Schedule 4.4.5 Powers of Attorney
Schedule 4.5.1 Contracts and Commitments
Schedule 4.5.2 Licenses; Intellectual Property
Schedule 4.5.3 Subsidiaries' Exceptions to Title
Schedule 4.5.5 Real Property and Leases
Schedule 4.6.1 Officers and Directors
Schedule 4.6.2 Compensation Structure - Employees
Schedule 4.6.3 Compensation Structure - Independent Contractors
Schedule 4.6.4 Employee Benefits
Schedule 4.6.5 Labor-Related Matters
Schedule 4.6.6 Transactions With Management
Schedule 4.7.1 Seller's Approvals and Consents
Schedule 4.7.3 Medicare, Medicaid Liabilities
Schedule 4.7.7 Compliance with Laws
Schedule 4.7.8 Permits
Schedule 5.4 Purchaser Approval and Consents
Schedule 5.5(b) Capitalization
Schedule 5.7 Changes to SEC Disclosures
Schedule 5.12 Litigation
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EXHIBITS
Exhibit A Earn-Out Note
Exhibit B Xxxx of Sale and Assignment
Exhibit C Lucor Management Agreement
Exhibit D Standstill Agreement
Exhibit E Restrictive Covenant Agreement
Exhibit F Registration Rights Agreement
Exhibit G Common Stock Warrant
Exhibit H Assumption Agreement
Exhibit I Subsidiary Assumption Agreement
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered
into as of the 21st day of December, 1998, by and between MATRIA HEALTHCARE,
INC., a Delaware corporation ("Purchaser"), and XXXXXX MEDICAL MANAGEMENT,
L.L.C., a Georgia limited liability company ("GMM" or "Seller").
W I T N E S S E T H:
WHEREAS, GMM owns 100% of the issued and outstanding shares of capital
stock of Xxxxxx Medical Acquisition Corporation, a Georgia corporation
("GMAC"), and GMAC is the owner of 100% of the issued and outstanding shares of
capital stock of USCI-Healthcare Management Solutions, Inc., a Delaware
corporation ("HMS"), and Diabetes Self Care, Inc., a Virginia corporation
("Self Care"); and GMM owns directly or indirectly 100% of the issued and
outstanding shares of capital stock of A.R. Medical Supplies, Inc., a Florida
corporation ("AR Medical") (GMAC, HMS, Self Care, and AR Medical are sometimes
referred to herein collectively as the "Corporation Subsidiaries" and
individually as a "Corporation Subsidiary"); and GMM is the direct or indirect
owner of 100% of the membership interests of the following limited liability
companies: Xxxxxx Medical North America, L.L.C., a Georgia limited liability
company ("Xxxxxx North America"), Xxxxxx Medical Direct, LLC, a Georgia limited
liability company ("Xxxxxx Direct"), Xxxxxx Medical Europe Limited, a limited
company formed under the laws of the United Kingdom ("Xxxxxx Europe"), Xxxxxx
Medical International, L.L.C., a Georgia limited liability company ("Xxxxxx
International"), "Xxxxx" Achtundesechzigste Beteiligungs und
Verwaltungsgesellschaft GmbH, a limited liability company incorporated in the
Federal Republic of Germany ("Germany") and registered in the commercial
register of the local court of Frankfurt under HRB 45034 ("Xxxxx 68"), Hans
M.W. Spreth GmbH, a German limited liability company ("Hans MW"), EU Medical
GmbH, a German limited liability company ("EU Medical"), "Xxxxx"
Eimundsiebsechzigste Beteiligungs und Verwaltungsgesellschaft GmbH, a German
limited liability company ("Xxxxx 71"), and Dia Real Diabetesservice
Kommanditgesellschaft, a limited partnership ("Kommanditgesellschaft"), duly
organized, validly existing and in good standing under the laws of Germany
("Dia Real") (Xxxxx 68, Xxxx XX, EU Medical, Xxxxx 71 and Dia Real are
sometimes referred to herein collectively, as the "German Subsidiaries" and
individually, as a "German Subsidiary") (Xxxxxx North America, Xxxxxx Direct,
Xxxxxx Europe, Xxxxxx International, and the German Subsidiaries are sometimes
referred to herein collectively as the "LLC Subsidiaries" and individually as
an "LLC Subsidiary") (the Corporation Subsidiaries and the LLC Subsidiaries are
sometimes referred to herein collectively as the "Subsidiaries" and
individually as a "Subsidiary"). The Corporation Subsidiaries, together with
Xxxxxx North America and Xxxxxx International are collectively referred to
herein as the "U.S. Subsidiaries." The German Subsidiaries, together with
Xxxxxx Europe are collectively referred to herein as the "Foreign
Subsidiaries."
WHEREAS, the Seller desires to sell and Purchaser desires to purchase
all of the outstanding capital stock of the Corporation Subsidiaries, all of
the outstanding membership interests of the LLC Subsidiaries and certain other
assets of GMM, and thereby acquire all of the
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properties, assets and business of GMM and the Subsidiaries as a going concern,
all pursuant to the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE 1
SALE AND PURCHASE OF STOCK ,
MEMBERSHIP INTERESTS AND OTHER ASSETS
1.1 SALE OF STOCK, MEMBERSHIP INTERESTS AND OTHER ASSETS AT THE
CLOSING.
(a) Subject to the terms and conditions set forth in this
Agreement and on the basis of and in reliance upon the representations,
warranties, obligations and covenants set forth in this Agreement, at the
"Closing" (as defined in Section 2.1 hereof), the Seller hereby agrees to sell,
assign, transfer, convey and deliver to Purchaser, and Purchaser hereby agrees
to purchase and receive from the Seller, free and clear of any and all Liens
(as defined below), all of the business and assets of GMM on the Effective Date
(as defined below) (other than the "Excluded Assets," as defined in Section
1.1(c)) (hereinafter, the "GMM Assets"), including, without limitation, (i)
100% of the outstanding capital stock of GMAC and 100% of the outstanding
membership or other equity interests of Xxxxxx International, Xxxxxx Europe,
Xxxxxx Direct, Xxxxxx North America and Xxxxx 68 (collectively, the
"Interests"), (ii) all rights of Seller under contracts and agreements, (iii)
all cash, cash equivalents, deposits and investments ("Cash Items") shown on
the December 31, 1998 balance sheet of Seller delivered to Purchaser pursuant
to Section 2.2(u) (the "December 31, 1998 Balance Sheet") plus any Cash Items
received by Seller in the ordinary course of the Business (as defined below)
from the Effective Date (as defined below) through the Closing Date (as defined
below) (the "Interim Period") and minus any disbursement of Cash Items by
Seller in the ordinary course of business during the Interim Period, and (iv)
all other assets shown on the December 31, 1998 Balance Sheet to the extent not
disposed of after that date in the ordinary course of business, plus all assets
purchased or received by Seller during the Interim Period. For purposes of this
Agreement, "Lien" shall mean all liens, charges, security interests, claims,
pledges, hypothecations and encumbrances of any nature whatsoever, other than
those liens and other encumbrances listed on Schedule 1.1(a)(iv) (the
"Permitted Liens").
(b) Through the Seller's conveyance of the Interests and other
assets described in Section 1.1(a) to the Purchaser, the Seller intends for the
Purchaser to thereby acquire substantially all of the properties, assets and
business of GMM and the Subsidiaries as a going concern, including, without
limitation, all items of personal property and other assets used in connection
with the business of GMM and the Subsidiaries, whether or not any of such
assets have any value for accounting purposes (collectively, the "Assets"),
free and clear of all Liens. The Seller shall deliver custody and control of
the Assets to the Purchaser at the Closing. The "Business" shall mean the
diabetes supply and disease management business, the microsampling business and
all other businesses operated by the Seller and the Subsidiaries on the date
hereof.
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(c) Notwithstanding the foregoing, the term "Assets" shall not
include the following assets, properties and rights of Seller (collectively,
the "Excluded Assets"):
(i) Seller's minute books and membership interest
ledgers; provided that Purchaser may obtain copies of the foregoing
and Seller hereby covenants to provide Purchaser reasonable access to
the foregoing, for all proper purposes;
(ii) Seller's rights under this Agreement and the other
agreements to be executed in connection herewith;
(iii) those assets, properties and rights set forth on
Schedule 1.1(c);
(iv) claims (and benefits to the extent they arise
therefrom) to the extent they relate to any Excluded Liabilities (as
defined below) of Seller and any other Excluded Assets of Seller; and
(v) rights arising from any refunds due Seller as of the
Effective Date with respect to insurance premium payments of Seller
and income tax refunds due Seller for periods ending on or prior to
the Effective Date from federal, state and local income taxing
authorities.
(d) At the Closing, Purchaser shall execute and deliver to the
Seller the "Assumption Agreement" (as defined in Section 2.3(l) hereof),
pursuant to which Purchaser assumes and agrees to perform, pay and discharge in
accordance with their respective terms the following debts, liabilities and
obligations of Seller (collectively, the "Assumed Liabilities"), as of the
Effective Date:
(i) all debts, liabilities and obligations arising after
the Effective Date under the contracts assigned to Purchaser pursuant
to Section 1.1(a)(ii);
(ii) any liabilities and obligations reflected as current
liabilities on the unaudited balance sheet of Seller dated as of
September 30, 1998 delivered to Purchaser pursuant to Section 2.2(t)
(the "September 30, 1998 Balance Sheet") which remain unpaid or
outstanding on the Closing Date, including, without limitation, all
amounts reflected thereon for accounts payable, accrued taxes, accrued
payroll related expense, accrued professional fees, accrued interest,
intercompany accounts incurred in the ordinary course of Business
between Seller and any Subsidiary and other current liabilities,
including deferred revenue, incurred in the ordinary course of the
Business, but specifically excluding liabilities described as Excluded
Liabilities in Section 1.1(e) hereof (the foregoing type of
liabilities are hereafter referred to as "Current Liabilities");
(iii) the Current Liabilities of Seller, incurred in the
ordinary course of the Business from September 30, 1998 through
Closing but expressly excluding the Excluded Liabilities set forth in
Section 1.1(e) hereof; and
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(iv) any other indebtedness for borrowed money or seller
financing, other than capital lease obligations and related accrued
interest ("Funded Debt") of Seller which Purchaser elects to assume
and which results in a reduction in the Purchase Price pursuant to
Section 1.4.
(e) Notwithstanding anything else contained herein to the
contrary, all liabilities and obligations of Seller (whether known or unknown,
liquidated or unliquidated, contingent or fixed) other than the Assumed
Liabilities (collectively, the "Excluded Liabilities") are not assumed by
Purchaser (regardless of whether any such liabilities or obligations are
disclosed in or pursuant to this Agreement) pursuant hereto and all Excluded
Liabilities (other than those assumed by Xxxxxx North America pursuant to the
Subsidiary Assumption Agreement (as defined in Section 2.3(m)) shall remain the
liabilities and obligations of Seller. Seller hereby agrees that it shall fully
and timely pay, perform and discharge all of its Excluded Liabilities (other
than those assumed by Xxxxxx North America pursuant to the Subsidiary
Assumption Agreement) in accordance with their respective terms. Without
limiting the generality of the foregoing, Excluded Liabilities include, without
limitation, the following, whether or not reflected as Current Liabilities on
the September 30, 1998 Balance Sheet or the December 31, 1998 Balance Sheet:
(i) any liability or obligation arising under any
contract of Seller listed on Schedule 1.1(e) hereof;
(ii) any liability or obligation (including, without
limitation, taxes) related to the Excluded Assets;
(iii) any liability or obligation to any employee of
Seller, not employed by Purchaser or any Subsidiary after the Closing;
(iv) except as set forth on Schedule 1.1(e), any
liability or obligation arising out of any termination by Seller of
the employment of any employee as a result of this transaction or
otherwise and any liability or obligation related to any former
employee of Seller who retired effective as of or prior to the Closing
Date, including, without limitation, any liability under the agreement
dated June 13, 1997 between Seller and Xxxxxxx X. Xxxxxx;
(v) any liability or obligation under any litigation,
arbitration, investigation or other proceeding brought against Seller
with respect to any matter occurring prior to the Closing Date
(regardless of whether it is pending as of or has been threatened or
asserted prior to the Closing Date);
(vi) any liability or obligation for any income taxes
owed by Seller for any period ending on or prior to the Effective Date
and any liability or obligation for any income, sales, use or other
taxes arising in connection with the consummation of the transactions
contemplated by this Agreement; (except to the extent there is a
transfer tax with respect to the transfer of stock under UK law);
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(vii) any liability or obligation of Seller relating to
any breach of contract, breach of warranty, tort, infringement or
violation of law prior to the Closing Date;
(viii) any liability or obligation payable to any member or
affiliate of Seller;
(ix) any liability or obligation of Seller to indemnify
any person by reason of the fact that such person was an employee,
officer, director or agent of Seller (or such person was serving as an
employee, officer, director or agent of any other entity at the
request of Seller) prior to the Closing Date;
(x) any liability or obligation of Seller for costs and
expenses (including, without limitation, professional fees) incurred
in connection with this Agreement and the transactions contemplated
hereby;
(xi) except as set forth in Section 1.1(d)(iv), any
liability or obligation of Seller relating to any bank loan or other
indebtedness for borrowed money, including any accrued interest
thereon; and
(xii) any liability covered by insurance maintained by
Seller immediately prior to the Closing Date, to the extent of such
coverage.
1.2 PURCHASE PRICE. Subject to the provisions of Sections 1.4,
1.5 and 1.6 hereof, as consideration for all of the Interests and Assets to be
acquired by Purchaser pursuant to Section 1.1, Purchaser shall pay to Seller
the aggregate amount of $130,000,000 (the "Purchase Price"). The Purchase Price
shall be allocated as provided in Section 1.3 hereof and paid as provided in
Section 1.4 hereof.
1.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Interests and Assets as provided on Schedule 1.3 hereof.
Each party hereto covenants and agrees that it will not take a position on any
tax return, before any agency charged with collection of any tax, or in any
judicial or administrative proceeding that is in any way inconsistent with the
allocation set forth on Schedule 1.3.
1.4 PAYMENT OF PURCHASE PRICE.
(a) At the Closing, Purchaser shall deliver to the Seller, in
immediately available U.S. funds, by wire transfer to such banks and accounts
in the United States as shall be designated by Seller, or by certified or
official bank checks, the amount of $85,000,000, less the amount of any Funded
Debt of Seller or any Subsidiary that Purchaser elects to assume pursuant to
Section 1.1(d)(iv) or accepts as a liability of a Subsidiary pursuant to
Section 3.16 by notice to Seller not less than 2 days prior to the Closing.
(b) At the Closing, Purchaser shall deliver to the Seller 10,000
shares of the $.01 par value convertible preferred stock of the Purchaser
having a liquidation value of $1,000 per share (the "Convertible Preferred
Stock"). Such Convertible Preferred Stock shall have the rights and preferences
set forth on Schedule 1.4(b) hereof.
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(c) At the Closing, Purchaser shall deliver to the Seller 35,000
shares of the $.01 par value redeemable preferred stock of the Purchaser having
a liquidation value of $1,000 per share (the "Redeemable Preferred Stock").
Such Redeemable Preferred Stock shall have the rights and preferences set forth
on Schedule 1.4(c) hereof.
1.5 ADDITIONAL PURCHASE PRICE PAYMENTS.
(a) Subject to the terms and conditions set forth in this Section
1.5, Purchaser shall make the following additional payments, if any, to the
Seller in consideration for the Interests and Assets, which payments shall be
in addition to the Purchase Price (any such additional payment is referred to
herein as an "Additional Purchase Price Payment"), as follows:
(i) if the aggregate EBITDA (as defined below) of the
Subsidiaries equals or exceeds U.S.$*** during calendar year 1999,
Purchaser shall pay to the Seller an Additional Purchase Price Payment
of $*** for each dollar of aggregate EBITDA between U.S.$*** and
U.S.$***, for a possible Additional Purchase Price Payment of
U.S.$20,000,000;
(ii) for each additional U.S.$*** of aggregate EBITDA of
the Subsidiaries during calendar year 1999 above U.S.$***, Purchaser
shall pay to the Seller an Additional Purchase Price Payment in the
amount of $5,000,000; provided that such Additional Purchase Price
Payments under this clause (ii) shall not exceed $15,000,000;
(iii) provided that if any amount is owing pursuant to
Section 1.5(a)(i) or 1.5(a)(ii) above, Purchaser shall pay to the
Seller an Additional Purchase Price Payment equal to that amount of
interest (at 4% per annum) that would have accrued on the Additional
Purchase Price Payments payable pursuant to Sections 1.5(a)(i) and
(ii) above, if any, had the Earn-Out Note for such Additional Purchase
Price Payments been issued on January 1, 2000, which amount shall be
added to the principal of the Earn-Out Note on the date of issuance;
(iv) provided that if any amount is owing pursuant to
Section 1.5(a)(i) or (ii) above, Purchaser shall pay to the Seller an
Additional Purchase Price Payment equal to that amount of interest (at
8% per annum) that would have accrued on the Additional Purchase Price
Payments payable pursuant to Sections 1.5(a)(i) and (ii) above, if
any, had the Earn-Out Note for such Additional Purchase Price Payments
been issued on January 1, 2000, which Additional Purchase Price
Payment shall be paid in cash at the time of issuance of the Earn-Out
Note as provided below;
(v) if, due to application of the installment sale rules
of the United States Internal Revenue Code of 1986, as amended (the
"Code"), the determination of the Additional Purchase Price Payments
pursuant to clauses (i) and (ii) above causes the gross profit
percentage attributed to the payments of Purchase Price reported by
the Seller for federal income tax purposes as income received by the
Seller in calendar year 1999 (the "1999 Payments") to be higher than
originally reported, Purchaser shall pay Seller an
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Additional Purchase Price Payment hereunder, in an amount equal to the
lesser of (y) $250,000 or (z) the amount of interest payable to the
Internal Revenue Service with respect to any resulting underpayment of
tax on the 1999 Payments, such interest to be computed through that
date which is 30 days after the date on which the amount of the
Additional Purchase Price Payments payable under clauses (i), (ii) and
(iii) above is determined.
Any Additional Purchase Price Payment payable pursuant to this Section
1.5 shall be allocated among the Interests and Assets as provided in Schedule
1.3. Any Additional Purchase Price Payment payable pursuant to Sections
1.5(a)(i), 1.5(a)(ii) and 1.5(a)(iii) shall be paid by the Purchaser by the
delivery to Seller of a note of the Purchaser substantially in the form
attached hereto as Exhibit A (the "Earn-Out Note"), accompanied by an opinion
of Xxxxxxxx Xxxxxxx LLP, counsel for the Purchaser, dated the date of the
Earn-Out Note, in form and substance reasonably satisfactory to Seller. Any
Additional Purchase Price Payment payable pursuant to Section 1.5(a)(v) shall
be paid by Purchaser in cash, either by wire transfer or certified or official
bank checks within 10 days of Seller's delivery to Purchaser of a detailed
calculation of the amount due. Any Additional Purchase Price Payment payable
pursuant to Section 1.5(a)(iv) shall be paid by Purchaser in cash, either by
wire transfer or certified or official bank checks on the date of issuance of
the Earn-Out Note.
As used in this Section 1.5, the term "EBITDA" of the Subsidiaries
shall mean the 1999 annual consolidated earnings of the Subsidiaries and, to
the extent positive, the earnings of Diabetes Management Services, Inc.'s
diabetes supply business (which business specifically excludes DMS' business of
providing clinical services or any sales of supplies incidental thereto)
("DMS") (whether or not such business is operated through a Subsidiary) before
interest, taxes, depreciation and amortization, as reported at the conclusion
of 1999 in audited consolidated financial statements of the Subsidiaries and
DMS (excluding any financial results of any acquisitions by Purchaser or any
Subsidiary subsequent to the Closing). EBITDA shall be derived from the
applicable amounts that were determined in accordance with generally accepted
accounting principles ("GAAP") applied in a manner consistent with past
practices, provided that the costs of the audit of the Financial Statements, as
defined in Section 4.3.7, of Seller, the Subsidiaries and DMS for the year
ended December 31, 1998 and for any fiscal year prior to December 31, 1998
which Purchaser is required to file with the Securities and Exchange Commission
("Commission") in connection with the Form 8-K report of this transaction shall
be deducted in computing 1999 EBITDA. EBITDA shall not include any allocation
of overhead of Purchaser to the Subsidiaries other than (i) charges for
services actually provided to the Subsidiaries by Purchaser at the request of
Lucor Holdings, LLC ("Lucor") which services shall be charged at a rate
approximating the costs incurred by Purchaser for providing such services, as
set forth below; or (ii) charges for services contemplated in the 1999 Xxxxxx
Medical Budget previously reviewed by Purchaser as the same may subsequently be
revised pursuant to this Section 1.5 (the "Budget"), so long as the amount
charged to EBITDA for services under this Section (ii) shall not exceed the
amount included in the Budget therefor. The costs incurred by Purchaser shall
be determined by considering relevant pricing factors, including, without
limitation, the number of personnel hours required, the hourly cost of the
person or persons providing the services, and the cost of materials, the
allocable overhead to the Subsidiaries (including employee benefits) and the
cost of capital consumed in providing such services. In
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addition to amounts to be billed to Subsidiaries, Subsidiaries shall either pay
directly or reimburse Purchaser for the amount of all expenses for outside
professional services reasonably incurred by Purchaser for and on behalf of
Subsidiaries, including, without limitation, public accounting and outside
legal services. Any compensation paid or expenses reimbursed by Purchaser under
the Lucor Management Agreement shall be charged against EBITDA. If the
Purchaser believes the Subsidiaries should make an expenditure that is not
contemplated in the Budget or is greater than the amount included in the Budget
for such item, and Lucor Management does not agree that the expenditure is
necessary, the matter will be submitted to the Board of Directors of the
Purchaser, and the expenditure will be charged against EBITDA and added to the
Budget only if the Board of Directors by a majority vote concludes that the
expenditure is necessary.
(b) No later than March 31, 2000, Purchaser shall cause to be
prepared in accordance with GAAP and delivered to the Seller audited
consolidated financial statements of the Subsidiaries (including DMS, whether
or not operated through a Subsidiary, but excluding any financial results of
any acquisitions by Purchaser or any Subsidiary subsequent to the Closing) for
the year ended December 31, 1999 (the "Additional Payment Financial
Statements"). Payment of all Additional Purchase Price Payments calculated by
the Purchaser to be due pursuant to Sections 1.5(a)(i) ,1.5(a)(ii) and
1.5(a)(iii) shall be made pursuant to the Earn-Out Note which shall be executed
and delivered by the Purchaser to the Seller within 15 days following the date
such Additional Payment Financial Statements are agreed to by Purchaser and
Seller or finally resolved as hereinafter provided. The Seller and, on the
Seller's behalf, an independent national accounting firm chosen by the Seller)
shall have the right at mutually agreed times during normal business hours
commencing on the Closing Date and ending 60 days after the receipt of the
Additional Payment Financial Statements to inspect the books and records of the
Subsidiaries (and DMS). Seller shall notify Purchaser in writing of any
objections to the Additional Payment Financial Statements (in reasonable
detail) within 65 days after receiving them. If Seller fails to give such
notice by such time, Seller shall be deemed to have agreed with the Additional
Payment Financial Statements as delivered. If Seller gives such notice by such
time, (i) Purchaser shall execute and deliver to the Seller an Earn-Out Note
within 15 days following receipt by Purchaser of the Seller's Notice with
regard to the undisputed portion of any amounts owed to Seller pursuant to this
Section 1.5, and (ii) Seller and Purchaser shall then have 10 business days
after such notice to agree on the amounts of the EBITDA. If Seller and
Purchaser are not able to agree by such time, the Additional Payment Financial
Statements will be submitted to Deloitte & Touche in Atlanta, Georgia (or any
successor accounting firm), who shall have responsibility for determining the
correct EBITDA, which was derived from the applicable amounts that were
determined in accordance with GAAP applied in the manner consistent with
reasonable past practices, within 30 days following such submission. Deloitte &
Touche's (or any such successor accounting firm's) determination shall be final
and binding on Seller and Purchaser. The costs of any such determination shall
be shared equally by Seller and Purchaser.
(c) During 1999, Purchaser shall keep the Business intact as a
separate unit, shall manage it in the ordinary course consistent with past
practice, and shall not, without obtaining the prior written consent of Seller,
take any of the following actions:
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(i) liquidate, consolidate, dissolve or merge any
material Subsidiary or DMS with or into another company other than
another Subsidiary, including without limitation, into a subsidiary or
affiliate of Purchaser;
(ii) cause a material change in the nature of the
Business as presently conducted by the Subsidiaries and DMS;
(iii) transfer assets or incur liabilities in the
Subsidiaries or DMS except in the ordinary course of business
consistent with past practice;
(iv) remove from the premises of the Subsidiaries (other
than to the premises of the Purchaser) any books or records of the
Business reasonably necessary for the continuation of the operation of
the Business; or
(v) fail to honor or perform its obligations under the
Lucor Management Agreement.
1.6 CASH ADJUSTMENT.
(a) Subject to the terms and conditions set forth in this Section
1.6, the Purchase Price for the Interests and Assets shall be increased by the
amount (the "Cash Adjustment") of the average of the cash reported on the
consolidated daily cash balances reports of the Seller and the Subsidiaries for
the period from September 16, 1998 through December 15, 1998 inclusive (the
"Average Cash Balance"), adjusted in accordance with Section 1.6(b) below.
Purchaser shall pay at the Closing one-half of the amount of the "Estimated
Cash Adjustment" determined in accordance with Section 1.6(c) and any remaining
unpaid balance of the Cash Adjustment shall be paid in accordance with Sections
1.6(d) and (e).
(b) The Cash Adjustment shall be an amount equal to the Average
Cash Balance, plus any receipt of Cash Items by Seller related to Excluded
Assets from December 16, 1998 to the Closing Date and minus (i) any
disbursement of Cash Items by Seller or any Subsidiary related to Excluded
Liabilities or Subsidiary Excluded Liabilities (as defined in Section 3.16),
and (ii) distributions to or payments to or on behalf of members of Seller or
their affiliates from December 16, 1998 to the Closing Date (other than
payments of base salary and 1998 bonuses in the aggregate amount of $335,000).
(c) Not later than 10 days prior to the Closing, Purchaser and
Seller shall agree upon the amount of the Estimated Cash Adjustment. If
Purchaser and Seller are unable to agree by such time, then the parties shall
cause a determination to be made of such Estimated Cash Adjustment by Deloitte
& Touche in Atlanta, Georgia (or any successor accounting firm). Seller shall
notify Purchaser in writing of the amounts so determined no later than 2 days
prior to the Closing. The cost of such determination shall be shared equally by
Purchaser and Seller.
(d) On or before February 1, 1999, Lucor, with the assistance of
Purchaser's personnel, shall deliver to Purchaser the December 31, 1998 Balance
Sheet, prepared in accordance with GAAP consistently applied, together with a
detailed calculation of the Cash
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Adjustment determined in accordance with Sections 1.6(a) and 1.6(b). On or
before April 1, 1999, Purchaser shall deliver to Seller (i) the December 31,
1998 (Consolidated) Balance Sheet, prepared in accordance with GAAP
consistently applied and audited by Purchaser's independent certified public
accountants (Purchaser's Accountants), (ii) Purchaser's detailed calculation of
the Cash Adjustment determined in accordance with Sections 1.6(a), and 1.6(b),
and (iii) payment, by wire transfer or certified or official bank check, of the
unpaid balance of the amount of the Cash Adjustment as shown in such
calculation.
(e) Seller shall notify Purchaser in writing of any objections to
Purchaser's calculation of the Cash Adjustment (in reasonable detail) within 15
days after receiving it. If Seller fails to give such notice by such time,
Seller shall be deemed to have agreed with Purchaser's calculation of the Cash
Adjustment as delivered. If Seller gives such notice by such time, Seller and
Purchaser shall then have 10 business days after such notice to agree on the
amounts of the Cash Adjustment. If Seller and Purchaser are not able to agree
by such time, the Cash Adjustment calculation will be submitted to Deloitte &
Touche in Atlanta, Georgia (or any successor accounting firm), who shall have
responsibility for determining the correct Cash Adjustment, under GAAP applied
in a manner consistent with past practices, within 30 days following such
submission. Deloitte & Touche's (or any such successor accounting firm's)
determination shall be final and binding on Seller and Purchaser. The costs of
any such determination shall be shared equally by Seller and Purchaser. If
Deloitte & Touche determines that the actual Cash Adjustment is greater than
Purchaser's calculation of the Cash Adjustment pursuant to Section 1.6(d),
Purchaser shall pay Seller within 15 days following Purchaser's receipt of
Deloitte & Touche's determination, by wire transfer or certified or official
bank check, the additional amount so determined. If Deloitte & Touche
determines that the actual Cash Adjustment is less than Purchaser's calculation
of the Cash Adjustment pursuant to Section 1.6(d), Seller shall pay Purchaser
within 15 days following Seller's receipt of Deloitte & Touche's determination,
by wire transfer or certified or official bank check, the amount of any
overpayment resulting therefrom.
ARTICLE 2
CLOSING
2.1 CLOSING DATE. Subject to the fulfillment of the conditions
precedent specified in Articles 7 and 8 of this Agreement (or the waiver
thereof as provided therein), the purchase and sale of the Interests and Assets
shall be consummated at a closing (the "Closing") to be held at 10:00 a.m.
prevailing Eastern Standard Time at the offices of Xxxxxxxx Xxxxxxx LLP, 000
Xxxxxxxxx Xxxxxx, XX, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, on January 15, 1999,
or at such other time and place as shall be determined by the mutual agreement
of Purchaser and Seller (the "Closing Date"). The Closing shall be deemed
effective as of 12:01 a.m. Eastern Standard Time, January 1, 1999 (the
"Effective Date").
2.2 DELIVERIES OF THE SELLER. At the Closing, the Seller shall
deliver to Purchaser, in form and substance satisfactory to Purchaser, the
following:
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(a) any and all certificates representing the Interests, which
certificates (as to Subsidiaries directly owned by GMM) shall be duly endorsed
in blank for transfer or accompanied by properly executed transfer powers
endorsed in blank, and any other documentation reasonably requested by
Purchaser necessary or appropriate to transfer and assign all of such Interests
to Purchaser;
(b) a Xxxx of Sale and Assignment executed by the Seller,
substantially in the form of Exhibit B attached hereto (the "Xxxx of Sale") or
a similar document required by the local law applicable to any Foreign
Subsidiary and such other documents of transfer, assignment and conveyance as
may be reasonably requested by Purchaser to vest in Purchaser good and
marketable title in and to the Interests and Assets;
(c) a certificate, dated as of the Closing Date, signed by Seller
stating that (i) all conditions specified in Sections 7.1 and 7.2 have been
fulfilled; (ii) all authorizations, consents, approvals and waivers or other
action required to be obtained or taken by Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
all agreements and transactions contemplated by this Agreement have been
obtained or taken; and (iii) there has been no material adverse change in the
business, properties or assets of the Seller or Subsidiaries from the date of
this Agreement to the Closing Date;
(d) an opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.,
counsel for Seller and Xxxx X. Xxxxxx ("MJG"), dated the Closing Date, in form
and substance reasonably satisfactory to Purchaser;
(e) an opinion of Xxxxxxxxx & Xxxxxxxxxxx, P.C., counsel for SZ
Investments, LLC ("SZI"), dated the Closing Date, in form and substance
reasonably satisfactory to Purchaser;
(f) all minute books, stock record books, corporate seals, client
lists, books of account, bank accounts, leases, contracts, agreements, files
and other documents, instruments, work product, funds, receivables, assets,
papers, and properties, of any kind, of the Subsidiaries and all such
documents, etc. in any way related to their respective businesses, provided
that Seller may retain copies of the foregoing, and Purchaser hereby covenants
to provide Seller reasonable access to the foregoing for all proper purposes;
(g) a Management Agreement, executed by MJG through Lucor (the
"Lucor Management Agreement"), substantially in the form of Exhibit C attached
hereto;
(h) certificates of existence and good standing for the Seller
and Subsidiaries (other than the Foreign Subsidiaries) issued by the Secretary
of State or other applicable governmental authority of its respective state or
country of incorporation or organization, as applicable, dated as of a date no
more than five days prior to the Closing Date;
(i) copies of the Articles of Incorporation or Articles of
Organization, as applicable, of Seller and each Subsidiary (other than the
Foreign Subsidiaries) certified to be true and accurate by the Secretary of
State or other applicable governmental authority of its respective
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state or country of incorporation or organization, as applicable, dated as of a
date no more than five days prior to the Closing Date;
(j) copies of the Bylaws or Operating Agreement, as applicable,
of Seller and each Subsidiary (other than the Foreign Subsidiaries) certified
to be true and accurate by the current Secretary of Seller or such Subsidiary,
dated as of the Closing Date;
(k) copies of the latest extracts from the Commercial Registers
(Handelsregisterauszuge) for each German Subsidiary indicating that such
Subsidiary has been duly incorporated and still exists on the respective
Register;
(l) copies of the applicable Gesellschaftsvertag for each German
Subsidiary;
(m) Standstill Agreement executed by MJG and SZI, substantially
in the form of Exhibit D attached hereto (collectively the "Standstill
Agreement");
(n) Required Consents of Third Parties;
(o) releases of all Liens on any of the assets, properties or
rights of the Seller or the Subsidiaries (the "Lien Releases");
(p) bank signature cards for all of Seller's and Subsidiaries'
bank accounts;
(q) all other documents, instruments, certificates and opinions
required to be delivered by the Seller pursuant to this Agreement;
(r) a Restrictive Covenant Agreement executed by Seller and MJG,
substantially in the form of Exhibit E attached hereto;
(s) a Restrictive Covenant Agreement executed by SZI,
substantially in the form of Exhibit E attached hereto;
(t) the unaudited Consolidating Balance Sheet as of September 30,
1998;
(u) the unaudited Consolidating Statement of Operations for the
year ended December 31, 1998 and the Consolidating Balance Sheet as of December
31, 1998; and
(v) the calculation of the Estimated Cash Adjustment in
accordance with Section 1.6(c).
2.3 DELIVERIES OF PURCHASER. At the Closing, Purchaser shall
deliver or cause to be delivered to the Seller the following:
(a) the Purchase Price (including, without limitation, the cash
consideration, Convertible Preferred Stock and Redeemable Preferred Stock) to
the extent required by and as provided in Section 1.4 hereof;
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(b) a certificate, dated as of the Closing Date, signed by the
Purchaser stating that (i) all conditions specified in Sections 8.1 and 8.2
have been fulfilled; and (ii) all authorizations, consents, approvals and
waivers or other action required to be obtained or taken by Purchaser in
connection with the execution, delivery and performance of this Agreement and
the consummation of all agreements and transactions contemplated by this
Agreement have been obtained or taken;
(c) the Standstill Agreement executed by Purchaser;
(d) an opinion of Xxxxxxxx Xxxxxxx LLP, counsel for the
Purchaser, dated the Closing Date, in form and substance reasonably
satisfactory to Seller;
(e) a Registration Rights Agreement executed by Purchaser (the
"Registration Rights Agreement") substantially in the form of Exhibit F
attached hereto;
(f) the Lucor Management Agreement, executed by Purchaser;
(g) all other documents, instruments, and certificates required
to be delivered by Purchaser pursuant to this Agreement;
(h) certificates of existence and good standing for the Purchaser
issued by the Secretary of State of Delaware, dated as of a date no more than
five (5) days prior to the Closing Date;
(i) copies of the Certificate of Incorporation of Purchaser,
certified to be true and accurate by the Secretary of State of Delaware, dated
as of a date no more than 5 days prior to the Closing Date;
(j) copies of the Bylaws of Purchaser certified to be true and
accurate by the current Secretary of Purchaser, dated as of the Closing Date;
(k) the Common Stock Warrant, substantially in the form of
Exhibit G attached hereto;
(l) the Assignment and Assumption Agreement, substantially in the
form of Exhibit H attached hereto (the "Assumption Agreement"); and
(m) the Subsidiary Assumption Agreement substantially in the form
of Exhibit I hereto (the "Subsidiary Assumption Agreement").
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ARTICLE 3
ADDITIONAL AGREEMENTS
3.1 CONFIDENTIALITY. Purchaser and the Seller acknowledge that the
Confidentiality Agreement, dated October 28, 1998, shall
survive the execution of this Agreement and remain binding
upon Purchaser and the Seller, except that paragraph 3 thereof
is superseded by Section 3.3 of this Agreement; , provided,
however, that Purchaser hereby consents, pursuant to paragraph
9 of such Confidentiality Agreement, to purchases of Matria
Common Stock by or on behalf of Seller and its members during
the Interim Period so long as (i) Seller informs Purchaser in
writing of the number of shares so purchased and the purchase
price paid therefor, not later than 2 business days after each
such purchase; (ii) such purchases shall not cause to the
"Beneficial Ownership" of Seller and its affiliates (as
defined in the Standstill Agreement), in the aggregate, to
exceed 3% of the outstanding Matria Common Stock without the
prior written consent of Purchaser; and (iii) the shares so
purchased shall otherwise remain subject to all provisions of
such Confidentiality Agreement and shall be subject to the
Standstill Agreement from and after the Closing Date.
3.2 ACCESS TO PREMISES, RECORDS, PROPERTIES, CUSTOMERS AND
EMPLOYEES.
(a) During the period from the date of this Agreement to the
Closing, Seller agrees to permit and to cause the Subsidiaries to permit
Purchaser and its representatives, agents, counsel and accountants to have full
access at all reasonable times to the premises, business, properties, assets,
financial statements, contracts, books, records and working papers of, and
other relevant information pertaining to, the Seller and the Subsidiaries and
to cause their respective officers and employees to furnish to Purchaser and
its representatives, agents, counsel and accountants such financial and
operating data and other information with respect to the business, properties
and assets of the Seller and the Subsidiaries, as Purchaser may reasonably
request; and Seller agrees to cause the respective officers and employees of
the Subsidiaries to cooperate with Purchaser and its representatives, agents,
counsel and accountants in order to enable Purchaser to become fully informed
with respect to the business, earnings, financial condition, prospects,
properties, assets, liabilities and obligations of the Seller and the
Subsidiaries.
(b) During the period from the date of this Agreement to the
Closing, Purchaser agrees to permit the Seller and its representatives, agents,
counsel and accountants to have full access at all reasonable times to the
premises, business, properties, assets, financial statements, contracts, books,
records and working papers of, and other relevant information pertaining to,
Purchaser and its wholly-owned subsidiaries and to cause its officers and
employees to furnish to Seller and its representatives, agents, counsel and
accountants such financial and operating data and other information with
respect to the business, properties and assets of Purchaser, as Seller may
reasonably request; and the Purchaser agrees to cause its officers and
employees to cooperate with Seller and its representatives, agents, counsel and
accountants in order to enable Seller to become fully informed with respect to
the business, earnings, financial condition, prospects, properties, assets,
liabilities and obligations of Purchaser and its wholly-owned subsidiaries.
(c) During the period from the date of this Agreement to the
Closing, Seller agrees to permit, and to cause the Subsidiaries to permit,
Purchaser and its representatives, agents, counsel and accountants to talk to
and meet with, at all reasonable times, the respective customers, suppliers and
employees of the Seller and the Subsidiaries to the extent such activities do
not unreasonably disrupt the Business; provided, however, Purchaser shall
notify Seller prior to such
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conversations with customers and suppliers and allow Seller the opportunity to
be included in said conversations.
3.3 PUBLICITY. During the period from the date of this Agreement
to the Closing, each party hereto agrees to obtain the approval of the other
parties hereto prior to issuing any press release, written public statement or
announcement with respect to the transactions contemplated by this Agreement,
which approval shall not be unreasonably withheld; provided, however, that the
provisions of this Section 3.3 shall not prohibit any party from making any
such release, statement or announcement if, upon advice of counsel, it is
believed that such party is required to do so under any applicable law, rule or
regulation (in which case such party shall use all reasonable efforts to give
the other party prior notice thereof and an opportunity to review and comment
thereon).
3.4 ACQUISITION PROPOSALS.
(a) During the term of this Agreement, Seller shall not, directly
or indirectly, through any officer, director, employee or agent of Seller or
the Subsidiaries, or otherwise, (i) solicit, initiate or encourage (or
authorize any person to solicit, initiate or encourage) any inquiries,
proposals or offers from any person or entity relating to any acquisition or
purchase of all or a material amount of the assets of, or any equity interest
in, or any merger, consolidation or business combination with the Seller or the
Subsidiaries or (ii) participate in any discussions or negotiations regarding,
or furnish to any other person or entity any information with respect to, any
effort or attempt by any other person or entity to do or seek any of the
foregoing. Seller will promptly notify Purchaser if any such proposal or offer,
or any inquiry or contact with any person or entity with respect thereto, is
made.
(b) During the term of this Agreement, Purchaser shall not,
directly or indirectly, through any officer, director, employee or agent of
Purchaser or otherwise, (i) solicit, initiate or encourage (or authorize any
person to solicit, initiate or encourage) any inquiries, proposals or offers
from any person or entity relating to any acquisition or purchase by Purchaser,
directly or indirectly, of all or a material amount of the assets of, or any
equity interest in, or merger, consolidation or business combination with a
competitor of Seller or the Subsidiaries other than DMS or (ii) participate in
any discussions or negotiations regarding, or furnish to any other person or
entity any information with respect to, any effort or attempt by any other
person or entity to do or seek any of the foregoing. Purchaser will promptly
notify Seller if such proposal or offer, or any inquiry or contact with any
person or entity with respect thereto, is made.
3.5 APPROVALS AND CONSENTS; REASONABLE EFFORTS. From the date
hereof until the Closing, each party hereto hereby covenants with the other
parties hereto that it will cooperate to give all notices and obtain as soon as
is reasonably practicable all approvals, consents and waivers of state and
federal departments or agencies or of any other parties required or deemed
necessary or beneficial for consummation of the transactions contemplated by
this Agreement and shall use all reasonable efforts to take or cause to be
taken all actions and to do or cause to be done all things necessary under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement; provided, however, that nothing in
this Agreement or in any document delivered pursuant to this Agreement shall be
construed as an
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attempt to agree to assign any contract, certificate, license or other Asset
which under law, rule or regulation or by agreement is nonassignable without
the consent of a party or parties thereto, or of any governmental authority, as
the case may be, unless such consent shall be given. Seller will use its
reasonable good faith efforts to obtain all such necessary consents of the
parties to any such contracts prior to the Closing. In order, however, that the
full value of the Interests, and every such contract, certificate, license or
other asset included within the Assets and all claims and demands in such
contracts may be realized, Seller covenants with Purchaser that Seller, by
itself or by its agents, will, at the request and expense and under the
direction of Purchaser, in the name of the Seller, or otherwise, as Purchaser
shall specify and as shall be permitted by any law, rule or regulation, take
all such reasonable actions and do or cause to be done all such reasonable
things as shall be necessary in order that the rights of Seller in and under
the Interests, and all such contracts, certificates, licenses and other Assets
shall be preserved. Each of the parties shall use reasonable efforts to close
the transactions contemplated herein on or before January 15, 1999.
3.6 COOPERATION OF THE PARTIES; REGULATORY APPROVALS. Purchaser
shall be responsible, at its sole cost and expense, for obtaining all
regulatory approvals necessary for the consummation of the transactions
contemplated by this Agreement. The parties shall cooperate with each other and
with their respective counsel and accountants in connection with any acts or
actions required to be taken as part of or as a condition to their respective
obligations under this Agreement. Seller shall cooperate with and assist
Purchaser, as Purchaser shall reasonably request, in obtaining the approval of
all regulatory agencies and officials whose approval is required for the
transfer of all licenses and other regulatory approvals required to enable the
Purchaser to acquire the Interests and the Assets and operate the business of
the Subsidiaries.
3.7 EXPENSES. Seller will pay all fees and expenses, including,
without limitation, counsel and accountants' fees, incurred by Seller and the
Subsidiaries in connection with this Agreement and any transaction contemplated
by this Agreement. The Purchaser will pay all fees and expenses, including,
without limitation, counsel and accountants' fees, incurred by it in connection
with this Agreement and any transaction contemplated by this Agreement.
Notwithstanding the foregoing, Purchaser shall pay the filing fee for the
notification required to be filed under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended (the "HSR Act"). Purchaser shall also pay
the notary fees for the notarial deed regarding the transfer of the German
Subsidiaries. Purchaser shall be responsible for paying any UK transfer taxes
payable upon the transfer of the Interests.
3.8 CORPORATE NAMES. Following Closing, neither Seller nor any
affiliate of Seller will use any corporate name, trade name or advertising
symbol (other than the Seller's logo) associated with, or similar to those of
the Seller or the Subsidiaries in connection with Seller's or the Subsidiaries'
businesses other than the "Xxxxxx" name. MJG and Seller hereby grant to
Purchaser a fully paid-up, perpetual, royalty-free, world-wide license to use
the "Xxxxxx" name, which license shall be exclusive with respect to the health
care industry; provided, however, that such license may be revoked on not less
than 60 days' written notice specifying in detail the reasons therefor, by MJG
or Seller in the event that either of them reasonably believes that the
Purchaser's use of the Xxxxxx name brings disrepute to MJG.
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3.9 XXXX-XXXXX-XXXXXX FILINGS. Each of the Purchaser and the
Seller agrees to (i) use its reasonable best efforts to file all documents with
the Federal Trade Commission and the United States Department of Justice as may
be required to comply with the HSR Act, and (ii) promptly furnish all materials
and information thereafter requested by any of the regulatory agencies having
jurisdiction over such filings, and (iii) use all reasonable efforts to obtain
an early termination of the applicable waiting period.
3.10 STANDSTILL AND RESTRICTIVE COVENANT AGREEMENTS. Prior to or
at the Closing, Seller shall cause MJG and SZI to enter into the Standstill
Agreement and the Restrictive Covenant Agreements as required by Sections
2.2(m), 2.2(r) and 2.2(s).
3.11 LUCOR MANAGEMENT AGREEMENT. Prior to or at the Closing,
Seller shall cause Lucor Management, Inc. to enter into the Lucor Management
Agreement.
3.12 TAX MATTERS.
(a) Seller shall pay or cause to be paid in a timely fashion all
income taxes (i) payable by Seller, or (ii) payable by Seller or any Subsidiary
with respect to periods prior to the Effective Date. Purchaser shall be
responsible for all Taxes (as defined in Section 4.3.6) of each Subsidiary with
respect to periods following the Effective Date.
(b) Seller shall file and control any returns required to be
filed by the Seller or any Subsidiary after the Closing Date relating to
periods ending on or before the Effective Date; provided that Purchaser shall
have the right to review and comment on such returns before they are filed,
provided further, that with prior written notice to Purchaser, Seller may make
such extensions to Tax filings and make such estimated interim payments as may
be permitted under applicable Tax law and regulations. In connection with such
returns for the taxable year ending December 31, 1998, Seller shall assure that
all Section 338(h)(10) elections are made in accordance with applicable Tax
rules and regulations and Section 6.7 of the Universal Self Care Agreement (as
defined in Section 9.1(b)).
(c) Seller, on the one hand, and Purchaser, on the other hand,
agree to give prompt notice to each other of any proposed adjustment to Taxes
for periods prior to the Effective Date. Seller and Purchaser shall cooperate
with each other in the conduct of any Tax audit or other proceedings involving
any Subsidiary for such periods. In connection with any such audit or other
proceeding Purchaser, upon Seller's request and at Seller's expense, shall
provide Seller copies of all notices, correspondence, demands, assessments and
other documents generated in connection with any such audit or other
proceeding, all of which information shall remain subject to the
confidentiality provisions of the October 28, 1998 Confidentiality Agreement.
Seller shall also have the right to discuss the status of such audit or other
proceeding with Purchaser's representatives and, with prior written notice to
Purchaser, with the applicable taxing authorities involved. All of such
activities by Seller shall be conducted in a manner so as not to adversely
impact the best interests of Purchaser or the Subsidiaries; provided that
notwithstanding the above, Seller shall at all times be permitted to act as
required by law and to deal honestly and accurately with all applicable taxing
authorities and in their preparation for submissions to such authorities
without being in violation of this subsection (c).
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(d) Seller, on the one hand, and Purchaser, on the other hand,
agree to furnish or cause to be furnished to each other, upon request, such
information and assistance (including access to books and records) relating to
the Seller and the Subsidiaries as is reasonably necessary for the preparation
of any return, claim for refund or audit, and the prosecution or defense of any
claim, suit or proceeding relating to any proposed adjustment.
(e) Seller agrees to indemnify Purchaser from and against any
liability Purchaser may suffer from, arising out of, relating to, in the nature
of, or caused by any liability of any Corporation Subsidiary for income taxes
of any person other than any Corporation Subsidiary (i) under Treasury
Regulation ss. 1.1502-6 (or any similar provision of state, local or foreign
law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.
3.13 BREAK-UP FEE.
(a) In the event that Seller breaches Section 3.4(a) of this
Agreement and the Closing does not occur for any reason not attributable to
Purchaser or its affiliates, and within a year following the date of this
Agreement either (i) a person other than MJG or SZI gains control of more than
15% of the outstanding membership interests of Seller with the help,
assistance, or approval of Seller, any of its management, its Board of
Directors, or any stockholder or member of Seller or any successor to Seller,
or (ii) Seller merges, consolidates, or effects any other business combination
with any person, the result of which is that the current members of Seller own
less than 80% of the resulting entity, or (iii) Seller, the Subsidiaries, or
any of them, sell, lease or otherwise transfer all or 30% or more of their
assets taken as a whole to any person or persons, then Seller shall be liable
to pay to Purchaser the sum of $3,000,000 upon the consummation of any such
transaction.
(b) In the event that Purchaser breaches Section 3.4(b) of this
Agreement and the Closing does not occur for any reason not attributable to
Seller or its affiliates, and within a year following the date of this
Agreement Purchaser acquires, directly or indirectly, through merger,
consolidation, business combination or otherwise, substantially all of the
assets of, or more than 51% of the equity interest in, any entity that was the
subject of Purchaser's breach of Section 3.4(b) then Purchaser shall be liable
to pay to Seller the sum of $3,000,000 upon consummation of any such
transaction.
3.14 SELLER AND SUBSIDIARY PERMITS. Seller shall cooperate with
and use its commercially reasonable efforts to assist Purchaser, both in
advance of the Closing and after the Closing, in maintaining or reapplying for
any Seller and Subsidiary Permits, as defined in Section 4.7.8, for Purchaser's
use after the Closing at Purchaser's sole cost and expense.
3.15 BULK SALES LAW. Purchaser and Seller each hereby waive
compliance with the provisions of any applicable bulk sales or transfer laws.
3.16 DISCHARGE OF LIABILITIES. Seller shall pay, perform and
discharge when due in the ordinary course of business all debts, liabilities
and obligations of Seller or any Subsidiary (i) for any income taxes for any
period ending and prior to the Effective Date and any income, sales,
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use or other taxes arising in connection with the consummation of the
transaction contemplated by this Agreement except to the extent there is a
transfer tax with respect to the transfer of the stock under UK law; (ii)
payable to Seller or any member or affiliate of Seller; (iii) for costs and
expenses (including, without limitation, professional fees) in connection with
this Agreement or the transactions contemplated hereby; and (iv) any Funded
Debt other than Funded Debt of any Subsidiary which Purchaser accepts as a
liability of a Subsidiary by notice to Seller not less than two (2) days prior
to the Closing. The debts, liabilities and obligations referred to in this
Section 3.16 are hereinafter referred to as the "Subsidiary Excluded
Liabilities."
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, and notwithstanding any
independent investigations or verification undertaken by Purchaser or its
representatives in connection herewith, Seller hereby represents and warrants
to Purchaser that the following representations and warranties are true and
correct as of the date hereof and shall, except as may be specifically provided
for in this Agreement or otherwise specifically agreed upon or waived, in each
case in writing by Purchaser, be true and correct as of the Closing:
4.1 VALIDITY. This Agreement constitutes the legal, valid and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether asserted in a proceeding at law or
in equity).
4.2 DEFINITION OF MATERIAL ADVERSE EFFECT. As used in this
Agreement, the term "Material Adverse Effect" shall mean a material adverse
effect in the business or in the financial condition, results of operations,
properties, assets, liabilities or prospects of Seller or the Subsidiaries, or
any of them, or on the ability of Seller to enter into this Agreement and
perform its obligations hereunder.
4.3 CORPORATE AND FINANCIAL.
4.3.1 CORPORATE STATUS.
(a) Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia. Seller does not have any direct or indirect subsidiaries or own any
shares of capital stock of any corporation or any interest in the ownership or
management of any other entity except in those corporations and other entities
listed on Schedule 4.3.1 hereto. Seller has full power and authority, corporate
or otherwise, and possesses all rights, privileges, franchises, licenses,
permits, authorizations and approvals, governmental or otherwise, necessary to
entitle it to use its corporate name and to own or lease its properties and
assets and to carry on its business as and in the places where such properties
or assets are now owned, leased or operated and such business is conducted,
except where the
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absence of such could not reasonably be expected to result in a Material
Adverse Effect. Seller is qualified to transact business as a foreign limited
liability company in the states listed on Schedule 4.3.1, and Seller is
qualified to do business in all jurisdictions in which such qualification is
required, except where the failure to so qualify would not have a Material
Adverse Effect.
(b) Each of the Corporation Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its respective state or country of incorporation. Each of the LLC
Subsidiaries (other than Dia Real) is a limited liability company duly
organized, validly existing and in good standing under the laws of its
respective state or country of organization. None of the Subsidiaries has any
direct or indirect subsidiaries or owns any shares of capital stock of any
corporation or any interest in the ownership or management of any other entity
except in those corporations and other entities listed on Schedule 4.3.1. Each
of the Subsidiaries has full power and authority and possesses all rights,
privileges, franchises, licenses, permits, authorizations and approvals,
governmental or otherwise, necessary to entitle it to use its name and to own
or lease its properties and assets and to carry on its business as and in the
places where such properties or assets are now owned, leased or operated and
such business is conducted, except where the absence of such could not
reasonably be expected to result in a Material Adverse Effect. Each Subsidiary
is qualified to transact business as a foreign corporation or limited liability
company, as applicable, in the states listed on Schedule 4.3.1 and each
Subsidiary is qualified to do business in all jurisdictions in which such
qualification is required, except where failure to qualify would not have a
Material Adverse Effect. Xxxxx 68 validly exists and is in good standing under
the laws of the Federal Republic of Germany and is registered in the commercial
register of the local court of Frankfurt under HRB 45034. Hans MW and EU
Medical are validly existing and in good standing under the laws of the Federal
Republic of Germany. Dia Real is a limited partnership (kommanditgessellschaft)
duly organized, validly existing and in good standing under the laws of the
Federal Republic of Germany.
(c) The extracts from the Commercial Register and the
articles of incorporation of the German Subsidiaries delivered by the Seller at
Closing contain the most recent, true, accurate and complete version of the
extracts from the Commercial Register and the articles of incorporation,
respectively, of the German Subsidiaries currently valid and in full force and
effect. No changes have been made thereto.
4.3.2 AUTHORITY; NO VIOLATION; CONSENTS.
(a) The Subsidiaries, and each of them, have full power
and authority to consummate the transactions contemplated by this Agreement,
and all corporate or other action necessary on the part of the Subsidiaries, or
any of them, to consummate the transactions contemplated hereby has been taken.
(b) Seller has full power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, and all corporate or other action
necessary on the part of Seller to execute and deliver this
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Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby has been taken.
(c) Neither the execution and delivery of this Agreement
by Seller nor the performance of its obligations hereunder, will:
(i) violate or conflict with any provision of
the Certificate or Articles of Incorporation or Articles of
Organization, as applicable, or Bylaws or operating agreement of
Seller or any Subsidiary;
(ii) except as set forth on Schedule 4.7.1,
breach or otherwise constitute or give rise to a default under any
material contract, commitment or other obligation to or by which
Seller or any Subsidiary is bound;
(iii) violate any material statute, ordinance,
law, rule, regulation, judgment, order or decree of any court or other
governmental or regulatory authority to which Seller or any Subsidiary
is subject; or
(iv) except as set forth on Schedule 4.7.1,
require any consent, approval or authorization of, notice to, or
filing, recording, registration or qualification with any person,
entity, court or governmental or regulatory authority.
4.3.3 OWNERSHIP AND CAPITALIZATION.
(a) Schedule 4.3.3 accurately sets forth the members and
the percentage of membership interest owned by each member of each class of
GMM. Schedule 4.3.3 accurately sets forth GMM's direct and indirect ownership
interest in each of the Subsidiaries, and no other person or entity owns any
ownership interest in the Subsidiaries other than as shown on Schedule 4.3.3.
Xxxxx 68 owns of record and beneficially 100% of the outstanding ownership
interests of Hans MW, EU Medical and Xxxxx 71. EU Medical and Xxxxx 71,
collectively, own of record and beneficially 100% of the outstanding ownership
interests of Dia Real. GMAC owns of record and beneficially 100% of the
outstanding capital stock of HMS and Self Care. Xxxxxx Direct owns of record
and beneficially 100% of the outstanding capital stock of AR Medical.
(b) (i) Schedule 4.3.3 accurately sets forth the
authorized capital stock of each Corporation Subsidiary and the
amounts of such capital stock issued and outstanding. Schedule 4.3.3
accurately sets forth the members and membership interest of each LLC
Subsidiary and the amounts of such membership interests issued and
outstanding.
(ii) All of the outstanding capital stock and
membership or ownership interests, as applicable, of the Subsidiaries
is duly and validly issued, fully paid and non-assessable and was
offered, issued and sold in compliance with all applicable federal or
national and state securities laws. No event has occurred which could
be registered as a repayment of share capital or could otherwise give
rise to an obligation to inject capital contributions into the German
Subsidiaries.
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(iii) None of the capital stock or share capital
or membership or ownership interests, as applicable, of any Subsidiary
has been issued in violation of any preemptive or other material
rights of its shareholders, members or owners.
(c) Other than as listed on Schedule 4.3.3, none of the
Subsidiaries has outstanding any securities or other rights which are either by
their terms or by contract convertible or exchangeable into capital stock or
membership or other equity interest in such Subsidiary, or any preemptive or
similar rights to subscribe for or to purchase, or any options or warrants or
agreements for the purchase or issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, the capital stock or
membership or other equity interest (or securities convertible into capital
stock or membership or other equity interest) in such Subsidiary. None of the
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire or to register any shares of its
capital stock or membership or other equity interests.
(d) Other than as listed on Schedule 4.3.3, there are no
agreements to which Seller or any Subsidiary is a party in any way restricting
the transfer of any shares of capital stock or membership or other equity
interests of any Subsidiary.
(e) Any shares of capital stock or membership or other
equity interest in Seller or the Subsidiaries which have been purchased or
redeemed by the Seller or the Subsidiaries, as the case may be, have been
purchased or redeemed in substantial compliance with all applicable national or
federal and state laws, rules, regulations, and ordinances, including, without
limitation, all federal and state securities laws. The purchase of the
Interests and the consummation of the transactions contemplated hereby will
not, with the giving of notice or lapse of time or both, result in a material
default or acceleration of the maturity of, or otherwise materially modify, any
agreement, note, mortgage, bond, security agreement, loan agreement or other
contract or commitment of Seller or the Subsidiaries, or any of them.
4.3.4 TITLE TO INTEREST AND ASSETS. Seller has good, valid
and marketable title to its Interests and Assets, free and clear of any and all
Liens except for the liens and encumbrances listed on Schedule 4.3.4 to be
removed at or prior to Closing, and will transfer good, valid and marketable
title thereto to Purchaser at Closing.
4.3.5 CORPORATE OR OTHER BOOKS AND RECORDS. The stock and
membership records, minute books and other books and records of the Seller and
the U.S. Subsidiaries fully and accurately reflect all issuances, transfers and
redemptions of the capital stock or membership or other equity interests of the
Seller and the U.S. Subsidiaries, as the case may be, correctly show the total
number of shares of such capital stock or membership or other equity interests,
as the case may be, issued and outstanding on the date hereof, accurately
reflect in all material respects all corporate or other action taken by the
officers, directors, managers, members or shareholders, as applicable, of the
Seller and the U.S. Subsidiaries, as the case may be (including actions taken
by consent without a meeting), and contain true and complete copies or
originals of the Seller's and the U.S. Subsidiaries': (i) Certificate or
Articles of Incorporation or Articles of Organization or other organizational
documents, as the case may be, and all amendments thereto,
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(ii) Bylaws or Operating Agreements or similar agreements, as the case may be,
as amended and currently in force, and (iii) the minutes of all meetings or
consent actions of their respective officers, directors, managers, members or
shareholders, as applicable. Foreign Subsidiaries have complied with all
similar requirements of their governing law. No resolutions, regulations or
bylaws have been passed, enacted, consented to or adopted by such officers,
directors, managers, members or shareholders except those contained in such
minute books and all corporate or other actions of the Seller and the U.S.
Subsidiaries were duly and validly taken in compliance with all applicable
laws, rules, regulations and ordinances.
4.3.6 TAXES.
(a) The Seller and the Subsidiaries have duly filed and
will file, either individually or as part of a consolidated return or
otherwise, when due (i) all required federal, state, local and foreign "Tax"
(as hereinafter defined) returns and reports; and (ii) all returns and reports
of all other governmental units and agencies having jurisdiction with respect
to Taxes imposed upon any of their respective income, properties, revenues,
franchises, operations or other assets or Taxes imposed which might create a
lien or encumbrance on any of their respective assets required to be filed by
any of them prior to the date hereof. All such returns and reports are true,
complete and correct in all material respects, and the Seller and the
Subsidiaries have paid and will pay when due all Taxes as set forth in such
returns or reports, and all such Taxes as set forth constitute all amounts
which are due and owing by the Seller and the Subsidiaries. All federal, state,
local and foreign Taxes and other governmental charges paid or payable by the
Seller or the Subsidiaries have been timely paid, or have been accrued or
reserved on the Seller's or the Subsidiaries' books in accordance with Internal
Revenue Service rules and regulations and GAAP applied on a basis consistent
with prior periods. Adequate reserves for the payment of Taxes have been
established on the books of the Seller and the Subsidiaries, as applicable, for
all periods through the date hereof, whether or not due and payable and whether
or not disputed. Until the Closing, the Seller and the Subsidiaries shall
continue to maintain sufficient reserve accounts for the payment of expected
Tax liabilities in accordance with GAAP applied on a basis consistent with
prior periods. Except as set forth in Schedule 4.3.6, neither Seller nor any
Subsidiary has received any notice of a Tax deficiency or assessment of
additional taxes of any kind, and there is no threatened claim against Seller
or any Subsidiary, or any reasonable basis for any such claim, for payment of
any additional federal, state, local or foreign taxes for any period, and on
the Closing Date there will be no such notice, no such claim and no basis for
any such claim. Neither Seller nor any Subsidiary has executed or otherwise
agreed to or is bound by any currently effective waiver of any statute of
limitations with respect to payment or assessment of Taxes or other agreement
altering or affecting any otherwise applicable statute of limitations with
respect to the payment of Taxes or the filing of Tax returns. There are no
rulings or closing agreements executed with any taxing authority relating to
Seller or the Subsidiaries or any of their respective assets that will be
binding upon Purchaser after the Closing Date. Except for claims for customs
duties, no claim has ever been asserted by an authority in a jurisdiction where
the Seller or the Subsidiaries do not file Tax returns that Seller or any
Subsidiary is or may be subject to taxation by that jurisdiction.
(b) The Seller and the Subsidiaries have withheld proper
and accurate amounts from all of their respective employees, independent
contractors, creditors, shareholders,
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members or other third parties who have performed services in connection with
the businesses of the Seller or any Subsidiary for all periods prior to the
date hereof and will withhold proper and accurate amounts from the date hereof
until Closing, all in compliance with the Tax withholding provisions of
applicable federal, state, local and foreign Tax laws. All federal, state,
local and foreign Tax returns, proper and accurate in all respects, have been
filed by the Seller or the Subsidiaries for all periods for which returns were
due with respect to withholding, social security, Medicare and unemployment
taxes, and the amounts shown thereon to be due and payable have been paid in
full.
(c) Each LLC Subsidiary has only one member and is
treated as a disregarded entity separate from its owner for income Tax purposes
under Treasury Regulation ss. 301.7701-3.
(d) For purposes of this Agreement, "Tax" or "Taxes"
shall mean any taxes, fees, levies, duties, charges or similar assessments
(including interest, penalties and additions) imposed by or payable to any
governmental or other taxing authority, whether foreign, federal, state, local
or otherwise, including, without limitation, partnership, net income, gross
income receipts, franchise, assets, withholding, excise, ad valorem, value
added, capital gains, stamp, real and personal property assessment, sales, use,
employment, social security and unemployment contributions, net worth,
services, customs duties and other taxes or charges of any kind or nature.
(e) All transactions between the German Subsidiaries and
any of their present or former shareholders or persons closely related to such
shareholders have been conducted entirely on an arm's-length basis, and no
event has occurred which could be regarded as the payment of a constructive
dividend. The classification of the German Subsidiaries' equity for Tax
purposes as at December 31, 1997 is true and accurate in all material respects.
4.3.7 FINANCIAL STATEMENTS. Attached hereto as Schedule
4.3.7 are true, correct and complete copies of (a) the audited consolidated
financial statements of Seller and each Subsidiary for the fiscal years ended
December 31, 1996 and December 31, 1997, including fiscal balance sheets,
statements of income and retained earnings, statements of shareholders' or
members' equity, statements of cash flows and related notes (all of the
foregoing described financial statements being herein collectively referred to
as the "Audited Financial Statements"); and (b) unaudited consolidating balance
sheets of Seller and each Subsidiary dated September 30, 1998 (the "Unaudited
Balance Sheets") and unaudited statements of income and cash flows for the
nine-month period ended September 30, 1998 (together with the Unaudited Balance
Sheets, the "Unaudited Financial Statements") (the Audited Financial Statements
and the Unaudited Financial Statements are collectively referred to hereinafter
as the "Financial Statements"). Notwithstanding the foregoing, (i) audited
financial statements for only 1997 for DIA Real have been prepared and are
attached in Schedule 4.3.7 and (ii) no audited financial statements for Hans MW
are available, and only unaudited financial statements for Hans MW are attached
in Schedule 4.3.7. Except as set forth on Schedule 4.3.7 hereto, all of the
Financial Statements were prepared in accordance with GAAP applied on a basis
consistent with prior periods, except that the Unaudited Financial Statements
do not contain normal year end adjustments and omit footnote disclosures
required by GAAP. Except as set forth on Schedule 4.3.7 hereto, the Financial
Statements present fairly the financial condition of Seller and each
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Subsidiary as of the dates indicated therein and the results of operations and
cash flows of Seller and each Subsidiary for the respective periods covered
thereby and are consistent with the books and records of Seller and each
Subsidiary.
4.3.8 ACCOUNTS. Schedule 4.3.8 contains a complete and
accurate list of the names and addresses of each and every bank and other
institution in which Seller or any Subsidiary maintains an account or safety
deposit box, the account numbers of each such account, and the names of all
persons who are presently authorized to draw thereon or have access thereto.
4.3.9 NOTES RECEIVABLE; ACCOUNTS RECEIVABLE; ACCOUNTS
PAYABLE.
(a) All notes receivable, accounts receivable and other
receivables of the Seller or the Subsidiaries or due to the Seller or the
Subsidiaries at September 30, 1998 are shown on the Unaudited Balance Sheets to
the extent required by GAAP or are set forth on Schedule 4.3.9 as of the date
thereof. Except to the extent such receivables were satisfied in full in the
ordinary course of business since the date of the Unaudited Balance Sheets, all
such notes receivable, accounts receivable and other receivables shown on the
Unaudited Balance Sheets or on Schedule 4.3.9 and all such notes receivable,
accounts receivable and other receivables arising since the date thereof
(collectively, the "Receivables") have been and will be (except to the extent
collected in the ordinary course of business consistent with past practice)
genuine, legal and valid obligations of and bona fide claims against the
respective makers thereof or debtors thereon for sales made, services performed
or other charges arising on or before the date hereof, and all of the goods
delivered and services performed that gave rise to such Receivables were
delivered or performed in all material respects in accordance with the
applicable orders, contracts, or client requirements therefor. All accounts
payable shown on the Unaudited Balance Sheets represent, and all Current
Liabilities to be reflected on the unaudited December 31, 1998 Balance Sheet
will represent expenses incurred in the ordinary course of business consistent
with past practices, except for accruals or payments incurred in connection
with this Agreement.
(b) Except as set forth on Schedule 4.3.9, neither
Seller nor any Subsidiary has written off any such Receivables since the date
of the Unaudited Balance Sheets, except nonmaterial write-offs in the ordinary
course of business consistent with past practice. All such Receivables are
evidenced by written agreements, invoices or other instruments, true and
correct copies of which will be made available to Purchaser for examination
prior to the Closing. Except as set forth in Schedule 4.3.9, none of such
Receivables is the subject of a pledge or assignment to secure debt, is subject
to any security interest which will not be released by the Lien Releases, or
has been placed for collection with any attorney or collection agency or
similar individual or firm.
4.3.10 LIABILITIES.
(a) Neither Seller nor any Subsidiary has any debts,
liabilities, or obligations of any kind in excess of $25,000 in the aggregate,
whether accrued, absolute, known or unknown, contingent or otherwise, including
but not limited to any (i) liability or obligation on account of any federal,
state, local or foreign Taxes or penalties, or interest or fines with respect
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to such Taxes, (ii) liability arising from or by virtue of the production,
manufacture, sale, lease, distribution, delivery or other transfer or
disposition of personal property or services of any type, kind or variety, or
(iii) unfunded liability with respect to any pension, profit sharing or
employee stock ownership plan, whether operated by Seller or a Subsidiary or
any other entity covering employees of Seller or a Subsidiary, except (1) those
reflected on the Unaudited Balance Sheets, (2) liabilities incurred in the
ordinary course of business consistent with past practice since the date of the
Unaudited Balance Sheets (none of which individually or in the aggregate has
had, or will have a Material Adverse Effect), and (3) as specifically disclosed
in Schedule 4.3.10. Except as set forth on Schedule 4.3.10, neither Seller nor
any Subsidiary has any liability or obligation (absolute or contingent) to
provide funds on behalf of, or to guarantee or assume any debt, liability or
obligation of any corporation, partnership, association, joint venture,
individual or other person or entity.
4.3.11 ORDINARY COURSE OF BUSINESS AND ABSENCE OF CHANGES.
Except as set forth in Schedule 4.3.11, since September 30, 1998, Seller and
each Subsidiary has operated its respective business in the ordinary course
consistent with past practices. Without limiting the generality of the
foregoing, and except as set forth in Schedule 4.3.11, since September 30,
1998:
(a) there has been no change in the business, assets,
liabilities, results of operation, cash flow or financial condition of Seller
or any Subsidiary, or in any of their respective relationships with suppliers,
customers, employees, independent contractors, lessors, third party payors,
regulators, vendors or others, which individually or in the aggregate could
have a Material Adverse Effect;
(b) the properties and assets of Seller and each
Subsidiary have been maintained in good order, repair and condition, ordinary
wear and tear excepted;
(c) the books, accounts (including, without limitation,
methods, practices and principles of financial and tax accounting), and records
of Seller and each Subsidiary have been maintained in the usual, regular and
ordinary manner on a basis consistent with prior years;
(d) there has been no declaration, setting aside or
payment of any dividend or other distribution on or in respect of the capital
stock of, or other membership or equity interest in, Seller or any Subsidiary
nor has there been any direct or indirect redemption, retirement, purchase or
other acquisition by Seller or any Subsidiary of any of the capital stock of,
or other membership or equity interest in, Seller or such Subsidiary;
(e) there has been (i) no increase in the compensation
or in the rate of compensation or commissions payable or to become payable by
Seller or any Subsidiary to any director, officer, manager, salaried employee,
or agent earning $25,000 or more per annum; (ii) no general increase in the
compensation or in the rate of compensation payable or to become payable to
hourly employees or to salaried employees or fee-for-services contractors of
Seller or any Subsidiary earning less than $25,000 per annum ("general
increase" for the purpose hereof means any increase generally applicable to a
class or group of employees or agents, but not including increases granted to
individual employees for merit, length of service, change in position or
responsibility or other reasons applicable to specific employees or agents and
not
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generally to a class or group thereof); (iii) no director, officer, manager or
employee hired at a salary in excess of $25,000 per annum; and (iv) no increase
in any payment of or commitment to pay any bonus, profit sharing or other
extraordinary compensation to any employee;
(f) there has been no change in the Certificate or
Articles of Incorporation, Articles of Organization, Operating Agreement or
Bylaws or other organizational documents, as applicable, of Seller or any
Subsidiary;
(g) there has been no mortgage, lien or other
encumbrance or security interest (other than liens for current Taxes not yet
due and payable) created on or in (including without limitation, any deposit
for security consisting of) any asset or assets of Seller or any Subsidiary or
assumed by Seller or any Subsidiary with respect to any asset other than in the
ordinary course of business;
(h) no obligation or liability of Seller or any
Subsidiary has been discharged or satisfied, other than current liabilities
reflected on the Unaudited Balance Sheets and current liabilities incurred
since the date thereof in the ordinary course of business consistent with past
practice;
(i) there has been no sale, transfer or other
disposition of any asset of Seller or any Subsidiary, the fair market value of
which individually exceeds $25,000 or in the aggregate exceeds $100,000, except
for sales of inventory in the ordinary course of business consistent with past
practice;
(j) there has been no amendment, termination or waiver
of any right of Seller or any Subsidiary under any contract or agreement or
governmental license, permit or permission which, individually or in the
aggregate, has had or could result in a Material Adverse Effect;
(k) there has been no creation of, amendment to or
contribution, grant, payment or accrual for or to the credit of any employee of
Seller or any Subsidiary with respect to any bonus, incentive compensation,
deferred compensation, profit sharing, retirement, pension, group insurance or
other benefit plan, or any union, employment or consulting agreement or
arrangement;
(l) neither Seller nor any Subsidiary has (i) entered
into any contract, agreement or commitment other than in the ordinary course of
business consistent with past practices (none of which has had or will result
in a Material Adverse Effect); or (ii) failed to perform its obligations under
any of its contracts or agreements;
(m) no Seller or Subsidiary has failed to manage working
capital components (including cash, receivables, other current assets, trade
payables and other current liabilities) in a fashion consistent with past
practice, including failing to sell inventory and other property in an orderly
and prudent manner or failing to make all budgeted and other normal capital
expenditures, repairs, improvements and dispositions; and
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(n) no Subsidiary shall have assumed or otherwise become
obligated to pay any liability of Seller other than liabilities properly
related to the operations of such Subsidiary and not properly an obligation of
Seller.
4.3.12 LITIGATION AND PROCEEDINGS. Except as set forth on
Schedule 4.3.12, there are no actions, decrees, suits, counterclaims, claims,
proceedings or governmental or other investigations pending or, to the
Knowledge of Seller (as defined below) or any Subsidiary, threatened against
Seller or the Subsidiaries, or any of them, in any court or before any
arbitrator or governmental agency, and no judgment, award, order or decree of
any nature has been rendered against Seller or the Subsidiaries, or any of
them, with respect thereto by any agency, arbitrator, court, commission or
other authority which has not been paid or discharged. "Knowledge of Seller"
means the actual knowledge of an executive officer of Seller. There are no
pending or threatened claims against any of the officers, directors, employees,
managers, members or shareholders of any Seller or any Subsidiary in connection
with the business or affairs of Seller or such Subsidiary.
4.3.13 RESERVED.
4.3.14 INVENTORY. The inventory included in the Assets
consists of items of a quality and quantity usable and salable in the ordinary
course of the Business and are free of material defects, and the quantity of
inventory is reasonable and warranted given the present and anticipated
material circumstances of the Business.
4.4 BUSINESS OPERATIONS.
4.4.1 CUSTOMERS AND ACCOUNTS. Schedule 4.4.1 contains a
true, complete and accurate list of all customers and accounts (including,
without limitation, third party payors) of Seller, Xxxxxx North America, Xxxxxx
International, Xxxxxx Europe, Xxxxxx Direct, and AR Medical to whom sales of
more than $25,000 were made during the period from January 1, 1997 through
December 11, 1998; of Self Care to whom sales of more than $25,000 were billed
during the period from January 28, 1998 through November 30, 1998; of HMS,
constituting at least 75% of sales during the period from February 1, 1998
through November 30, 1998; and for the German Subsidiaries, to whom sales of
more than US$25,000 were made since June 29, 1998. To the Knowledge of Seller,
except as set forth on Schedule 4.4.1, relations with each such customer and
account are strong, and Seller does not know of any customer or account who
intends to discontinue the purchase of products or services from Purchaser or
any Subsidiary on a basis consistent with past practice. Schedule 4.4.1 also
lists all provider numbers for Seller and each Subsidiary (identified by name
of provider, provider number and the applicable Seller or Subsidiary) pursuant
to which any revenue included in the Financial Statements was collected from a
third party payor.
4.4.2 SUPPLIERS. Schedule 4.4.2 contains a list of each
supplier of goods or services to Seller or any Subsidiary to whom Seller or any
such Subsidiary paid in the aggregate more than $50,000 during the period
indicated on such Schedule, together with the amounts paid during such period.
To the Knowledge of Seller, except as set forth on Schedule 4.4.2, relations
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with each supplier and account are strong, and Seller does not know of any
supplier who intends to discontinue to supply products or services to Purchaser
or any Subsidiary.
4.4.3 ENVIRONMENTAL.
(a) Except as set forth on Schedule 4.4.3, the Seller
and the Subsidiaries have complied in all material respects at all times and
are currently in compliance with all applicable laws, regulations, rules,
judgments, orders and decrees pertaining to health, safety or environmental
matters, including, without limitation, the Resource Conservation and Recovery
Act (as amended by the Hazardous and Solid Waste Amendments of 1984), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(as amended by the Superfund Amendments and Reauthorization Act of 1986), the
Clean Water Act, the Clean Air Act and the Toxic Substances Control Act
(collectively, "Environmental Laws").
(b) Except as set forth on Schedule 4.4.3, neither
Seller nor any Subsidiary has received any notice from any person or entity of
(and neither Seller nor any Subsidiary is otherwise aware of) any event,
condition, circumstance, activity, practice, incident, action or plan
(including, without limitation, any intentional or unintentional release into
the environment of any hazardous or toxic substances) which may interfere with
the Seller's or any Subsidiary's operation of their respective businesses,
prevent continued compliance by the Seller or any Subsidiary with all
Environmental Laws, or otherwise give rise to any liability or serve as the
basis for any claim, action, suit or proceeding, hearing or investigation under
any Environmental Law.
(c) (i) Except as set forth on Schedule 4.4.3, no
portion of the "Real Property" (as defined in Schedule 4.5.5) has been used by
the Seller or any Subsidiary or to the Knowledge of Seller by any other party
for the generation, handling, processing, use, refinement, recycling,
treatment, storage or disposal of hazardous or toxic substances in any material
amount which may give rise to liability; (ii) to Seller's knowledge, no
underground tank or other underground storage receptacle for any hazardous or
toxic substances, petroleum or petroleum products is or has been located on any
portion of such Real Property; and (iii) there are no asbestos containing
materials or structures located at or on any of the Real Property.
(d) Neither the Seller, any Subsidiary nor any of the
Real Property listed on Schedule 4.5.5 is subject to any applicable
Environmental Law requiring the performance of site assessments, the removal or
remediation of hazardous or toxic substances, the giving of notice to any
governmental agency or the recording or delivery of an environmental disclosure
document or statement by virtue of the transactions contemplated by this
Agreement.
4.4.4 INSURANCE. Schedule 4.4.4 contains a complete list
and description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, the Seller, the Subsidiaries or any of their respective
officers, directors or managers, all of which will be maintained through the
Closing Date in full force and effect. Schedule 4.4.4 also contains a complete
list of (i) all pending claims under any of such policies or bonds; (ii) all
claims made within the last three (3) years under any of such policies or
bonds; and (iii) any denial of
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coverage or reservation of rights to contest any such claim asserted by any
insurer. All material terms, obligations and provisions of each of such
policies and bonds have been complied with; all premiums due thereon have been
paid, and no notice of cancellation with respect thereto has been received.
Neither the Seller nor any Subsidiary will, as of the Closing Date, have any
liability for premiums or for retrospective premium adjustments for any period
prior to the Closing Date. The Seller and the Subsidiaries have heretofore made
available to Purchaser a true, correct and complete copy of each such insurance
policy and bond listed on Schedule 4.4.4, or a summary thereof, and none of
such policies or bonds have since been modified in any respect.
4.4.5 POWERS OF ATTORNEY. Schedule 4.4.5 contains a
complete and accurate list setting forth the names and addresses of all persons
holding a power of attorney on behalf of any Subsidiary.
4.5 CONTRACTS; PROPERTIES AND ASSETS.
4.5.1 CONTRACTS.
(a) Schedule 4.5.1 includes a list of all Seller and
Subsidiary contracts or agreements with a value, expected payments or expected
benefits in excess of $25,000, identified by the Seller and Subsidiary, and all
other Seller and Subsidiary contracts or agreements that are material to the
Seller's or any Subsidiary's businesses (true, correct and complete copies of
which have been delivered to Purchaser), including without limitation the
following:
(i) all agreements and participation agreements
between Seller or any Subsidiary and any provider or pharmacy which
serves Medicare or Medicaid patients;
(ii) all managed care contracts or approvals in
a managed care plan or third-party program;
(iii) all third-party payor contracts;
(iv) all agreements with Medicare, MediCal, and
any state Medicaid agency or any fiscal intermediary for Medicare,
MediCal, or any Medicaid agency;
(v) all agreements with billing agencies and
financial or fiscal intermediaries;
(vi) all contracts or other documents regarding
arrangements with referral sources and marketing agents; and
(vii) all agreements with any supplier to Seller
or any Subsidiary (other than outstanding standard form purchase
orders in amounts less than $25,000).
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(b) True, correct and complete copies of each of the
following documents received by the Seller or any of the Subsidiaries since
January 1, 1998 have been made available to Purchaser and are listed on
Schedule 4.5.1:
(i) all notices or other correspondence with
any third party payor terminating a contract or relationship and the
reason for such termination and all notices or other correspondence
alleging any breach of any such contract;
(ii) all notices or other correspondence with
any managed care plan terminating a contract or relationship and the
reason for such termination and all notices or other correspondence
alleging any breach of any such contract;
(iii) all notices, if any, to terminate a
provider or participation agreement with Seller or any Subsidiary and
all notices or other correspondence alleging a breach of any such
agreement; and
(iv) all discount pricing policies.
(c) Except as set forth on Schedule 4.5.1:
(i) Each contract required to be listed in
Section 4.5.1(a) is in full force and effect and constitutes a binding
obligation of all parties thereto, enforceable against the other party
or parties to such contracts in accordance with its terms; no such
contract has been canceled or otherwise terminated, and to the
Knowledge of Seller there is no threat to do so; no such contract
requires assignment, and no such contract may be terminated, due to
the transfer of the Interests or Assets to Purchaser;
(ii) There are no existing defaults or events of
default, real or claimed, or events which with notice or lapse of time
or both would constitute defaults under any of the Seller's or
Subsidiaries' contracts; and
(iii) No Subsidiary is subject to any contract or
agreement: (1) that contains covenants limiting the freedom of any
Subsidiary to compete in any line of business in any geographic area;
(2) that requires any Subsidiary to share any profits or make any
payments or other distributions based on profits, revenues cash flows
or referrals; or (3) pursuant to which third parties have been
provided with products that can be returned to Seller or any
Subsidiary in the event they are not sold.
4.5.2 LICENSES; INTELLECTUAL PROPERTY.
(a) Schedule 4.5.2 contains a correct and complete list
of all (i) copyrights, registrations and registration applications, (ii)
trademarks, (iii) service marks, (iv) logos, (v) trade names, (vi) patents, and
(vii) computer software (the "Owned Software"), except for commercially
available over-the-counter "shrink-wrap" software (the "Business Software")
(collectively, the "Intellectual Property") used by the Seller or any
Subsidiary in the ordinary course of their respective businesses (including, to
the extent applicable, registrations,
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applications, and renewals for registrations of each of the foregoing) or which
are owned or held for use by the Seller or any Subsidiary in connection with
the operation of their respective businesses. Such items comprise all such
software, patents, copyrights, trademarks, service marks and trade names
required for the Seller and the Subsidiaries to conduct their respective
businesses as presently conducted. Schedule 4.5.2 also identifies all software
and other Intellectual Property licensed from third parties to the Seller or
any Subsidiary which is material to the business of the Seller or any
Subsidiary (the "Licensed Software" and "Licensed Intellectual Property").
Except as set forth on Schedule 4.5.2 and except for the Business Software, the
Seller and the Subsidiaries own all rights to use and protect, or hold a valid
license to use and protect, all such Intellectual Property. Neither Seller nor
any Subsidiary has violated or infringed in any material way any patent,
copyright, trademark, service xxxx or other intellectual property rights of any
other person or entity, and, to the Knowledge of Seller, there are no claims
pending or threatened against the Seller or any Subsidiary asserting that the
use of any Intellectual Property by the Seller or any Subsidiary infringes the
rights of any other person or entity. Neither the Seller nor any Subsidiary has
made or asserted any claim of violation or infringement of any Intellectual
Property against any other person or entity, and neither the Seller nor any
Subsidiary is aware of any such violation or infringement. Neither the Seller
nor any Subsidiary has granted any outstanding licenses or other rights to any
such Intellectual Property to any other person or entity.
(b) (i) The Business Software that is material to the
operation of the Seller's or the Subsidiaries' respective businesses, (ii) the
Owned Software, and (iii) any Licensed Software that has been incorporated into
any Owned Software is "Year 2000 Compliant" except where the failure to be so
compliant could not have a Material Adverse Effect. All hardware, computer
equipment and firmware used by the Seller and/or any Subsidiary is Year 2000
Compliant except where the failure to be so compliant would not have a Material
Adverse Effect. To the Knowledge of Seller, neither Seller nor any Subsidiary
depends to any extent on embedded computer technology or computer information
systems of its current vendors or suppliers that would, in the event that
embedded computer chips or vendor/supplier computer systems fail to be Year
2000 Compliant, have a Material Adverse Effect. For the purposes of this
Agreement, an item of computer hardware or software will be considered to be
Year 2000 Compliant if it is capable of correctly processing, providing and/or
receiving (including, without limitation, calculating, comparing and
sequencing) date and time data from, into, within and between the years 1999
and 2000 and any other years in the Twentieth and Twenty-First centuries or it
can be made so compliant or replaced without a material expenditure.
4.5.3 TITLE TO ASSETS. Except as otherwise noted on
Schedule 4.5.3 and for nonmaterial defects in title, the Subsidiaries have good
and marketable title to all of their respective assets, as of the date hereof,
free and clear of all Liens or claims of any kind or nature, and such property
and assets (together with the "Leased Assets", "Real Property", as each is
hereinafter defined, and the Intellectual Property and Contracts) constitute
and include substantially all of the property and assets owned or leased by
Seller and its Subsidiaries or used, in the conduct of the Subsidiaries'
respective businesses. As of the date hereof, the Subsidiaries have the right
to use all of the leased assets used by the Subsidiaries (collectively, the
"Leased Assets") in connection with the operation of their respective
businesses pursuant to valid and enforceable lease agreements, true and
complete copies of which have been provided to
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Purchaser. All of the properties and assets owned by the Subsidiaries are in
good operating condition and repair (ordinary wear and tear excepted). The
businesses of the Seller and the Subsidiaries has been operated and performed
through either the Seller or the Subsidiaries, and by acquiring the Interests
and Assets, Purchaser is acquiring the entire business of the Seller and each
of the Subsidiaries.
4.5.4 CONDITIONS OF PROPERTIES. All of the buildings
leased by the Seller or any Subsidiary and equipment owned or leased by the
Seller or any Subsidiary and used in their respective businesses are in good
condition and repair in all material respects, normal wear and tear excepted,
suited for the uses intended, and operated in conformity with all applicable
building, zoning and other applicable ordinances, laws and regulations, and
there are no proposed changes therein that would affect such properties or
their use.
4.5.5 REAL PROPERTY AND LEASES.
(a) Seller does not own any real property. Schedule
4.5.5 lists all real property previously owned at any point in the last three
(3) years by Seller or any Subsidiary (the "Owned Real Property").
(b) Schedule 4.5.5 lists all of the leases (the
"Facility Leases") of real property (together with the Owned Real Property, the
"Real Property") used by Seller or any Subsidiary in the operation of its
respective business, copies of which have been delivered to Purchaser by
Seller. Except as set forth on Schedule 4.5.5, each Facility Lease is valid, in
full force and effect, and enforceable in accordance with its terms and
constitutes a legal and binding obligation of each party thereto. Neither
Seller nor any Subsidiary has given or received any notice of material default,
termination or partial termination under any Facility Lease, and there is no
existing or continuing material default by Seller or any Subsidiary or, to the
Knowledge of Seller or any Subsidiary which default has not been cured, waived,
or otherwise resolved, any other party in the performance or payment of any
obligation under any Facility Lease.
(c) Except as set forth on Schedule 4.5.5, to the
Seller's Knowledge neither Seller nor any Subsidiary has received notice that
any zoning or similar land use restrictions are presently in effect or proposed
by any governmental authority which would materially impair the use or
occupancy of any of the Real Property for the purposes for which such Real
Property is currently being used, and the Seller's and the Subsidiaries' use of
the Real Property is in compliance in all material respects with all applicable
building, zoning and land use laws and regulations and property rights of
others, except to the extent such non-compliance would not have a Material
Adverse Effect. To the Knowledge of Seller, no condemnation by taking or
eminent domain of any Leased Real Property is pending or threatened.
(d) The copies of the Facility Leases heretofore
furnished by the Seller or the Subsidiaries to Purchaser are true, correct and
complete in all material respects, and such Facility Leases have not been
modified in any respect and are in full force and effect in accordance with
their respective terms.
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(e) The interests of the Seller or the Subsidiaries, as
applicable, in and under each of the Facility Leases are unencumbered and
subject to no present claim, contest, action or threatened action at law or in
equity.
(f) Except as set forth in Schedule 4.5.5, no rent has
been paid for more than one month in advance (excluding any amounts paid in
accordance with the Facility Leases as estimates of expenses or Lessee's share
thereof) and no security deposit has been paid by, nor is any brokerage
commission payable by the Seller or the Subsidiaries, or any or them, with
respect to any Facility Lease pursuant to which the Seller or the Subsidiaries,
or any of them, are lessees.
(g) There are no contractual obligations, agreements in
principle or present plans for the Seller or the Subsidiaries to enter into new
leases of real property or to renew or amend existing Facility Leases prior to
the Closing Date.
(h) No covenants, easements, restrictions, servitudes,
rights of way or regulations applicable to the Real Property have had or are
likely to have a Material Adverse Effect.
4.6 EMPLOYEES AND BENEFITS.
4.6.1 DIRECTORS, OFFICERS AND MANAGERS.
(a) Schedule 4.6.1 correctly lists all of the present
officers, directors and managers of the Seller and the Subsidiaries.
(b) Except as disclosed on Schedule 4.6.1, no director,
officer or manager of Seller or any Subsidiary serves as a director, officer or
manager of any other corporation or other entity on behalf of or as a designee
of Seller or any Subsidiary.
4.6.2 EMPLOYEES.
(a) Schedule 4.6.2 sets forth a list of all employees of
the Seller and Subsidiaries and as to each employee of Seller or any Subsidiary
whose current compensation (salary and bonus) exceeds an annual rate of
$25,000: his or her name, the Seller or Subsidiary he or she works for, the
location of employment, the date on which he or she was hired, the basic weekly
or hourly rate of pay (separately listing any bonus), such employee's accrued
sick leave entitlement up to November 30, 1998, such employee's accrued
vacation up to November 30, 1998, and all other benefits actually or
contingently accruing to such employee as of November 30, 1998. Except as set
forth on Schedule 4.6.2, neither Seller nor any Subsidiary has any obligation
to pay severance to any employee under any circumstances, contingent or
otherwise.
(b) Schedule 4.6.2 sets forth as to each officer or
other manager employed by Seller or any Subsidiary, the information described
in subsection (a) above, as well as the current compensation rate (salary,
bonus, commission or other) for each such person.
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(c) Except as set forth on Schedule 4.6.2, neither
Seller nor any Subsidiary has entered into any written employment agreement or
any other material written agreement with any employee, for a fixed term or
otherwise.
(d) Since the date of the Unaudited Balance Sheets, no
raises have been withheld in contemplation of the Closing of the transactions
contemplated hereby.
(e) Except as set forth on Schedule 4.6.2, during the
last three (3) years no significant accident or injury to any employee has
occurred at any of the Seller's or any Subsidiary's premises.
(f) To the Knowledge of Seller, no key employee
(including, without limitation, any licensed pharmacist, pharmacy assistant or
physician) of any Subsidiary will voluntarily leave such Subsidiary or decline
to continue employment, if offered, with Purchaser in connection with the sale
of the Interests and Assets to Purchaser hereunder.
(g) The Seller and Subsidiaries have made available to
Purchaser all employment records for each employee.
(h) To the Knowledge of Seller, no employee of any
Subsidiary is subject to any no-compete, no-hire, non-solicitation or similar
obligation pursuant to any employment or other agreement with any party which
would prevent or limit such employee from performing any duty in furtherance of
the businesses acquired by Purchaser hereunder following consummation of the
transactions contemplated by this Agreement.
(i) Schedule 4.6.2 contains a list of all licensed
pharmacists, pharmacy assistants and physicians employed or engaged by or
contracted with or by Seller or any Subsidiary, the type of license, all states
or other governmental entities which have licensed each such individual, the
license number (if any), any employed physicians' DEA number and a list of all
correspondence known to Seller relating to any adverse actions against any such
persons, true, correct and complete copies of which are contained on Schedule
4.6.2. All such persons are properly licensed by all applicable governmental
and regulatory agencies with respect to their activities on behalf of the
Seller or the Subsidiaries, and to Seller's Knowledge there are no material
problems or adverse actions regarding any such licenses.
4.6.3 COMPENSATION STRUCTURE - INDEPENDENT CONTRACTORS.
Schedule 4.6.3 contains a true and complete list of the names, titles, and
compensation arrangements of each independent contractor of the Seller and
Subsidiaries with annual payments or fees greater than $25,000. No such
independent contractor of Seller or any Subsidiary has informed or advised
Seller or such Subsidiary (nor is Seller otherwise aware) that such independent
contractor does not intend to continue to provide services to the Subsidiaries
after the date hereof. The Seller and Subsidiaries have heretofore provided
Purchaser with copies of all written agreements, correspondence, memoranda and
other written materials currently in effect with any such independent
contractor. A list of such agreements is included in Schedule 4.6.3.
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4.6.4 EMPLOYEE BENEFITS.
(a) Schedule 4.6.4 lists all "pension plans" (as such
term is defined in Section 3 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), "welfare benefit plans" (as such term is defined in
Section 3 of ERISA), bonus, stock option, stock purchase, restricted stock,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements to which
Seller or any Subsidiary is a party or which are maintained, contributed to or
sponsored by Seller or any Subsidiary for the benefit of any current or former
employee, manager, officer or director of Seller or such Subsidiary (all such
plans listed on Schedule 4.6.4 are sometimes referred to herein collectively as
the "Plans" and individually as a "Plan").
(b) True and complete copies of all the Plans and Plan
trusts, Summary Plan Descriptions, Actuarial Reports (if any) and Annual
Reports on Form 5500 for the most recent 3 years with respect to the Plans,
Internal Revenue Service determination letters, audit reports (if any) and any
other related documents have been made available to Purchaser.
(c) Except as set forth on Schedule 4.6.4, with respect
to each Plan: (i) no litigation or administrative or other proceeding is
pending or threatened; (ii) the Plan has been administered in compliance with,
and has been restated or amended so as to comply with, all applicable
requirements of law including all applicable requirements of ERISA, the Code
and regulations promulgated thereunder by the Internal Revenue Service and the
United States Department of Labor; and (iii) no Plan nor any trustee,
administrator or fiduciary for U.S. Subsidiaries thereof has at any time been
involved in any transaction relating to such Plan which would constitute a
breach of fiduciary duty under ERISA or a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code.
(d) Each Plan has been administered in all material
respects in compliance with the terms of the Plan.
(e) Each "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") maintained by or on behalf of
the Seller or any U.S. Subsidiary is listed on Schedule 4.6.4, and copies of
such Pension Plans have been, or prior to the Closing Date will be, made
available to Purchaser. The Pension Plans are qualified plans within the
meaning of Section 401(a) of the Code, and the trusts thereunder are exempt
from federal income tax under Section 501(a) of the Code, and the Seller's or
U.S. Subsidiaries' predecessors, if any, have made or accrued, and as of the
Closing Date will have made or accrued, all payments and contributions required
to be made under the provisions of the Pension Plans or by law with respect to
any period prior to the Closing Date. As of the date hereof, no contribution to
any profit sharing plan maintained by the Seller or any U.S. Subsidiary has
been authorized which has not been fully paid.
(f) Except as disclosed on Schedule 4.6.4 and except for
obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), neither Seller nor any Subsidiary has any obligation to provide, or
liability for, health care, life insurance or other benefits after termination
of employment for former or present employees. As of the Closing
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Date, the Seller and Subsidiaries will have cured any material violations or
deficiencies under applicable statutes, orders and regulations relating to
their employee benefit plans or their administration thereof and will have
provided adequate reserves, or insurance or qualified trust funds, for all
claims incurred through the Closing Date, based on an actuarial valuation
satisfactory to the actuaries of Purchaser representing a projection of claims
expected to be incurred for such retirees during their period of coverage under
such Plans.
(g) No fact or circumstance exists which could
constitute grounds in the future for the Pension Benefit Guaranty Corporation
("PBGC") (or any successor to the PBGC) to take any action whatsoever under
Section 4042 of ERISA in connection with any plan which an "Affiliate" (as
defined below) of Seller or any U.S. Subsidiary maintains within the meaning of
Section 4062 or 4064 of ERISA, and, in either case, the PBGC has not previously
taken any such action which has resulted in, or reasonably might result in, any
liability of an Affiliate or Seller or any U.S. Subsidiary to the PBGC, which
has had or could reasonably be expected to have a Materially Adverse Effect.
The term "Affiliate" for purposes of this Section means any trade or business
(whether incorporated or unincorporated) which is a member of a group described
in Section 414(c) of the Code of which Seller or any U.S. Subsidiary is also a
member.
(h) Only current and former employees of the Seller and
Subsidiaries or their dependents participate in the Plans.
(i) Neither Seller nor any U.S. Subsidiary is an
affiliate with any entity other than entities required to be aggregated with it
pursuant to Sections 414(b), (c), (m) or (o) of the Code. No Plan is
cosponsored or has been adopted by any entity other than the Seller and the
Subsidiaries.
(j) Except as set forth on Schedule 4.6.4, none of the
German Subsidiaries maintains any Plan other than Plans required by law.
4.6.5 LABOR-RELATED MATTERS. Except as set forth on
Schedule 4.6.5, neither Seller nor any Subsidiary is a party to any collective
bargaining agreement or agreement of any kind with any union or labor
organization. No German Subsidiary has employees who have formed a staff
council (Betriebsraft). Neither Seller nor any Subsidiary is in violation of or
default under any such collective bargaining or other agreement. The Seller and
the Subsidiaries have complied in all material respects with all obligations
under the National Labor Relations Act, as amended, Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as
amended, and all other federal, state and local labor laws and regulations
applicable to employees. There are no unfair labor practice charges pending or,
to the Knowledge of Seller, threatened against Seller or any Subsidiary and
there are no charges, complaints, claims, or proceedings pending or, to the
Knowledge of Seller, threatened against Seller or any Subsidiary with respect
to any alleged violation of any legal duty (including but not limited to any
wage and hour claims, employment discrimination claims or claims arising out of
any employment relationship) by Seller or any such Subsidiary as to any of its
respective employees or as to any person seeking employment therefrom, and no
such violations exist.
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4.6.6 TRANSACTIONS WITH MANAGEMENT. Schedule 4.6.6 contains a
description, by name, amount and type, of all contracts with or commitments to
present or former shareholders, directors, officers, members, managers,
employees or agents of Seller or any Subsidiary, including any business
directly or indirectly controlled by any such person, (other than contracts or
commitments relating to services to be performed by an officer, director,
employee, or agent as a currently employed employee or contracted agent of
Seller or any Subsidiary).
4.7 OTHER.
4.7.1 APPROVALS AND CONSENTS. Schedule 4.7.1 lists all
consents or other approvals necessary in order for Seller, the Subsidiaries,
and each of them, to consummate the transactions contemplated by this
Agreement, including but not limited to all governmental and other regulatory
approvals and consents of lenders, lessors, landlords and other third parties.
4.7.2 FRAUD AND ABUSE. Neither Seller nor any Subsidiary
nor any person or entity providing services for their respective businesses
have, engaged in any activities which are prohibited under Section 1320a-7b of
Title 42 of the United States Code or the regulations promulgated thereunder,
or related state or local statutes or regulations, or which are prohibited by
rules of professional conduct, including, but not limited to, the following:
(a) knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (b) any failure by a claimant to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (c) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate) directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing or ordering or
arranging for, or recommending, purchasing, leasing or ordering any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid; (d) engaging in any activity which is a basis for
exclusion from the Medicare, Medicaid and other federally-funded programs; or
(e) any violation of the Medicare or Medicaid requirements, including any fraud
and abuse provisions, except (i) where such circumstances could not reasonably
be expected to have a Material Adverse Effect or (ii) activities which a
reasonably prudent person with knowledge of the underlying facts could
reasonably conclude do not pose an unreasonable risk of violation of such law.
4.7.3 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR
PAYMENT LIABILITIES. Except as described in Schedule 4.7.3, neither Seller nor
any Subsidiary has or as of the Closing Date will have, any material liability
to any third party fiscal intermediary or carrier administering any state
Medicaid program or the federal Medicare program, or to any other third party
payor for the recoupment of any amounts previously paid to Seller or any
Subsidiary (or any predecessor entity) by any such third-party fiscal
intermediary, carrier, Medicaid program, Medicare program, or third party
payor. Except as set forth on Schedule 4.7.3, there are no pending or, to the
Knowledge of Seller, threatened actions by any third party fiscal intermediary
or carrier
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administering any state Medicaid or the federal Medicare program, the
Department of Health and Human Services, any state Medicaid agency, or any
third party payor to suspend payments to Seller or any Subsidiary.
4.7.4 BILLING PRACTICES AND REFERRAL SOURCES.
(a) BILLING PRACTICES GENERALLY. All billing practices
by the Seller and Subsidiaries to all third party payors, including, but not
limited to, the federal Medicare program, state Medicaid programs and private
insurance companies, have been true, fair and correct in all material respects
and in substantial compliance with all applicable laws, regulations and
policies of all such third party payors.
(b) TRANSACTIONS WITH REFERRAL SOURCES. Neither the
Seller, any Subsidiary nor any of their directors, officers or managers, are a
party to any contract, lease, agreement or arrangement, including, but not
limited to, any joint venture or consulting agreement with any physician,
hospital, nursing facility, home health agency or other person who to Seller's
Knowledge is in a position to make or influence referrals to or otherwise
generate business for the Seller or any Subsidiary to provide services, lease
space, lease equipment or engage in any other venture activity except to the
extent the same could not reasonably be expected to have a Material Adverse
Effect.
4.7.5 CONTRIBUTIONS, PAYMENTS OR GIFTS. Neither the
Seller, any Subsidiary nor any of their directors, officers or managers have
directly or indirectly (i) made or agreed to make, or is aware that there has
been made or that there are any agreements to make, any contribution, payment
or gift of funds or property to, or for the private use of, any governmental
official, employee or agent where either the contribution, payment or gift or
the purpose of such contribution, payment or gift is or was illegal under the
laws of the United States or under the laws of any state thereof or any other
jurisdiction (foreign or domestic) under which such payment, contribution or
gift was made; (ii) established or maintained any unrecorded fund or asset for
any purpose or made any false or artificial entries on any of their books or
records for any reason or (iii) made, or agreed to make, or are aware that
there has been made or that there are any agreements to make, any payment to
any person with the intention or understanding that any part of such payment
would be used for any purpose other than that described in the documents
supporting such payment.
4.7.6 PHYSICIAN SELF-REFERRALS. Neither Seller nor any
Subsidiary has submitted any claims in connection with any referrals which
violated any applicable self-referral law, including the Xxxxx Law (42 U.S.C.
ss. 1395nn) or any applicable state self-referral law as those laws are
currently interpreted, except (i) to the extent that any such violation could
not reasonably be expected to have a Material Adverse Effect or (ii) to the
extent claims were submitted under circumstances that a reasonably prudent
person with knowledge of the underlying facts would conclude do not pose an
unreasonable risk of violating such law.
4.7.7 COMPLIANCE WITH LAWS. Seller and each Subsidiary and
each of their respective predecessors in interest have complied and are in
compliance in all material respects with all federal, foreign, state and local
laws, rules, regulations and ordinances applicable to it or
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its business, including, without limitation, those enforced by the Food and
Drug Administration ("FDA") and any similar foreign agencies, and any other
laws, rules, regulations or ordinances regarding the design, manufacture and
sale of medical devices and supplies. No present or past violation of any such
law, rule, regulation or ordinance, whether known or unknown, has occurred
which could or would materially impair the right or ability of Seller or any
Subsidiary or any of their successors, officers, directors, managers, members,
employees or agents to conduct their respective activities. All products
manufactured, sold, licensed, leased or otherwise distributed by Seller or any
Subsidiary or any of its predecessors in interest were free of material defects
at the time of shipment and were manufactured in accordance with good
manufacturing practices and other applicable requirements. All such products
were labeled, packaged, and distributed in substantial compliance with all
applicable domestic or foreign laws, rules, regulations and ordinances, and
except as set forth on Schedule 4.7.7 no such products have been the subject of
any recall or inquiry or investigation of any federal, state or local
government authority or foreign jurisdiction (including, without limitation,
the FDA). Except as set forth on Schedule 4.7.7, no product liability claim or
any other claim premised in whole or in part on product liability is pending or
threatened against Seller or any Subsidiary with respect to any such products
nor are there any unasserted contingent liabilities involving product liability
claims. No oral or written warranties have been made or given by Seller or any
Subsidiary with respect to any such product other than those product warranties
disclosed or contained in contracts on Schedule 4.5.1.
4.7.8 PERMITS. Except as set forth on Schedule 4.7.8:
(a) The Seller and the Subsidiaries and their employees,
as applicable, hold all permits, licenses, franchises and authorizations from
governmental and regulatory authorities necessary to conduct the Seller's and
the Subsidiaries' businesses in the manner in which such businesses have been
and are being conducted (the "Seller and Subsidiary Permits"). True, complete
and correct copies of the Seller and Subsidiary Permits are contained on
Schedule 4.7.8, including but not limited to the following:
(i) a list of all countries, states and other
jurisdictions from, in or to which the Seller or any Subsidiary mails
prescription drugs, a description of any governmental permits or
licenses held by the Seller and any of the Subsidiaries required to do
so or regarding the use of the mails in any of such countries, states
and other jurisdictions, and a statement as to where such mailings are
made;
(ii) all medical, healthcare, and pharmacy
related permits, licenses, franchises and authorizations from
governmental and regulatory authorities, including DEA numbers and/or
approvals, and Medicare, MediCal, and any Medicaid agency supplier or
provider numbers and the Seller and Subsidiaries that use such
number(s);
(iii) all approvals, certifications, or licenses
granted by the FDA (including 510(k)s), with a description of the
device or procedure so approved; and
(iv) all approvals by or participation in
private accrediting agency programs, evidence of which has been
provided to Purchaser.
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(b) True, correct and complete copies of all
correspondence regarding any material adverse information concerning any of the
Seller and Subsidiary Permits, all material notices concerning any of the
Seller and Subsidiary Permits, and other material information concerning the
Seller and Subsidiary Permits are contained or described on Schedule 4.7.8.
(c) Except as set forth on Schedule 4.7.8, all of the
Seller and Subsidiary Permits are fully transferable to Purchaser and none of
the Seller and Subsidiary Permits will be terminated, canceled, revoked or
otherwise materially adversely affected by the transactions contemplated
hereby. With respect to those Seller and Subsidiary Permits set forth on
Schedule 4.7.8 which will be terminated, canceled, revoked or otherwise
materially adversely affected by the transactions contemplated hereby, if any,
all standards and conditions to be met by the Seller and Subsidiaries necessary
for the reissuance of such Seller and Subsidiary Permits to Purchaser have been
satisfied or obtained and will continue until the Closing to be satisfied by
the operation of the Seller and the Subsidiaries. No event has occurred that
allows (nor after notice or lapse of time or both would allow) revocation or
termination of any Seller or material Subsidiary Permit or would result in any
other material impairment of the rights of the holder of any Seller or material
Subsidiary Permit.
(d) Seller and each Subsidiary has all necessary
certificates of medical need and benefit assignments required to receive
reimbursement from Medicare, Medicaid and MediCal and other third party payors
for each of its customers who rely on third party payors for payment.
4.7.9 INVESTMENT REPRESENTATIONS.
(a) The Convertible Preferred Stock, the Redeemable
Preferred Stock, the Warrants and the Earn-Out Note (together with any
underlying securities, collectively, the "Matria Securities") to be received by
Seller pursuant to this Agreement are being acquired for Seller's own account
for investment purposes only and not with a view to any distribution or public
offering in violation of the Securities Act of 1933, as amended (the
"Securities Act").
(b) The Matria Securities to be received by Seller
pursuant to this Agreement have not been registered under the Securities Act;
(c) Seller is an "accredited investor" within the
meaning of Rule 501 of the Securities Act;
(d) The Purchaser has made available to Seller at
reasonable times prior to Seller's execution of this Agreement the opportunity
to ask questions and receive answers concerning the terms and conditions of
this Agreement and the Matria Securities and to obtain any additional
information which Purchaser possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished to Seller;
(e) Seller understands and agrees that Seller may not
sell or otherwise transfer any of the Matria Securities except pursuant to a
registered offering or in one or more private
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transactions which, in the opinion of counsel reasonably satisfactory to
Purchaser are not required to be registered under the Securities Act; and
(f) Seller acknowledges and agrees that each certificate
representing the Matria Securities issued pursuant to this Agreement shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR IN
THE ABSENCE OF RECEIPT BY THE ISSUER OF AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT IT MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
Purchaser covenants to remove the legend on each such certificate once any such
Matria Security may be sold without restrictions in accordance with the
Securities Act and applicable state securities laws.
4.7.10 BROKERS. No broker, finder or other financial
consultant has acted on behalf of Seller or any Subsidiary in connection with
this Agreement or the transactions contemplated by this Agreement.
4.7.11 LIMITATION ON WARRANTIES. Except as expressly set
forth in this Article 4, Seller makes no express or implied warranty of any
kind whatsoever, including, without limitation, any representation as to
physical condition or value of any of the assets of Seller or any of its
Subsidiaries or the future profitability or future earnings performance of the
Subsidiaries. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, and notwithstanding any
independent investigation or verification undertaken by Seller or its
representatives in connection herewith, Purchaser represents and warrants that
the following representations and warranties are true and correct as of the
date hereof and shall, except as may be specifically provided for in this
Agreement or otherwise specifically agreed upon or waived, in each case in
writing by the Seller, be true and correct as of the Closing:
5.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has full
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power and authority, and possesses all rights, privileges, franchises,
licenses, permits, authorizations and approvals, governmental or otherwise,
necessary to entitle it to use its corporate name and to own or lease its
properties and assets and to carry on its business as and in the places where
such properties or assets are now owned, leased or operated and such business
is conducted, where the absence of such could reasonably be expected to result
in, individually or in the aggregate, a Purchaser Material Adverse Effect (as
defined below). Purchaser and its subsidiaries are qualified to do business in
all necessary jurisdictions except where the failure to so qualify would not
have a Purchaser Material Adverse Effect.
5.2 POWER AND AUTHORITY. Purchaser has the full corporate power
and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Purchaser, and no other corporate proceedings on the part of
Purchaser are necessary to authorize the execution, delivery and performance of
this Agreement by Purchaser.
5.3 BINDING EFFECT. This Agreement has been duly executed and
delivered by Purchaser and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
and similar laws affecting creditors' rights generally and general principles
of equity (regardless of whether asserted in a proceeding at law or in equity).
5.4 NO VIOLATION; CONSENTS. Neither the execution and delivery
of this Agreement by Purchaser nor the performance by it of its obligations
hereunder will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Purchaser;
(b) except as set forth on Schedule 5.4, breach or otherwise
constitute or give rise to a default under any contract,
commitment or other obligation to or by which Purchaser is a
party or is bound, except to the extent any such breach or
default would not have a Purchaser Material Adverse Effect;
(c) violate any statute, ordinance, law, rule, regulation,
judgment, order or decree of any court or other governmental
or regulatory authority to which Purchaser is subject; or
(d) except as set forth on Schedule 5.4, require any consent,
approval or authorization of, notice to, or filing,
recording, registration or qualification with any third
party, court or governmental or regulatory authority.
5.5 CAPITALIZATION.
(a) The authorized capital stock of Purchaser consists of
100,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 50,000,000 shares of
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Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which two
series of the Preferred Stock have been designated: the Convertible Preferred
Stock, consisting of 16,500 authorized shares, and the Redeemable Preferred
Stock, consisting of 60,000 authorized shares. As of December 13, 1998, there
were issued and outstanding 36,409,544 shares of Common Stock and no shares of
the Preferred Stock. The shares of Convertible Preferred Stock and Redeemable
Preferred Stock issuable to the Seller pursuant to this Agreement have the
rights, preferences and limitations set forth in Schedules 1.4(b) and 1.4(c),
respectively, and will be, when issued in accordance with the terms hereof,
validly issued, fully paid, nonassessable and free of preemptive rights.
(b) Except as set forth on Schedule 5.5(b) and except for (i)
stock options issued subsequent to September 30, 1998 under Purchaser's 1997
Stock Incentive Plan and 1996 Directors' Non-Qualified Stock Option Plan (the
"Purchaser Option Plans"); (ii) stock options exercisable under Purchaser's
1996 Employee Stock Purchase Plan (together with the options outstanding under
the Purchaser Option Plans (the "Outstanding Purchaser Options"); (iii) the
Rights Agreement, dated as of January 20, 1996, by and between Purchaser and
SunTrust Bank, Atlanta, as Rights Agent, as amended (the "Purchaser's
Shareholder Rights Plan"); and (iv) 1,278,180 at September 30, 1998 in
principal amount of Purchaser's 8% Convertible Subordinated Debentures and Note
due December 31, 2001 convertible into Purchaser's Common Stock at $4.90 per
share, Purchaser is not a party to or bound by any option, call, warrant,
conversion privilege or other agreement obligating Purchaser at present, at any
future time, or upon occurrence of any event to issue or sell any shares of
Purchaser Common Stock or other capital stock of Purchaser. Except as set forth
on Schedule 5.5(b) and the Registration Rights Agreement to be delivered
pursuant to Section 2.3(f) of this Agreement, Purchaser is not a party to any
agreement obligating Purchaser to register any of its securities with the SEC
or any other governmental agency, whether such registration obligation is
presently existing or arises in the future or upon the occurrence of an event.
5.6 EXCHANGE ACT REPORTS AND FINANCIAL STATEMENTS. Purchaser has
filed with the Commission all required reports, schedules, forms, proxy,
registration and other statements and other documents (collectively, the "SEC
Documents"). As of the date of this Agreement, the last SEC Document filed by
Purchaser was Purchaser's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), as
the case may be, and the rules and regulations of the Commission promulgated
thereunder applicable to the SEC Documents. As of their respective filing
dates, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by a later SEC Document filed
and publicly available prior to the Closing Date, the circumstances or bases
for which modifications or supersessions have not and will not individually or
in the aggregate result in any material liability or obligation on behalf of
Purchaser under the Securities Act, the Exchange Act, the rules promulgated
under the Securities Act or the Exchange Act, or any federal, state or local
anti-fraud, blue sky, securities or similar laws. The consolidated financial
statements of Purchaser and its subsidiaries included in the SEC Documents (as
amended or
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supplemented by any later filed SEC Document filed and publicly available prior
to November 1, 1998), comply as to form in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
Commission) applied on a consistent basis during the periods involved (except
as may be indicated in notes thereto) and fairly present the consolidated
financial position, assets and liabilities of Purchaser and its subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the SEC Documents and except for this Agreement and the transactions
contemplated herein since September 30, 1998, Purchaser and its subsidiaries
have conducted their businesses, in all material respects, only in the ordinary
course and in a manner consistent with past practice, and there has not
occurred any event, condition, circumstance, change or development (whether or
not in the ordinary course of business) that, individually or in the aggregate,
has had or could reasonably be expected to have a material adverse effect on
the financial condition or results of operations of Purchaser and its
subsidiaries, taken as a whole, whether or not required by GAAP to be provided
or reserved against on a balance sheet prepared in accordance with GAAP (a
"Purchaser Material Adverse Effect"). Without limiting the generality of the
foregoing, except as set forth on Schedule 5.7 hereto, or as disclosed in any
SEC Documents filed with the Commission and publicly available prior to
November 1, 1998 or as contemplated herein, since September 30, 1998, there has
not been (i) any change by Purchaser in its accounting methods, principles or
practices, (ii) any revaluation by the Purchaser of any of its or any of its
subsidiary's material assets other than in the ordinary course of business
consistent with past practice, (iii) any entry outside the ordinary course of
business by Purchaser or any of its subsidiaries into any commitments or
transactions material, individually or in the aggregate, to Purchaser and its
subsidiaries taken as a whole, (iv) any declaration, setting aside or payment
of any dividends or distributions in respect of the shares of Purchaser's
capital stock or, any redemption, purchase or other acquisition of any of its
securities, or (v) any grant or issuance of any Equity Securities of Purchaser
or any of its subsidiaries. "Equity Securities" means, with respect to the
Purchaser or any of its subsidiaries, as the case may be, (i) any class or
series of common stock, preferred stock or other capital stock, whether voting
or non-voting, (ii) any other equity securities issued by Purchaser or such
subsidiary, as the case may be, whether now or hereafter authorized for
issuance by the Purchaser's or such subsidiary's, as the case may be,
Certificate of Incorporation, (iii) any debt, hybrid or other securities issued
by Purchaser or such subsidiary, as the case may be, which are convertible
into, exercisable for or exchangeable for any other Equity Securities, whether
now or hereafter authorized for issuance by Purchaser's or such subsidiary's,
as the case may be, Certificate of Incorporation, (iv) any equity equivalents
(including, without limitation, stock appreciation rights, phantom stock or
similar rights), interests in the ownership or earnings of Purchaser or such
subsidiary, as the case may be, or other similar rights, (v) any written or
oral rights, options, warrants, subscriptions, calls, preemptive rights,
rescission rights or other rights to subscribe for, purchase or otherwise
acquire any of the foregoing, (vi) any written or oral obligation of the
Purchaser or such subsidiary, as the case may be, to issue, deliver or sell,
any of the foregoing, (vii) any written or oral obligations of Purchaser or
such subsidiary, as the case may be, to repurchase, redeem or
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otherwise acquire any Equity Securities, and (viii) any bonds, debentures,
notes or other indebtedness of Purchaser or such subsidiary, as the case may
be, having the right to vote (or convertible into, or exchangeable for
securities having the right to vote) on any matters on which the stockholders
of Purchaser or such subsidiary, as the case may be, may vote.
5.8 NO SHAREHOLDER VOTE REQUIRED. No vote of the holders of any
Equity Securities or other securities of Purchaser or any of its subsidiaries
is required to approve or effect this Agreement and the transactions
contemplated hereby.
5.9 REPORTING COMPANY; FORM S-3. Purchaser is subject to the
reporting requirements of the Exchange Act and its Common Stock is registered
under Section 12 of the Exchange Act. Purchaser is eligible to register for
resale shares of its Common Stock on a registration statement on Form S-3 under
the Securities Act.
5.10 TRADING ON NASDAQ. Purchaser's Common Stock is authorized for
quotation on the Nasdaq National Market, and the trading in Purchaser's Common
Stock on Nasdaq has not been suspended as of the date hereof and as of the
Closing Date.
5.11 BROKERS. Both parties acknowledge that Xxxxxx Xxxxxxxxx
Xxxxxx & Co. ("BHC") has acted on behalf of Purchaser in connection with the
transactions contemplated by this Agreement and that any and all fees of BHC
shall be paid by the Purchaser. Other than BHC, no other broker, finder or
other financial consultant has acted on behalf of Purchaser in connection with
this Agreement or the transactions contemplated by this Agreement.
5.12 ABSENCE OF LITIGATION; COMPLIANCE. Except as set forth on
Schedule 5.12 hereto or as disclosed in any SEC Documents filed with the SEC
and publicly available prior to November 1, 1998, to the best of Purchaser's
"Knowledge" (as defined below), there are no suits, claims, actions,
proceedings or investigations pending or overtly threatened against Purchaser
or any wholly-owned subsidiary, or any properties or rights of Purchaser or any
wholly-owned subsidiary, before any court, arbitrator or "Governmental Entity"
(as defined below), which (i) if determined adversely to Purchaser or any
wholly-owned subsidiary could, individually or in the aggregate, reasonably be
expected to have a Purchaser Material Adverse Effect; or (ii) seek to delay or
prevent the consummation of the transaction contemplated by this Agreement.
Neither Purchaser nor any of its wholly-owned subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which in the future could
reasonably be expected to have, individually or in the aggregate, a Purchaser
Material Adverse Effect or could prevent or delay the consummation of the
transactions contemplated by this Agreement. To the best of Purchaser's
Knowledge, neither Purchaser nor any of its wholly-owned subsidiaries is in
violation of, nor has Purchaser or any subsidiary violated, any material
provisions of any note, bond, mortgage, indenture, contract, agreement, lease,
or other instrument or obligations to which Purchaser or any of its
wholly-owned subsidiaries is a party or by which Purchaser, any of its
wholly-owned subsidiaries or any of their respective properties are bound or
affected except for any such violations which could not, individually or in the
aggregate, reasonably be expected to have a Purchaser Material Adverse Effect.
"Governmental Entity" means any court, administrative agency or commission or
other governmental authority or instrumentality, whether domestic (federal,
state or local) or foreign.
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"Purchaser's Knowledge" means the actual knowledge of any executive officer of
Purchaser.
5.13 TAKEOVER STATUS. No "fair price", "moratorium", "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws or applicable stock exchange rules or regulations,
including, without limitation, Section 203 of the Delaware General Corporation
Law, applicable to the Parent or any of its subsidiaries is applicable to the
transactions contemplated hereby, taken individually or in the aggregate.
5.14 CORPORATE ACTION. Purchaser has taken all such actions as are
necessary or desirable in order to (i) amend in a manner satisfactory to
Seller's counsel Purchaser's Shareholder Rights Plan so that any acquisition of
securities of Matria (but not dispositions) ("Purchases") contemplated or
permitted by this Agreement and the acquisitions contemplated or permitted by
the Standstill Agreement constitute neither a "triggering event" nor a
"distribution date" as defined by such plan and so that neither Seller, MJG,
nor SZI shall become "Acquiring Persons" within the meaning of Purchaser's
Shareholder Rights Plan as a result of the Purchases contemplated or permitted
by this Agreement or acquisitions contemplated or permitted by the Standstill
Agreement; and (ii) satisfy the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203") with respect to approval of the
Purchases contemplated or permitted by this Agreement and Purchases
contemplated or permitted by the Standstill Agreement and to ensure that
neither Seller nor any of its affiliates shall be an "Interested Shareholder"
within the meaning of Section 203.
5.15 INVESTMENT REPRESENTATIONS.
(a) The Interests in the Subsidiaries (collectively the "Seller's
Securities") to be acquired by Purchaser pursuant to this Agreement are being
acquired for Purchaser's own account for investment purposes only and not with
a view to any distribution or public offering in violation of the Securities
Act;
(b) The Seller's Securities to be received by Purchaser pursuant
to this Agreement have not been registered under the Securities Act;
(c) Purchaser is an "Accredited Investor" within the meaning of
Rule 501 of the Securities Act and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Seller's Securities, and has the ability to bear
the economic risks of its investment;
(d) Seller has made available to Purchaser at a reasonable time
prior to Purchaser's execution of this Agreement the opportunity to ask
questions and receive answers concerning the terms and conditions of this
Agreement and the Seller's Securities and to obtain any additional information
which Seller possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy of the information furnished to
Purchaser;
(e) Purchaser understands and agrees that Purchaser may not sell
or otherwise transfer any of the Seller's Securities except pursuant to a
registered offering or in one or more private
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transactions that, in the opinion of counsel reasonably satisfactory to Seller,
such transaction or transactions are not required to be registered under the
Securities Act; and
(f) Purchaser acknowledges and agrees that each certificate
representing the Seller's Securities acquired pursuant to this Agreement shall
include a legend in substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR IN
THE ABSENCE OF RECEIPT BY THE SELLER OF AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE SELLER
THAT IT MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
5.16 LIMITATION ON WARRANTIES. Except as expressly set forth in
this Article 5, Purchaser makes no express or implied warranty of any kind
whatsoever, including, without limitation, any representation as to physical
condition or value of the assets of Purchaser or any of its Subsidiaries or the
future profitability or future earnings performance of the Purchaser and its
Subsidiaries.
5.17 COMPLIANCE WITH SECURITIES LAWS. Purchaser has not taken, and
will not take, any action which would subject the issuance and sale of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the Warrant and
the Earn-Out Note pursuant to this Agreement to the provisions of Section 5 of
the Securities Act, or violate the registration or qualification provisions of
any securities or blue sky laws of any applicable jurisdiction, and, based in
part on the representations of Seller in Section 4.7.8, the sale of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the Warrant and
the Earn-Out Note pursuant to this Agreement and the issuance of Common Stock
upon exercise of the Warrant from time to time complies with all applicable
requirements of applicable federal and state securities and blue sky laws.
ARTICLE 6
CONDUCT OF BUSINESS OF COMPANY PENDING CLOSING
Except as otherwise expressly provided herein, Seller covenants and
agrees that, without the prior written consent of Purchaser in each instance,
between the date hereof and the Closing Date:
6.1 CONDUCT OF BUSINESS. The Seller and the Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and preserve intact
their present business organizations, keep available the services of their
respective present officers, managers, employees and agents and preserve
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their goodwill and their relationships with customers, suppliers, lenders and
others having business dealings with each of them.
6.2 MAINTENANCE OF PROPERTIES. The Seller and the Subsidiaries
will maintain their respective properties and assets in good operating
condition, ordinary wear and tear excepted.
6.3 INSURANCE. The Seller and the Subsidiaries will maintain and
keep in full force and effect all of the insurance referred to in Section 4.4.4
hereof or other insurance equivalent thereto in all material respects.
6.4 ISSUANCE OF SECURITIES. Neither Seller nor any Subsidiary
will sell, issue, authorize or propose the sale or issuance of, or purchase or
propose the purchase of, any shares of capital stock or other equity interest
or any class of securities convertible into, or rights, warrants or options to
acquire, any such shares, other equity interests or other convertible
securities or enter into any agreement with respect to the foregoing. Neither
Seller nor any Subsidiary shall exercise any option or warrant to purchase the
capital stock or other equity interest of any Seller, Subsidiary or other
entity owned or held by Seller or such Subsidiary.
6.5 DIVIDENDS. Except as expressly agreed to by Purchaser and
Seller in writing, no dividend, distribution or payment will be declared or
made in respect of the capital stock or other equity interests of Seller or any
Subsidiary, except for the regular quarterly distribution to Seller's members
for taxes and neither Seller nor any Subsidiary will, directly or indirectly,
redeem, purchase or otherwise acquire any of its capital stock or other equity
interests or enter into any agreement with respect to the foregoing.
6.6 AMENDMENT OF CHARTER. Except as may be necessitated by this
Agreement, neither the Seller nor any of the Subsidiaries will amend or cause
to be amended its respective Articles of Incorporation, Articles of
Organization, Operating Agreement, Bylaws or other organizational documents.
6.7 NO ACQUISITIONS. Neither the Seller nor any of the
Subsidiaries will acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets or stock of, or by any other manner, any
business or any corporation, partnership, association or other entity or
division thereof or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Seller or any Subsidiary
other than the cartoning machine nor will any of the Seller or Subsidiaries
enter into any agreement with respect to the foregoing.
6.8 DISPOSITION OF ASSETS. Other than in the ordinary course of
business consistent with past practice, the transfers expressly permitted
pursuant to Section 4.3.11 hereof, or the sale of eleven acres of undeveloped
land located in McDonough, Georgia, neither the Seller nor any of the
Subsidiaries will sell, mortgage, lease, buy or otherwise acquire, transfer or
dispose of any real property or interest therein or sell or transfer, mortgage,
pledge or subject to any lien, charge or other encumbrance any other tangible
or intangible asset or enter into any agreement with respect to the foregoing.
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6.9 COMPENSATION. No increase will be made in the compensation
payable or to become payable by any of the Seller or any Subsidiary to any
director, officer, manager, salaried employee or agent; no "general increase"
(as defined in Section 4.3.11(f) hereof) will be made in the compensation
payable or to become payable to any hourly or salaried employees or agents of
any of the Seller or any Subsidiary; no increase will be made in any payment of
or commitment to pay any bonus, profit sharing, severance pay or other
extraordinary compensation to any employee or agent of any of the Seller or any
Subsidiary; and neither the Seller nor any of the Subsidiaries will enter into
any agreement with respect to the foregoing.
6.10 BANKING ARRANGEMENTS. No change will be made in the banking
and safe deposit arrangements referred to in Section 4.3.8 hereof, except in
the ordinary course of business, consistent with past practice, and then only
after first notifying Purchaser of each such change.
6.11 INDEBTEDNESS. Neither the Seller nor any of the Subsidiaries
will incur any indebtedness for borrowed money or purchase money indebtedness
or capital lease obligations or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt securities of others or enter
into any agreement with respect to the foregoing.
6.12 PAYMENT OF DEBT. Except as expressly agreed to by Purchaser
and Seller in writing, neither the Seller nor any of the Subsidiaries will pay
any claim or discharge or satisfy any lien or encumbrance or pay any obligation
or liability or enter into any agreement with respect to the foregoing other
than in the ordinary course of business or as required by the terms of any
instrument evidencing or governing the same.
6.13 BENEFIT PLANS. Other than in the ordinary course of business
consistent with past practice, neither the Seller nor any of the Subsidiaries
will enter into or amend, or make or authorize the making of any contributions
to, any bonus, incentive compensation, deferred compensation, severance, profit
sharing (including, without limitation, the adoption of any resolution or
taking of any other action for or with respect to the contribution of any sum
pursuant to the terms of any existing profit sharing or similar plan),
retirement, pension, group insurance or other benefit plan, or any union,
employment or consulting agreement or arrangement, including, without
limitation, any employee benefit plan, except as and to the extent required by
law or regulation.
6.14 CONTRACTS. Neither the Seller nor any of the Subsidiaries
will enter into any contract, except in the ordinary course of business
consistent with past practice, provided that the written consent of Purchaser
shall be required before any of the Seller or any Subsidiary enters into any
contract with annual payments thereunder in an amount greater than $25,000.
6.15 BOOKS AND RECORDS. The books and records of the Seller and
the Subsidiaries will be maintained in the usual, regular and ordinary course
of business consistent with past practice.
6.16 OTHER ACTIONS. None of the Subsidiaries or the Seller, or any
of them, will take any action that would or could reasonably be expected to
result in any of the representations and
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warranties concerning the Subsidiaries or the Seller set forth in this
Agreement becoming untrue in any respect at any time on or prior to the date
this Agreement terminates.
6.17 SELLER TO ADVISE PURCHASER OF CHANGES. Seller shall promptly
advise Purchaser in writing of any change or event having, or which can
reasonably be foreseen to have, a Material Adverse Effect.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
All of the obligations of Purchaser under this Agreement are subject
to the fulfillment prior to or at the Closing of each of the following
conditions, any one or more of which may be waived, in whole or in part, in
writing by Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained herein or in any certificate, Schedule or other
document delivered pursuant to the provisions hereof, or in connection
herewith, shall be true in all material respects as of the date when made and
shall be deemed to be made again as of the Closing Date and shall be true in
all material respects at and as of such time, except as a result of changes or
events expressly permitted or contemplated herein.
7.2 PERFORMANCE OF AGREEMENTS. Seller shall have performed and
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by such party prior to or at the
Closing.
7.3 DELIVERIES. Seller shall have delivered or caused to be
delivered to Purchaser each and every item required to be delivered by Seller
pursuant to Section 2.2 hereof, including the Lien Releases, Standstill
Agreement, the Lucor Management Agreement, the Xxxx of Sale, and the
Restrictive Covenant Agreement.
7.4 APPROVALS. Purchaser and Seller shall have received from any
and all governmental authorities, bodies or agencies having jurisdiction over
the transactions contemplated by this Agreement such consents, authorizations
and approvals as are necessary for the consummation thereof and all applicable
waiting or similar periods required by law shall have expired, including,
without limitation, the waiting period under the HSR Act, and such regulatory
consents, authorizations and approvals shall not contain conditions or
restrictions unduly burdensome on the operations or business of the
Subsidiaries to be conducted following the Closing Date.
7.5 FINANCING OBTAINED BY THE PURCHASER. The Purchaser shall have
completed the financing of the purchase of the Interests and Assets on terms
satisfactory to Purchaser in its sole discretion.
7.6 NO INJUNCTIONS. No preliminary or permanent injunction or
other order by any federal or state court which prevents the consummation of
the transactions contemplated by this
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Agreement shall have been issued and remain in effect, and no action to obtain
any such injunction or order shall have been filed and remain pending.
7.7 CONSENTS AND APPROVALS OF THIRD PARTIES. All consents,
authorizations and approvals to the transactions contemplated by this Agreement
necessary to the consummation of such transactions or that are required
pursuant to the terms of any material agreement or arrangement to which any of
the Seller or the Subsidiaries is a party or by which any of the Seller or the
Subsidiaries is bound or in order to preserve any right, license, Medicare
Authorization or franchise held or owned by the Seller or the Subsidiaries
shall have been duly obtained except where the failure to obtain such consent,
authorization or approval will not have a Material Adverse Effect, and such
consents, authorizations or approvals shall be in form and substance reasonably
satisfactory to Purchaser and without condition, cost or expense to Purchaser.
The foregoing shall include, without limitation, the consent of Nissho
Corporation ("Nissho") to the assignment by Seller to a Subsidiary designated
by Purchaser, of the exclusive distributorship agreement between Nissho and
Seller dated as of November 14, 1997.
7.8 RESIGNATIONS. Purchaser shall have received copies of written
resignations from all persons serving as directors, officers and managers of
the Subsidiaries except for such officers, directors and managers as Purchaser
shall designate in writing to the Seller; such resignations shall be effective
on or prior to the Closing Date.
7.9 OPINIONS OF SELLER'S AND SZI'S COUNSEL. Purchaser shall have
received the opinions of Nelson, Mullins, Xxxxx & Scarborough, L.L.P. and
Xxxxxxxxx & Xxxxxxxxxxx, P.C. referenced in Sections 2.2(d) and 2.2(e) in form
reasonably satisfactory to Purchaser.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SELLER
All of the obligations of Seller under this Agreement are subject to
the fulfillment prior to or at the Closing Date of each of the following
conditions, any one or more of which may be waived, in whole or in part, in
writing by Seller:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained herein or in any certificate, schedule or
other document delivered pursuant to the provisions hereof, or in connection
herewith, shall be true in all material respects as of the date when made and
shall be deemed to be made again at and as of the Closing Date and shall be
true in all material respects at and as of such time, except as a result of
changes or events expressly permitted herein.
8.2 PERFORMANCE OF AGREEMENTS. Purchaser shall have performed and
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
8.3 DELIVERIES. Purchaser shall have delivered to the Seller each
and every item required to be delivered by Purchaser pursuant to Section 2.3
hereof including the Registration
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Rights Agreement, the Standstill Agreement, the Lucor Management Agreement, the
Warrant Agreement and the Assumption Agreement.
8.4 APPROVALS. The Seller and the Subsidiaries shall have
received from any and all governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement such
consents, authorizations and approvals as are necessary for the consummation
thereof and all applicable waiting or similar periods required by law shall
have expired, including, without limitation, the waiting period under the HSR
Act and such regulatory consents, authorizations and approvals shall not
contain conditions or restrictions unduly burdensome on the operations or
business of the Subsidiaries to be conducted following the Closing Date.
8.5 NO INJUNCTIONS. No preliminary or permanent injunction or
other order by any federal or state court which prevents the consummation of
the transactions contemplated by this Agreement shall have been issued and
remain in effect, and no action to obtain any such injunction or order shall
have been filed and remain pending.
8.6 ACTIONS OF PURCHASER. Purchaser has taken all such actions as
are necessary or desirable in order to (i) amend in a manner satisfactory to
Seller's counsel Purchaser's Shareholder Rights Plan so that any acquisition of
securities of Matria (but not dispositions) ("Purchases") contemplated or
permitted by this Agreement and the acquisitions contemplated or permitted by
the Standstill Agreement constitute neither a "triggering event" nor a
"distribution date" as defined by such plan and so that neither Seller, MJG,
nor SZI shall become "Acquiring Persons" within the meaning of Purchaser's
Shareholder Rights Plan as a result of the Purchases contemplated or permitted
by this Agreement or acquisitions contemplated or permitted by by the
Standstill Agreement; and (ii) satisfy the provisions of Section 203 of the
Delaware General Corporation Law ("Section 203") with respect to approval of
the Purchases contemplated or permitted by this Agreement and Purchases
contemplated or permitted by the Standstill Agreement and to ensure that
neither Seller nor any of its affiliates shall be an "Interested Shareholder"
within the meaning of Section 203; and (iii) MJG's and SZI's representative
shall have been elected to, and shall continue to be incumbent members of,
Purchaser's Board of Directors pursuant to and upon the terms and conditions
set forth in the Standstill Agreement.
8.7 CERTIFICATES OF DESIGNATION. At or before the Closing Date,
Purchaser shall have taken all necessary corporate action to designate the
relative powers, designations, preferences and relative, participating,
optional or other rights of the Convertible Preferred Stock and the Redeemable
Preferred Stock, whether by amending Purchaser's Certificate of Incorporation
or by filing a Certificate or Certificates of Designation. Such action shall be
consistent with the description of such rights and preferences of the
Convertible Preferred Stock set forth on Schedule 1.4(b) and of the Redeemable
Preferred Stock set forth on Schedule 1.4(c) hereof, and in any event shall be
in form and substance satisfactory to Seller's counsel.
8.8 OPINION OF PURCHASER'S COUNSEL. Seller shall have received
the opinion of Xxxxxxxx Xxxxxxx LLP referenced in Section 2.3(e) in form
reasonably satisfactory to Seller.
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ARTICLE 9
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS.
(a) Except as otherwise provided in this Section 9.1, the
representations and warranties made by Seller in or pursuant to this Agreement
shall survive the Closing for a period of 18 months. The representations and
warranties made by Seller in Section 4.3.6 shall survive the Closing until 60
days following the expiration of all applicable statutes of limitation with
respect to the subject matter of such Section, and any extensions thereof; the
representations and warranties made by Seller in Sections 4.7.2, 4.7.5 and
4.7.6 with respect to Seller and the Subsidiaries other than Xxxxxx North
America, Xxxxxx Direct, Xxxxxx Europe and Xxxxxx International shall survive
the Closing for a period of 2 years; the representations and warranties made by
Seller in Sections 4.7.3 and 4.7.4 with respect to Seller and the Subsidiaries
other than Xxxxxx North America, Xxxxxx Direct, Xxxxxx Europe and Xxxxxx
International shall survive Closing for a period of 5 years; and the
representations and warranties made by Seller in Section 4.3.3, other than
subsection (e), shall survive the Closing indefinitely.
(b) Notwithstanding the foregoing, if the Purchaser or any
Subsidiary suffers a Loss and with respect to the event giving rise to such
Loss Seller or any Corporation Subsidiary is entitled to indemnification under
Section 6.9 of the Asset Purchase Agreement dated November 14, 1997 between
Seller, Universal Self Care, Inc. ("Universal") and certain other parties (the
"Universal Self Care Agreement") and such right to claim indemnity under the
Universal Self Care Agreement has not expired, Purchaser and Seller (or its
successors and assigns) shall jointly pursue a claim for indemnification
against Universal under the Universal Self Care Agreement (a "Universal
Claim"). Purchaser and Seller shall each bear one-half of the expenses of
asserting a Universal Claim but Purchaser shall be entitled to receive any
recovery on such Universal Claim. Without limiting the generality of the
foregoing, with respect to any Loss incurred by Purchaser or any Subsidiary
which is the subject of a Universal Claim, (1) Seller agrees to assert its
right of setoff under its Convertible Subordinated Promissory Note dated
January 28, 1998 (the "Universal Self Care Note") for the amount of any such
Loss and Purchaser shall have the right to cancel the Offset Shares (as defined
in Section 9.2(e)(ii)) in the manner provided in Section 9.2(e) to the extent
of any such set-off and (2) Seller shall assign to Purchaser its rights in any
escrow established pursuant to Section 5 of the Universal Self Care Note to the
extent of any such Loss. In furtherance of the foregoing, Seller agrees that it
will not waive, release or relinquish any of its rights to receive
indemnification from Universal (or its successors or assigns) under the
Universal Self Care Note (whether for breach of representations, warranties,
covenants or otherwise) whether in connection with the discount of the
Universal Self Care Agreement or for any other reason without the prior written
consent of Purchaser.
(c) Except for the representations and warranties made by
Purchaser in Section 5.5, which shall survive the Closing indefinitely, the
representations and warranties made by the Purchaser in or pursuant to this
Agreement shall not survive the Closing.
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(d) Notwithstanding the foregoing provisions of this Section 9.1,
subject to any applicable statute of limitations, any party may make a claim at
any time based on fraud or violation of the Commission's Rule 10b-5 in
connection with any representation or warranty.
9.2 INDEMNIFICATION.
(a) BY SELLER. From and after the Closing, Seller shall
indemnify, reimburse, defend and hold harmless Purchaser, its affiliates
(including, without limitation, the Subsidiaries), and their respective
officers, directors, managers, members, shareholders, employees,
representatives, successors and assigns from and against any and all direct or
indirect claims, losses, liabilities, Taxes, damages (including, without
limitation, special and consequential damages), costs (including court costs)
and expenses (including, without limitation, all reasonable attorneys' and
accountants' fees and expenses) (collectively "Losses"), arising out of or in
connection with (i) any breach, inaccuracy or untruth of any representation or
warranty made by Seller contained in this Agreement or the Schedules hereto,
whether such breach, inaccuracy or untruth exists or is made on the date of
this Agreement or as of the Closing; (ii) any breach of or noncompliance by
Seller with any covenant or agreement of Seller contained in this Agreement;
(iii) the claims set forth on Schedule 4.3.12; (iv) the indemnification
obligations of GMAC under the Universal Self Care Agreement; (v) any Excluded
Liability or Subsidiary Excluded Liability; and (vi) any contract or
relationship between Seller, any Subsidiary or any member of Seller and BT
Bankers Trust or any of its affiliates; provided, however, if Purchaser is not
entitled to indemnification under Section 9.2(a)(v) because the Excluded
Liability has been assumed by Xxxxxx North America under the Subsidiary
Assumption Agreement, this shall in no way limit the right of Purchaser to
indemnification under Section 9.2(a)(i) if the facts that would constitute the
Subsidiary Assumed Liability give rise to such a right thereunder.
(b) BY PURCHASER. From and after the Closing, Purchaser shall
indemnify, reimburse, defend and hold harmless the Seller, its affiliates, and
their respective officers, directors, managers, members, shareholders,
employees, representatives, successors or assigns from and against any and all
Losses arising out of or in connection with (i) any breach, inaccuracy or
untruth solely of any representation or warranty of Purchaser contained in
Section 5.5 only, whether such breach, inaccuracy or untruth exists or is made
on the date of this Agreement or as of the Closing; (ii) any breach of or
noncompliance by Purchaser with any covenant or agreement of Purchaser
contained in this Agreement; or (iii) Purchaser's operation of the Business
following the Closing. Without limiting the generality of the foregoing,
Purchaser shall have no liability whatsoever, whether pursuant to this Section
9.2(b) or otherwise, for any breach of any other representation or warranty of
Purchaser set forth in this Agreement, other than with respect to Section 5.5.
(c) DEFINITIONS. A person entitled to make a claim for
indemnification hereunder shall be referred to as an "Indemnified Party." A
person obligated for indemnification hereunder shall be referred to as an
"Indemnifying Party." A person entitled to make a claim for indemnification
pursuant to Section 9.2(a) shall be referred to as a "Purchaser Indemnified
Party," and a person entitled to make a claim for indemnification pursuant to
Section 9.2(b) shall be referred to as a "Seller Indemnified Party."
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(d) CLAIM THRESHOLD. Notwithstanding the foregoing, no claim for
indemnification under Section 9.2(a) or Section 9.2(b) may be made by an
Indemnified Party against an Indemnifying Party unless and until the cumulative
total of all Losses suffered by such Indemnified Party exceeds or is reasonably
expected to exceed $500,000 (the "Threshold"); provided, however, that any Loss
incurred by Purchaser or its affiliates resulting from or arising out of (i)
the claims set forth on Schedule 4.3.12, (ii) the indemnification obligations
of GMAC under the Universal Self Care Agreement, (iii) any Excluded Liability;
or (iv) any Subsidiary Excluded Liability shall not be subject to such
Threshold; and provided further, that any Loss incurred by Seller or its
affiliates resulting from or arising out of any Subsidiary Assumed Liability,
as defined in the Subsidiary Assumption Agreement, shall not be subject to such
Threshold. In addition, the Threshold and the other provisions of this Section
9.2(d) shall not be applicable to any Universal Claim which shall be handled in
the manner set forth in Section 9.1(b). Once Losses exceed the Threshold, the
Indemnified Party suffering such Losses may recover all Losses in excess of
$250,000. The foregoing limitations shall not apply to any Loss either
intentionally caused by the Indemnifying Party or of which the Indemnifying
Party had Knowledge prior to the Closing.
(e) SECURITY AND PRIORITY OF RECOURSE. The obligations of Seller
under this Section 9.2 shall be secured as follows:
(i) Purchaser shall have the right to offset any Loss
against any Cash Adjustment payable pursuant to Section 1.6;
(ii) During the 18-month period following the Closing,
the Purchaser shall have the right to recover any Loss required to be
indemnified pursuant to Section 9.2(a) by cancellation of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the
Warrants and the Earn-Out Note (collectively, but excluding any
underlying Common Stock, the "Offset Shares"), to the extent of the
Loss, on a pro rata basis as among each separate class, series or type
of instrument comprising the Offset Shares, with the Offset Shares to
be valued for such purpose as follows: the Convertible Preferred
Stock, at the higher of its liquidation preference or the aggregate
Current Market Price Per Share of the underlying Common Stock, the
Redeemable Preferred Stock, at its liquidation preference, the
Earn-Out Note, at its principal amount, and the Warrants, at the
excess of the Current Market Price Per Share (as defined in the
Warrants) over the exercise price of the Warrants; provided, however,
that if the exercise price of the Warrants is equal to or less than
the Current Market Price Per Share at the time such right of
cancellation is exercised, the Warrants shall be valued at zero and
the amount of Warrants to be cancelled shall be the same percentage of
the total outstanding Warrants as the percentage of the total
outstanding Redeemable Preferred Stock that is cancelled to offset
such Loss. Seller shall have the right to pay in cash any Loss that
would otherwise be paid by cancellation pursuant to this Section
9.2(e)(ii). In the event Seller has distributed or otherwise sold,
assigned, transferred or disposed of any Offset Shares within 18
months after the Closing Date, if Purchaser elects to exercise its
right of cancellation under this Section 9.2(e)(ii), Purchaser will
exercise such rights as follows:
(A) Purchaser shall allocate to each Member
Group (as hereinafter
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defined) such Member Group's Pro Rata Share (as hereinafter
defined) of the Loss;
(B) Purchaser shall cancel Offset Shares held
by a Member Group in an amount equal to the Member Group's
Pro Rata Share of the Loss on a pro rata basis as among each
separate class, series or type of instrument comprising the
Offset Shares held by the Member Group;
(C) If (1) Purchaser has not recovered the
entire amount of the Loss after exercising its rights under
subparagraphs (A) and (B) above because one or more Member
Groups held an insufficient amount of Offset Shares to
satisfy such Member Group's Pro Rata Share of the Loss, and
(2) any other Member Group continues to hold any Offset
Shares, Purchaser shall be entitled to recover the deficiency
against any Offset Shares held by any such other Member Group
(irrespective of whether any such other Member Group has
already satisfied its Pro Rata Share of the Loss in
accordance with subparagraphs (A) and (B) above) by
cancelling Offset Shares held by each such other Member Group
(on a pro rata basis if there is more than one such other
Member Group, based on each such other Member Group's Pro
Rata Share of the Loss referred to in subparagraph (A) above)
on the same basis as specified in subparagraph (B) above;
(D) Each Member Group (and each member thereof)
may elect in its sole discretion to satisfy any portion of
the Loss which would otherwise be satisfied by cancellation
of some or all of its Offset Shares hereunder by paying
Purchaser an amount in cash equal to such portion of the
Loss, in which event Purchaser would not be entitled to
exercise the rights of cancellation hereunder with respect to
the portion of the Loss so satisfied in cash (it being
specifically understood that the relevant Member Group (or
member thereof) may select to pay cash in lieu of
cancellation of any portion of any class, series or type of
instrument or any combination thereof comprising Offset
Shares which are held by it);
(E) For purposes of this Section 9.2(e)(ii),
"Member Group" shall mean, with respect to any member of
Seller, such member together with each transferee or
subsequent holder of such member's Offset Shares or any
subsequent transferee or holder (other than any member of any
other Member Group). "Pro Rata Share" shall mean, with
respect to, (1) any Member Group in which Xxxx X. Xxxxxx is a
member, 81.25%, (2) any Member Group in which XXX-Xxxxxx
Investors, L.L.C. or SZ Investments, L.L.C. is a member,
16.01%, and (3) any Member Group in which Nissho is a member,
2.74%.
(iii) For periods following the 18-month period after the
Closing, the Purchaser shall have the right to recover any Loss
required to be indemnified pursuant to Section 9.2(a) by cancellation,
to the extent of the Loss, of any outstanding principal and the
related accrued interest under the Earn-Out Note up to, but not
exceeding $15,000,000 in principal amount, and, to the extent the
original principal amount of the Earn-Out Note is
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less than $15,000,000, Purchaser shall have the right to recover any
Loss required to be indemnified pursuant to Section 9.2(a) by
cancellation, to the extent of the Loss, of the Redeemable Preferred
Stock at the rate of $1.10 of face amount of such Redeemable Preferred
Stock for each $1.00 of Loss. Any right of cancellation of any
outstanding principal and the related accrued interest under the
Earn-Out Note pursuant to this Section 9.2(e)(iii) shall expire as to
the lesser of one-third of the original principal amount of the
Earn-Out Note or $5,000,000 on each of the fourth, fifth and sixth
anniversaries of the Closing as to claims made by Purchaser after each
such anniversary for indemnification of Losses hereunder. Any right of
cancellation of the Redeemable Preferred Stock under this Section
9.2(e)(iii) shall expire as to one-third of the amount originally
subject to such cancellation on each of the eighth, ninth and tenth
anniversaries of the Closing as to claims made by Purchaser after each
such anniversary for indemnification of Losses hereunder.
(iv) In the event Purchaser asserts a claim for
indemnification against Seller and seeks to exercise its right of
offset against the Offset Shares pursuant to this Section 9.2(e), and
Seller disputes such claim (by delivery of written notice to Purchaser
within 30 days following receipt of notice of such claim pursuant to
Section 9.2(g)), Purchaser agrees not to cancel any instruments
representing the Offset Shares until such dispute is finally resolved;
provided that Purchaser may suspend any payments and distributions
owing under such Offset Shares until such dispute is finally resolved.
(f) PROCEDURES.
(i) The Indemnifying Party shall be entitled to defend
any claim, action, suit or proceeding made by any third party against
an Indemnified Party; provided, however, the Indemnified Party shall
be entitled to participate in such defense with counsel of its choice
and at its own expense, and if the Indemnifying Party does not provide
a competent and vigorous defense then the Indemnified Party's
participation shall be at the expense of the Indemnifying Party. The
Indemnified Party shall provide such reasonable cooperation and access
to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to such matter; and the parties shall
cooperate with each other in order to ensure the proper and adequate
defense thereof.
(ii) An Indemnifying Party shall not settle any claim
subject to indemnification hereunder without the prior written consent
of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed (provided that an Indemnified Party shall not be
deemed to be unreasonably withholding its consent if such settlement
does not include a full release of the Indemnified Party).
(iii) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be
paid by the Indemnifying Party (or amounts may be set off by the
Indemnified Party) upon the earliest to occur of: (A) the entry of a
judgment against the Indemnified Party and the expiration of any
applicable appeal period, (B) the entry of an unappealable judgment or
final appellate decision against the Indemnified party, (C) the
settlement of the claim, (D) with respect to indemnities for
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Taxes, upon the issuance of any final resolution by a taxation
authority, or (E) with respect to claims before any administrative or
regulatory authority when the Loss is finally determined and not
subject to further review or appeal; provided, however, the
Indemnifying Party shall pay on the Indemnified Party's demand any
cost or expenses reasonably incurred by the Indemnified Party in
defending or otherwise dealing with such claim.
(g) NOTICE OF CLAIM. To seek indemnification hereunder, an
Indemnified Party shall notify the Indemnifying Party of any claim for
indemnification, specifying in reasonable detail the nature of the Loss and the
amount or an estimate of the amount thereof. No Indemnified Party may make a
claim for breach of a representation or warranty against an Indemnifying Party
unless the Indemnified Party delivers written notice of such breach (specifying
in reasonable detail the nature of such breach) to the Indemnifying Party prior
to the end of the survival period of such representation or warranty under
Section 9.1(a) or (c). Provided that the Indemnified Party delivers written
notice of such breach to the Indemnifying Party in accordance with the
preceding sentence, the expiration of any representation or warranty in
accordance with the provisions of Section 9.1(a) or (c) shall not affect the
Indemnified Party's right to pursue any claim for a breach of such
representation or warranty.
(h) NO PREJUDICE. Nothing herein shall prevent an Indemnified
Party from making a claim for a Loss hereunder notwithstanding its Knowledge of
the Loss or possibility of the Loss on, prior to, or after the Closing Date;
provided that each party agrees to notify the other party of any material loss
of which it has Knowledge prior to the Closing, but any Indemnified Party's
failure to provide such notice shall not relieve the Indemnifying Party of any
of its obligations hereunder or create in the Indemnifying Party any right to
indemnification.
(i) OTHER RIGHTS; INDEMNIFICATION; EXCLUSIVE REMEDY OF
INDEMNIFIED PARTIES. Indemnification pursuant to the provisions of this Article
9 shall be the exclusive remedy of the Indemnified Parties for any
misrepresentation or breach of any warranty or covenant contained in this
Agreement; provided, however, that nothing herein shall be deemed to limit an
Indemnified Party's right to assert claims based on fraud or from pursuing
equitable relief (including, without limitation, injunctive relief). Except for
actions based on fraud, the only legal action which may be asserted by an
Indemnified Party with respect to any matter which is the subject of this
Article 9 shall be a contract action to enforce, or to recover damages for the
breach of, this Article 9.
(j) LIMITATION ON INDEMNIFICATION OBLIGATIONS. The obligations of
any Indemnifying Party under Sections 9.2(a) or (b) are subject to the
limitations that any insurance proceeds (net of applicable deductibles)
actually received by the Indemnified Party in connection with the event giving
rise to the claim for indemnification shall be netted against the Indemnified
Party's Losses arising out of such event.
(k) TAX BENEFIT. The amount of any recovery by Indemnified
Parties pursuant to Section 9.2(a) or (b), as the case may be, shall be net of
any foreign, Federal, state and/or local income tax benefits inuring to the
Indemnified Parties as a result of the state of facts which entitled the
Indemnified Parties to recover from the Indemnifying Parties pursuant to
Section 9.2(a) or (b).
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ARTICLE 10
TERMINATION
This Agreement may be terminated by Purchaser or Seller for the
reasons set forth in this Article 10 at any time prior to or on the Closing
Date upon written notice to the other parties as follows. These events of
termination are intended to operate independently from any other agreements,
representations, warranties and/or conditions contained in this Agreement.
10.1 MATERIAL ADVERSE CHANGE - SUBSIDIARIES. By Purchaser if,
after the date hereof, any event or events occur which have, individually or in
the aggregate, a Material Adverse Effect or if the Seller or any of the
Subsidiaries shall have suffered a material loss of or damage to any of its
properties or assets, which change, loss or damage materially affects or
impairs the ability of the Seller and the Subsidiaries, taken as a whole, to
conduct their businesses.
10.2 MATERIAL ADVERSE CHANGE - PURCHASER. By Seller if, after the
date hereof, any event or events occur which have, individually or in the
aggregate, a Purchaser Material Adverse Effect or Purchaser shall have suffered
a material loss of or damage to any of its properties or assets, which change,
loss or damage materially affects or impairs the ability of the Purchaser and
its subsidiaries, taken as a whole, to conduct their businesses.
10.3 NONCOMPLIANCE OF SELLER. By Purchaser, if the terms,
covenants or conditions of this Agreement to be complied with or performed by
Seller before the Closing shall not have been complied with or performed in all
material respects at or before the Closing Date and such non-compliance or
non-performance shall not have been waived by Purchaser.
10.4 NONCOMPLIANCE OF PURCHASER. By Seller, if the terms,
covenants or conditions of this Agreement to be complied with or performed by
Purchaser before the Closing shall not have been complied with or performed in
all material respects at or before the Closing Date and such non-compliance or
non-performance shall not have been waived by Seller.
10.5 FAILURE TO DISCLOSE - SELLER. By Purchaser, if it learns of
any material fact or condition not disclosed in this Agreement or the Schedules
which was required to be disclosed by the Seller pursuant to any provision of
this Agreement at or prior to the date of execution hereof with respect to the
business, properties, assets or earnings of the Seller or the Subsidiaries
which has a Material Adverse Effect.
10.6 FAILURE TO DISCLOSE - PURCHASER. By the Seller, if it learns
of any material fact or condition not disclosed in this Agreement which was
required to be disclosed by Purchaser.
10.7 ADVERSE PROCEEDINGS. By the Seller or Purchaser, if any
action, suit or proceeding shall have been instituted against any party to this
Agreement to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated herein,
which, in the good faith opinion of Seller or Purchaser, makes consummation of
the transactions herein contemplated inadvisable.
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10.8 TERMINATION DATE. By the Seller or Purchaser, if the Closing
has not been consummated on or prior to February 28, 1999.
10.9 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1 or 10.6, or pursuant to Section 10.4 or 10.5 for a
breach that is not willful or intentional, or pursuant to Section 10.7 in the
absence of any material breach hereunder by Purchaser or Seller, all rights and
obligations of the parties hereto under this Agreement shall terminate, and no
party hereto shall have any further liability or obligation hereunder to any
other party hereto, except that the provisions of Section 3.1 hereof shall
survive the termination of this Agreement for any reason. If this Agreement is
terminated pursuant to Section 10.2, or 10.3, or, in the case of 10.4 or 10.5
for a breach that is willful or intentional, the complying party or parties
shall be entitled to exercise and pursue all rights and remedies available to
it or them hereunder, at law, in equity or otherwise, and shall be entitled to
recover from the other party or parties all of its or their out-of-pocket
expenses incurred in connection with or relating to the negotiation,
preparation, execution and delivery of this Agreement.
ARTICLE 11
[RESERVED]
[RESERVED]
ARTICLE 12
MISCELLANEOUS
12.1 NOTICES. All notices required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by facsimile, by
nationally recognized private courier, or by United States mail. Notices
delivered by mail shall be deemed given 3 business days after being deposited
in the United States mail, postage prepaid, registered or certified mail.
Notices delivered by hand, by facsimile, or by nationally recognized private
carrier shall be deemed given on receipt if received on a business day or on
the first business day following receipt if not received on a business day;
provided, however, that a notice delivered by facsimile shall only be effective
if such notice is also delivered by hand, or by nationally recognized private
courier, or deposited in the Untied States mail, postage prepaid, registered or
certified mail, on or before 2 business days after its delivery by facsimile.
All notices shall be addressed as follows:
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(a) To Purchaser:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: General Counsel
Phone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
With copies to:
Xxxxxxxx Xxxxxxx LLP
NationsBank Plaza
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxx, III, Esquire
Phone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
(b) To Seller:
Xxxxxx Medical Management, L.L.C.
0000 Xxxxxxx 00 Xxxxx
P. O. Xxx 000
XxXxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxx
Phone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Phone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
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With a copy to:
Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx, Esquire
Phone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
12.2 ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties hereto with respect to the
matters contained herein and the agreements referred to herein contain the sole
and entire agreement among the parties hereto with respect to the subject
matter hereof and the transactions contemplated herein.
12.3 WAIVER; AMENDMENT. Prior to or on the Closing Date, each
party hereto shall have the right to waive any default in the performance of
any term of this Agreement by any other party hereto, to waive or extend the
time for the fulfillment by such other party of any or all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
such party's obligations under this Agreement, except any condition which, if
not satisfied, would result in the violation of any law or applicable
governmental regulation. No waiver, termination or discharge of this Agreement,
or any of the terms or provisions hereof, shall be binding upon the other
parties hereto unless confirmed in writing. No waiver by any party of any term
or provision of this Agreement or of any default hereunder shall affect such
party's rights thereafter to enforce such term or provision or to exercise any
right or remedy in the event of any other default, whether or not similar. This
Agreement may not be modified or amended except by a writing executed by all of
the parties hereto.
12.4 COUNTERPARTS, FAXED SIGNATURES, HEADINGS, ETC. This Agreement
may be executed simultaneously in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. Any signature page of any such counterpart, or any electronic
facsimile thereof, may be attached or appended to any other counterpart to
complete a fully executed counterpart of this Agreement, and any telecopy or
other facsimile transmission of any signature shall be deemed an original and
shall bind such party. The headings herein are for convenience of reference
only and shall not be deemed a part of this Agreement. A pronoun in one gender
includes and applies to the other gender as well.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of Purchaser, Seller and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by either party without the prior written consent of the other party,
except that Purchaser may assign this Agreement to any wholly owned subsidiary;
provided that such assignment shall not relieve Purchaser of its obligations
hereunder.
12.6 GOVERNING LAW. The validity and effect of this Agreement and
the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia.
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12.7 REMEDIES, DAMAGES, INJUNCTIONS AND SPECIFIC PERFORMANCE. It
is expressly understood and agreed that many of the covenants, agreements and
services to be rendered and performed by the parties pursuant to this Agreement
shall survive the Closing Date and are special, unique, and of an extraordinary
character, and in the event of any default, breach or threatened breach by
either party of any term, provision or Section of this Agreement to be
performed by such persons, or any of them, hereunder, either party shall be
entitled, if it so elects, to institute and prosecute proceedings in any court
of competent jurisdiction, either at law or in equity, and shall be entitled to
such relief as may be available to it pursuant hereto, at law or in equity,
including, without limiting the generality of the foregoing, any proceedings
to: (i) obtain damages for any breach of this Agreement; (ii) order the
specific performance thereof; or (iii) enjoin the other party from breaching
such provisions.
12.8 SEVERABILITY, INTERPRETATION. If any provision of this
Agreement shall be held void, voidable, invalid or inoperative, no other
provision of this Agreement shall be affected as a result thereof, and,
accordingly, the remaining provisions of this Agreement shall remain in full
force and effect as though such void, voidable, invalid or inoperative
provision had not been contained herein and all terms, provisions, Sections,
sub-sections or paragraphs shall be interpreted and construed in such a manner
as to carry out fully the intention of the parties hereto. This Agreement shall
not be construed more strictly against either party hereto regardless of which
party is responsible for its preparation, it being agreed that this Agreement
was fully negotiated by both parties.
12.9 FURTHER ASSURANCES. Upon the reasonable request of any other
party, each party hereto agrees to take any and all actions, including, without
limitation, the execution of certificates, documents or instruments, necessary
or appropriate to give effect to the terms and conditions set forth in this
Agreement.
12.10 LAW AND GAAP APPLICABLE TO FOREIGN SUBSIDIARIES. For purposes
of this Agreement, including but not limited to for purposes of the
representations contained in Article 4, unless otherwise stipulated, the laws,
regulations, rules, judgments, orders, decrees, book keeping and accounting
rules applicable to the Foreign Subsidiaries are those applicable in their own
jurisdiction or in the jurisdiction where they are exercising substantial
business activities. In no case shall this contract require the Foreign
Subsidiaries to comply with any laws, regulations, rules, judgments, orders,
decrees or bookkeeping and accounting rules unless they are applicable to the
affected Foreign Subsidiary under general principles of law.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above written.
"SELLER"
XXXXXX MEDICAL MANAGEMENT, LLC
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
--------------------------------------
Title: President and CEO
--------------------------------------
"PURCHASER"
MATRIA HEALTHCARE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
[CORPORATE SEAL]
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM, OR IN THE ABSENCE OF RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE MAKER THAT THEY MAY BE SOLD OR TRANSFERRED
WITHOUT SUCH REGISTRATION.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH
(13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
THIS NOTE IS SUBJECT TO CERTAIN RIGHTS OF CANCELLATION AS PROVIDED IN A
PURCHASE AND SALE AGREEMENT DATED AS OF DECEMBER 21, 1998, A COPY OF WHICH MAY
BE OBTAINED FROM MAKER.
NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE
Atlanta, Georgia
$____________ __________ ___, 2000
FOR VALUE RECEIVED, the undersigned, MATRIA HEALTHCARE, INC., a
Delaware corporation (the "Maker"), promises to pay to XXXXXX MEDICAL
MANAGEMENT, L.L.C., a Georgia limited liability company (together with any
subsequent holders or transferees hereof, individually and collectively, the
"Holder"), at _____________ ______________________________, or at such other
address as Holder may designate to Maker from time to time in writing, the
principal sum of _____________________ and No/100 Dollars ($_____________), in
immediately available funds and in such coin or currency of the United States
which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment together with (i) interest on the principal
amount from time to time outstanding under this Non-Negotiable Subordinated
Promissory Note (this "Note") until said principal amount is paid in full,
payable as provided herein and (ii) any and all other amounts that may be due
by the Maker to the Holder pursuant to this Note.
Interest shall accrue on the unpaid principal balance of this Note
from time to time outstanding and shall be payable as follows:
(A) interest shall accrue at the fixed rate of eight
percent (8%) per annum on the principal amount outstanding
from time to time under this Note and shall be due and
payable to Holder in arrears on January 1, April 1, July 1
and October 1 of each year this Note remains outstanding; and
74
(B) interest shall accrue at the fixed rate of four
percent (4%) per annum on the principal amount outstanding
from time to time under this Note ("Specified Interest") and
shall be due and payable to Holder on each of the "Third
Anniversary", the "Fourth Anniversary" and the "Maturity
Date" (each as defined below).
Interest shall accrue on the basis of the actual number of days elapsed based
on a 360 day year made up of twelve thirty day months.
Provided that the following payment will not result in a default under
the Maker's Senior Debt (as defined herein) and unless sooner accelerated by
Holder pursuant to the terms hereof, the Maker shall prepay to Holder on the
third anniversary of the date of this Note (the "Third Anniversary") (i)
[$____________], such amount being one-third of the initial principal amount of
this Note, and (ii) all Specified Interest then outstanding. Provided that the
following payment will not result in a default under the Maker's Senior Debt
and unless sooner accelerated by Holder pursuant to the terms hereof, the Maker
shall prepay to Holder on the fourth anniversary of the date of this Note (the
"Fourth Anniversary") (i) [$____________], such amount being one-third of the
initial principal amount of this Note, and (ii) all Specified Interest then
outstanding. Subject to the subordination provisions set forth in this Note and
unless sooner accelerated by Holder pursuant to the terms hereof, the Maker
shall pay to Holder on the fifth anniversary of the date of this Note (the
"Maturity Date") (i) the remaining principal balance of this Note, (ii) all
accrued but unpaid interest thereon, and (iii) all other amounts owing
hereunder, if any.
If any date for the payment of principal or interest, as set forth
above, falls on Saturday, Sunday or a holiday for which banks are authorized to
be closed in Atlanta, Georgia, then such payment shall be made on the next
business day for which banks are not so authorized and interest shall continue
to accrue thereon. Payments received by Holder after 2:00 p.m., Atlanta,
Georgia time on any business day shall not be credited as received until the
following business day.
Upon the occurrence of an "Acceleration Event" (as defined below) and
during the continuance thereof, the outstanding principal balance of this Note
shall bear interest at a rate per annum ("Default Interest") equal to the
lesser of (i) fifteen percent (15%) per annum or (ii) the maximum rate
permitted by applicable law. Maker shall pay Default Interest upon demand by
Holder, provided that the payment of such Default Interest shall not be
required to be made for so long as such payment is not permitted under the
Maker's Senior Debt Documents (as hereinafter defined).
Maker covenants and agrees that the indebtedness evidenced by this
Note shall be senior in right of payment to all promissory notes issued by the
Maker to sellers or their affiliates or shareholders in connection with
acquisitions consummated after the date hereof ("Junior Seller Notes"), and
each of the Junior Seller Notes shall contain a legend clearly stating that
such note is subordinate in right of payment to the Holder hereof and shall
contain subordination provisions, acknowledged by the holder thereof,
substantially similar to those contained in numbered paragraphs 1 through 13
(except 5(b)) hereof.
2
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This Note is issued pursuant to that certain Purchase and Sale
Agreement dated as of December 21, 1998 (the "Purchase Agreement"), by and
between the Maker and Xxxxxx Medical Management, LLC and represents an
"Additional Purchase Price Payment" due under the Purchase Agreement.
Capitalized terms used in this Note but not otherwise defined herein shall have
the respective meanings assigned to such terms in the Purchase Agreement. This
Note is subject to certain rights of cancellation pursuant to Article 9 of the
Purchase Agreement. If the Maker is entitled to cancel all or a portion of this
Note pursuant thereto, notice of cancellation shall be mailed, first class,
postage prepaid, not less than 30 days nor more than 60 days prior to the
cancellation date, to the Holder. In addition to any information required by
law, such notice shall set forth the cancellation date and the amount of
principal and accrued interest outstanding hereunder to be cancelled. In case
less than the total amount of principal and accrued interest outstanding
hereunder is to be cancelled, a new note in substantially the same form as this
Note representing the total principal and accrued interest that was not
cancelled will be issued to the Holder upon surrender of this Note without cost
to Holder. Except as set forth in this paragraph, Maker waives and agrees not
to assert any right of setoff or offset against Holder in connection with any
amounts due under this Note.
Maker shall be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal and accrued interest
owing thereon due hereunder by delivering 30 days' prior written notice to
Holder; provided that no such prepayment shall be made to the extent such
prepayment is then prohibited by the terms of any of Maker's Senior Debt.
Any of the following shall constitute an "Acceleration Event" under
this Note:
(a) Maker fails to pay any installment of principal or interest
within 10 days after such installment is due;
(b) Maker fails to pay any other amount due and owing under this
Note within 30 days following receipt by Maker of written
notice from Holder that such amount is due and owing to
Holder;
(c) Maker (i) files a voluntary petition or assignment in
bankruptcy or a voluntary petition, assignment or answer
seeking liquidation, reorganization, arrangement, or
readjustment of its debts under the Bankruptcy Reform Act of
1978, as amended (the "Bankruptcy Code"), or under any
similar federal, state or foreign law pertaining to
insolvency or debtor relief, (ii) enters into an agreement
indicating its consent to or approval of any such petition or
proceeding, (iii) applies for or consents to the appointment
of a receiver, custodian or trustee of Maker, or of all or
substantially all of its property, (iv) makes an assignment
for the benefit of its creditors, (v) becomes insolvent or is
unable or fails to pay its debts generally as they become due
or (vi) takes corporate or other official action in
furtherance of the foregoing;
(d) there is filed against Maker an involuntary petition in
bankruptcy seeking the liquidation, reorganization,
arrangement or readjustment of Maker's debts or any
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similar relief under the Bankruptcy Code or any similar state,
federal or foreign law, which remains undismissed or unstayed
for a period of 90 days;
(e) the occurrence of a Change in Control of Maker, which for
purposes of this subparagraph (e), shall mean any of the
following events: (i) any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than an
"Existing Stockholder" (as hereinafter defined) is or becomes
the direct or indirect beneficial owner of shares of the
Maker's capital stock representing greater than 50% of the
power to vote in the election of directors under ordinary
circumstances or (ii) the Maker sells, transfers or otherwise
disposes of all or substantially all of the assets of the
Maker other than in a transaction between the Maker and a
wholly-owned subsidiary of the Maker in which the
wholly-owned subsidiary assumes this Note pursuant to an
assignment and assumption agreement in form and substance
acceptable to the Holder and such wholly-owned subsidiary
causes a law firm acceptable to the Holder to issue a legal
opinion as to the corporate authority and capacity of the
subsidiary, the enforceability of this Note (as assumed) and
such other matters as the Holder may reasonably require, all
in form and substance satisfactory to each Holder in its
reasonable discretion, or (iii) the Maker is a party to a
merger or a consolidation in which the holders of the Maker's
voting securities prior to such merger or consolidation own,
directly or indirectly, securities representing less than 50%
of the voting power in the surviving entity. "Existing
Stockholder" shall mean Xxxx X. Xxxxxx, SZ Investments, LLC.,
any holder of Convertible Preferred Stock, Redeemable
Preferred Stock or Warrants or any affiliate of any of them;
(f) the failure of the Maker to comply with or perform any other
provision of this Note (and not constituting an Acceleration
Event under any of the other provisions of this paragraph)
and continuance of such failure for 30 days following receipt
of written notice thereof by Maker from Holder; or
(g) the acceleration of any of Maker's Senior Debt or the taking
of any collection action by any of the "Senior Debt Holders"
against the Maker or any of its subsidiaries or their
respective properties.
Subject at all times to the subordination provisions set forth below
in this Note, including without limitation the standstill provisions of
paragraph 5 below, (i) if an Acceleration Event described in subparagraphs (c)
or (d) above shall occur, this Note and all interest and other amounts due
hereunder shall become immediately due and payable, all without notice of any
kind, and (ii) upon the occurrence and during the continuation of an
Acceleration Event (including, without limitation, an Acceleration Event under
subparagraphs (c) or (d) above), the Holder (x) may, at its option, declare
this Note and all interest and other amounts due hereunder immediately due and
payable, and (y) shall have all of the rights and remedies provided to it at
law or in equity.
Until this Note has been fully satisfied in cash, Maker shall mail to
Holder within 105 days after the close of each fiscal year of Maker and within
50 days after the close of each of the
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first three quarters of each fiscal year of Maker financial statements,
including any notes thereto (and, in the case of fiscal year end, an auditors'
report by a firm of established national reputation) and the Management's
Discussion and Analysis of Financial Condition and Results of Operations, for
Maker comparable to those required to be included in annual and quarterly
reports furnished pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Until this Note has been fully satisfied in cash, Maker will not enter
into any material transaction with any Affiliate (as hereinafter defined) of
Maker (other than the Holder of this Note or any wholly-owned subsidiary of
Maker) unless such transaction is on terms and conditions at least as favorable
to Maker as could be obtained through arm's length negotiations with an
independent third party. For purposes of this Note, an "Affiliate", as applied
to any person or entity, shall mean any other person or entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with that person or entity. For the purposes of this definition,
"control" when used with respect to any person or entity means the power to
direct the management and policies of such person or entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Maker agrees to pay all costs of collection of this Note in the event
of nonpayment as required hereunder, including reasonable attorneys' fees and
court costs actually incurred.
Except as expressly provided herein, Maker hereby waives presentment,
demand, protest, notice of dishonor or protest, notice of nonpayment, notice of
maturity, notice of acceleration of maturity, diligence of collection and all
other notices of any kind.
No failure or delay on the part of the Holder in the exercise of any
right, power or privilege under this Note shall impair such right, power or
privilege or be construed to be a waiver of any default or Acceleration Event
or acquiescence therein nor shall any single or partial exercise of any such
right, power or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies under this Note are
cumulative to and not exclusive of any rights or remedies otherwise available.
Any consent, notice or other communication herein required or
permitted shall be given in writing and in the manner set forth in Section 12.1
of the Purchase Agreement and shall be given to the addresses of the Holder and
the Maker set forth therein or, as to each party, at such other address as may
be designated by such party in a written notice to all of the other parties.
The obligations, duties and rights of Maker under this Note are
personal to Maker and may not be assigned or assumed without the prior written
consent of Holder; provided, however, subject to compliance with applicable
securities laws and provided that any transferee agrees in writing to be bound
by the terms and conditions hereof, Holder may assign all or a portion of its
interest in this Note, to any member of Holder as of the Closing Date or any
"Permitted Transferee" (as such term is defined in that certain Standstill
Agreement dated _____________, 1999 between Maker, Xxxx X. Xxxxxx and SZ
Investments, L.L.C.) (each, an "Assignee"), or may sell or convey
participations interests in this Note to any member of Holder as of the Closing
Date or any Permitted Transferee. Upon an assignment by a Holder of an interest
in the Note,
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and at the request of Holder, Maker will issue a note to each such Assignee in
the principal amount assigned and shall also reissue this Note so that each
Holder shall hold a note in the face principal amount of the indebtedness owing
to such Holder, and the aggregate principal balance of the notes shall equal
the then outstanding principal balance owed by Maker to Holder hereunder. The
percentage of principal held by any Holder of the then outstanding principal
balance of the indebtedness of Maker to Holder hereunder shall be the
"Percentage Interest" of such party in the indebtedness evidenced hereby.
Subject to the terms of the Subordination provisions of this Note and
any applicable Senior Debt (to the extent any such provisions, agreements or
instruments require the consent of any other parties), and except as set forth
in the next succeeding sentence, this Note may be altered, amended or modified
by a writing signed by Maker and the Holders which, in the aggregate, hold a
Percentage Interest equal to, in the aggregate, at least sixty-six percent
(66%), but excluding for purposes of this calculation any Percentage Interest
held by the Maker or an Affiliate of Maker. The following waivers, alterations,
amendments or modifications of this Note require the written consent of Holders
which, in the aggregate, hold a Percentage Interest equal to at least ninety
percent (90%), but excluding for purposes of this calculation any Percentage
Interest held by the Maker or an Affiliate of Maker: any change in the
principal amount or the Maturity Date of this Note or the manner, place or time
of any payment of principal; any change in the interest rate or the manner,
place or time of any payment of interest; any change in the entitlement of each
Holder to receive principal, interest and other amounts due under this Note in
proportion to their respective Percentage Interest; any change in the
Acceleration Events or any waiver of any default or Acceleration Event; any
assumption or assignment of the obligations, duties or rights of Maker under
this Note; and any change to this paragraph.
The provisions of this Note shall be construed and interpreted, and
all rights and obligations of the parties under this Note determined, in
accordance with the laws of the State of Georgia without regard to principles
of conflicts of law.
It is the intention of the parties to conform strictly to the usury
laws, whether state or federal, that are applicable to this Note. All
agreements between Maker and Holder, whether now existing or hereafter arising
and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever, shall the amount paid or agreed to be paid to
the Holder hereof, or collected by the Holder, for the use, forbearance or
detention of the money loaned or to be loaned hereunder or otherwise, or for
the payment or performance of any covenant or obligation contained herein, or
in any other document evidencing, securing or pertaining to the indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable
federal or state usury laws. If under any circumstances whatsoever fulfillment
of any provision hereof or any other documents, at the time performance of such
provision shall be due, shall involve exceeding the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if under any circumstances the Holder hereof shall
ever receive an amount deemed interest by applicable law, which would exceed
the highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal and such other indebtedness,
the excess shall be deemed to have been a payment made by mistake and shall be
refunded to Maker or to any other person making such
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payment on Maker's behalf. All sums paid or agreed to be paid to the Holder
hereof for the use, forbearance or detention of the indebtedness of Maker
evidenced hereby outstanding from time to time shall, to the extent permitted
by applicable law, and to the extent necessary to preclude exceeding the limit
of validity prescribed by law, be amortized, prorated, allocated and spread
from the date of disbursement of the proceeds of this Note until payment in
full of the loan evidenced hereby so that the actual rate of interest on
account of such indebtedness is uniform throughout the term hereof. The terms
and provisions of this paragraph shall control and supersede every other
provision of all agreements between Maker and the Holder.
Maker warrants and represents to the Holder that the indebtedness
evidenced by this Note is with respect to an exempt transaction under the
Truth-In-Lending Act, 15 U.S.C. 1601, et seq. and that this Note is made for
business or commercial purposes (and not for personal or agricultural
purposes).
Time is of the essence with respect to the performance of the
obligations of Maker under this Note.
MAKER AND HOLDER HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
GEORGIA AND THAT OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE AND
HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. MAKER AND THE HOLDER
IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS NOTE.
In the event any one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Note and this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein or therein.
SUBORDINATION TERMS
This Note and the entire indebtedness evidenced hereby from time to
time, whether for principal, interest or any other amounts payable hereunder or
in respect hereof, shall be subject, subordinate and junior in all respects to
the following: (i) all "Obligations" of Maker under and as such term is defined
in the Credit Agreement dated as of __________, 1999 (as amended, modified,
extended or restated, the "Credit Agreement"), among the Maker, the Lenders
party thereto from time to time, and First Union National Bank, as
Administrative Agent (in such capacity, together with any successor or
replacement agent under such agreement or any refinancing or replacement
agreement, the "Agent") (as such may be amended, modified, supplemented or
restated from time to time, the "Senior Credit Facility"); (ii) all obligations
of Maker to any lender or group of lenders for borrowed money, whether to
refinance, in whole or in part, the indebtedness owing under the Credit
Agreement pursuant to an infusion of new
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money that pays in full the Obligations under the Senior Credit Facility or
consisting of a new credit facility which is established after the Senior
Credit Facility has been terminated (as such new facility may be amended,
modified, supplemented or restated from time to time, the "New Senior Credit
Facility"); and (iii) all obligations of Maker to holders of any non-investment
grade securities (as such may be amended, modified, supplemented or restated
from time to time, the "High Yield Debt").
All indebtedness, obligations and liabilities of Maker under the
Senior Credit Facility, the New Senior Credit Facility, or the High Yield Debt,
whether such indebtedness, obligations and liabilities are now existing or
hereafter arising, whether or not evidenced by notes or other instruments, and
whether direct or indirect, fixed or contingent, liquidated or unliquidated,
due or to become due, secured or unsecured, and whether for principal, interest
(including interest accruing after the filing of a petition initiating any
bankruptcy, insolvency or a similar proceeding as described in Section 9.1(f)
or Section 9.1(g) of the Credit Agreement, whether or not such interest is an
allowed claim enforceable against the Maker in any such proceeding), and all
other obligations or liabilities (including all fees, taxes, additional
compensation, expense reimbursements and indemnification) now or hereafter
payable under or with respect to any of the foregoing are collectively referred
to as the "Senior Debt". All documents evidencing the Senior Credit Facility,
the New Senior Credit Facility, or the High Yield Debt, including without
limitation, all credit agreements, security agreements, pledge agreements,
notes, bonds or other instruments, financing statements, mortgages, deeds of
trust, deeds to secure debt, investment property, securities, financing
statements, certificates, powers of attorney, stock powers or similar
documents, agreements or certificates, are hereinafter referred to as the
"Senior Debt Documents".
By its acceptance of this Note, Holder covenants and agrees that the
subordination terms set forth below shall inure to the benefit of the "Lenders"
under and as such term is defined in the Senior Credit Facility from time to
time party thereto (hereinafter the "Senior Lenders"), the lenders from time to
time party to any New Senior Credit Facility (hereinafter the "New Senior
Lenders"), and the holders from time to time of any High Yield Debt (the "High
Yield Debt Holders"; the Senior Lenders, the New Senior Lenders and the High
Yield Debt Holders are hereinafter collectively sometimes referred to as the
"Senior Debt Holders"), and the successors and assigns of any of the Senior
Debt Holders.
Holder hereby covenants and agrees that it will, upon the Maker's
request, from time to time enter into such subordination agreements as
requested by Maker or a Senior Debt Holder to evidence the subordination of the
indebtedness evidenced hereby to the Senior Debt to the fullest extent provided
hereunder with respect to debt subordination, the restrictions placed on
Holder's acceleration of the debt evidenced hereby and the enforcement of
remedies against Maker.
In the event Maker fails to pay the principal balance of this Note on
the Maturity Date, Holder shall be entitled in connection with (i) a
modification of the Senior Credit Facility other than a modification resulting
from a default or event of default thereunder, (ii) a refinancing of the senior
indebtedness of Maker pursuant to a proposed New Senior Credit Facility, or any
negotiations resulting from the occurrence of an event of default thereunder;
or (iii) the issuance of new High Yield Debt, or any negotiations resulting
from the occurrence of an event of default thereunder, to participate in such
negotiations to express its position concerning its rights under
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this Note. However, the consent of Holder to the terms of such modification,
new financing or placement of new High Yield Debt or modification thereof shall
not be required to be obtained as a condition to such transactions, and Holder
shall not have standing to object to Maker's consummation of the transaction
contemplated by any of (i), (ii) or (iii) of this paragraph on terms Maker and
deems appropriate in its sole and absolute discretion.
1. SUBORDINATION. Anything in this Note to the contrary
notwithstanding, all principal, interest and other amounts due or to become due
on this Note shall be subordinate and junior in right of payment to the extent
set forth herein to the prior payment in full in cash of all Senior Debt.
2. PRIORITY AND PAYMENT OVER UPON INSOLVENCY AND DISSOLUTION. In
the event of (i) any insolvency or bankruptcy case or proceeding or any
receivership, liquidation, reorganization or similar case or proceeding in
connection therewith relative to the Maker or to its assets, (ii) any
liquidation, dissolution or other winding up of the Maker, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Maker, then and in any such event the Senior Debt Holders
shall be entitled to receive payment in full in cash of all amounts due or to
become due on or in respect of all Senior Debt before the Holder of this Note
shall be entitled to receive and retain any payment on account of the
principal, interest or other amounts due or to become due on this Note and to
that end the Senior Debt Holders shall be entitled to receive, for application
to the payment of the Senior Debt, any payment or distribution of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Maker which is subordinated to the payment of
this Note, which may be payable or deliverable in respect of this Note in any
such case, proceeding, dissolution, liquidation or other winding up or event.
Accordingly, any payment or distribution of assets of the Maker of any kind or
character, whether in cash, property or securities, which would otherwise have
been made to the Holder of this Note but for the provisions of this Section 2
shall instead be made by the Maker or by the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of assets of the Maker directly to the Senior Debt Holders (or
the agent or trustee for the Senior Debt Holders on their behalf) for
application to the payment of all Senior Debt remaining unpaid to the extent
necessary to pay all Senior Debt in full in cash after giving effect to any
concurrent payment or distribution to or for the benefit of the Senior Debt
Holders.
If, notwithstanding the foregoing provisions of this Section 2, the
Holder of this Note shall have received any payment of distribution of assets
of the Maker of any kind or character, whether in cash, property or securities,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of the Maker which is
subordinated to the payment of this Note, before all amounts due or to become
due on or in respect of all Senior Debt have been paid in full in cash, then
and in such event such payment or distribution shall be received in trust for
the Senior Debt Holders and shall be forthwith paid over or delivered by the
Holder of this Note receiving the same directly to the Senior Debt Holders (or
to the agent or trustee for the Senior Debt Holders on their behalf) or, to the
extent legally required, to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other person making such payment or
distribution of assets of the Maker, for application to the
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payment of all Senior Debt remaining unpaid to the extent necessary to pay all
Senior Debt in full in cash after giving effect to any concurrent payment or
distribution to or for the benefit of the Senior Debt Holders. Notwithstanding
anything set forth in this Section 2 or elsewhere in this Note, the Maker may
make and the Holder may retain any payment received on account of this Note
prior to the occurrence of an event described in clauses (i) through (iii) of
this Section 2 or clauses (i) through (ii) of Section 3.
3. PAYMENT ON NOTE SUSPENDED WHEN SENIOR DEBT IS IN DEFAULT. In
the event and during the continuation of (i) any default in the payment of
principal of or interest on any Designated Senior Debt (as hereinafter
defined), whether at maturity, at a date fixed for prepayment or by declaration
of acceleration or otherwise, or any default in the payment of any other
obligations or liabilities constituting Designated Senior Debt, or (ii) any
other event of default (after expiration of any applicable grace or cure
periods) with respect to any Designated Senior Debt which would permit the
holders of such Designated Senior Debt (or a person or persons, including the
agent or trustee for such holders, acting on their behalf) to declare such
Designated Senior Debt to become due and payable prior to the date on which it
would otherwise have become due and payable, then in the case of either (i) or
(ii) above, unless and until such default or event of default shall have been
cured or waived or shall have ceased to exist or such acceleration shall have
been rescinded or annulled, or in the event any judicial proceeding shall be
pending with respect to any such event of default, then no payment (including
any payment which may be payable by reason of the payment of any other
indebtedness of the Maker which is subordinated to the payment of this Note)
shall be made by the Maker on account of the principal of or interest on this
Note or on account of the purchase or other acquisition by it of this Note. The
"Designated Senior Debt" shall mean, all Senior Debt under the Senior Credit
Facility or the New Senior Credit Facility, and, provided there is no Senior
Credit Facility or New Senior Credit Facility, then Designated Senior Debt
shall mean the High Yield Debt.
If, notwithstanding the foregoing provisions of this Section 3 or the
provisions of Section 5, the Maker shall make any payment or distribution on or
with respect to this Note prohibited by the foregoing provisions of this
Section 3 or the provisions of Section 5, or the Holder of this Note shall have
received any payment or distribution of assets of the Maker of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Maker which is subordinated to the payment of
this Note, at a time when such payment or distribution is prohibited by the
foregoing provisions of this Section 3 or the provisions of Section 5, then and
in such event such payment or distribution shall be received in trust for the
Senior Debt Holders and shall be forthwith paid over or delivered by the Holder
of this Note receiving the same directly to the Senior Debt Holders (or to the
agent or trustee for the Senior Debt Holders on their behalf) or, to the extent
legally required, to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making such payment or distribution
of assets of the Maker, for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay all Senior Debt in full in cash
after giving effect to any concurrent payment or distribution to or for the
benefit of the Senior Debt Holders. Nothing set forth in this Section 3 or
elsewhere in this Note, shall prohibit or restrict the Holder from accepting
and retaining for its own account at any time common stock in the Maker or its
Affiliate (but nothing herein shall require the Holder to accept or require the
Maker to offer such common stock) in full or partial payment of amounts due
under this Note.
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4. OBLIGATION TO PAY NOTE NOT IMPAIRED; PROVISIONS SOLELY TO
DEFINE RELATIVE RIGHTS. The subordination provisions of this Note are intended
solely for the purpose of defining the relative rights of the Holder of this
Note on the one hand and the Senior Debt Holders on the other hand. It is and
shall be the intent of the parties that these provisions shall constitute a
present assignment by the Holder of this Note of its rights to receive payments
or distributions of cash, property and securities of the Maker otherwise
payable to the Holder of this Note in the circumstances described in Sections 2
and 3 hereof. Nothing contained herein shall (i) impair or affect, as among the
Maker, its creditors (other than the Senior Debt Holders) and the Holder of
this Note, the obligation of the Maker, which is absolute and unconditional, to
pay the Holder of this Note the principal of and interest on this Note as of
when the same shall become due and payable in accordance with their terms, or
(ii) affect the relative rights against the Maker of the Holder of this Note
and the creditors of the Maker (other than the Senior Debt Holders), or (iii)
prevent the Holder of this Note from exercising all remedies otherwise
permitted by applicable law upon default under the instrument or instruments
governing this Note, subject to the rights, if any, under this Note of the
Senior Debt Holders to receive cash, property and securities otherwise payable
or deliverable to the Holder and subject to the other subordination provisions
of this Note.
5. ACTIONS AGAINST THE MAKER. (a) No Holder of this Note will
(i) declare this Note or any portion hereof due and payable before the stated
maturity hereof (other than any Acceleration Event described in paragraphs (c)
or (d) of the definition thereof, which results in an automatic acceleration of
this Note) or commence any action or proceeding against the Maker to recover
all or any part of this Note, (ii) ask, demand, xxx for, or take other
collection action against the Maker, directly or indirectly, in cash, property
or securities or other property or by set-off or in any manner (including
without limitation from or by way of collateral) receive payment of all or any
part of this Note, or (iii) join with any creditor in bringing any proceeding
against the Maker under Title 11 of the United States Code or any other state
or federal insolvency statute, unless and until, in each case under (i), (ii)
and (iii) above, either (a) the requisite percentage of the Senior Debt Holders
necessary to take such action under the instrument or instruments governing the
Senior Debt shall have commenced or joined action or (b) all Senior Debt has
been paid in full in cash, all commitments to extend credit under the Senior
Debt Documents have been terminated, and all letters of credit issued pursuant
to the Senior Debt Documents have been canceled or otherwise terminated, all as
more fully set forth in Section 3 hereof.
(b) Notwithstanding the foregoing paragraph 5(a) or anything else
set forth in this Note, in the event (i) Maker fails to pay the principal
balance of and any other amounts due under this Note on the Maturity Date, (ii)
the Senior Credit Facility Maturity Date has occurred and (iii) solely as to
the Senior Credit Facility (and not the New Senior Credit Facility or the High
Yield Debt), no event described in clauses (i) through (iii) of Section 2 or
clauses (i) through (ii) of Section 3 exists, Holder shall be allowed to
accelerate the obligations due under this Note and to exercise such remedies as
are available to Holder under this Note or applicable law provided that Holder
forbear from exercising any remedies for a period of not less than one hundred
eighty days (180) after the Maturity Date (hereinafter the "Standstill
Period"). Any cash or property acquired by Holder in connection with its
exercise of its remedies under the Note or any judgment obtained by Holder in
connection with the Note shall be held in trust for the benefit of
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the Senior Debt Holders until all Senior Debt has been paid in full, in cash,
all commitments to extend credit to Maker pursuant to the Senior Debt Documents
have been canceled or otherwise terminated, and all letters of credit issued
pursuant to the Senior Debt Documents have been canceled or otherwise
terminated, all as more fully set forth in Section 3 hereof. The "Senior Credit
Facility Maturity Date" shall mean the earlier of (x) March __, 2004, subject
to extension of such date to the then-current maturity date of that certain
Credit Agreement dated as of _____________, 1999 among the Maker, the Lenders
and the Agent, as amended, modified or extended, but (as to extensions) only to
the extent that the March ___ 2004 maturity date is being extended because of a
default or event of default under the Senior Credit Facility or in connection
with a workout of the Maker's obligations under the Senior Credit Facility
required in order to avoid a future default or event of default thereunder or
(y) the date the Obligations under and as such term is defined in the Credit
Agreement executed in connection with the Senior Credit Facility are paid in
full and the Credit Agreement has been terminated by the Agent.
6. SUBROGATION. Subject to the payment in full in cash of all
Senior Debt, the termination of all commitments to extend credit under the
Senior Debt Documents, and the cancellation or termination of all letters of
credit issued pursuant to the Senior Debt Documents, the Holder of this Note
shall be subrogated to the extent of the payments or distributions made to the
Senior Debt Holders pursuant to these provisions to the rights of the holders
of such Senior Debt to receive payments and distributions of cash, property and
securities applicable to the Senior Debt until the principal of and interest on
this Note shall be paid in full. For purposes of such subrogation, no payments
or distributions to the Senior Debt Holders of any cash, property or securities
to which the Holder of this Note would be entitled but for these provisions,
and no payments over pursuant to the provisions of Section 2 or 3 to the Senior
Debt Holders by the Holder of this Note shall, as among the Maker, its
creditors (other than the Senior Debt Holders) and the Holder of this Note, be
deemed to be a payment or distribution by the Maker to or on account of the
Senior Debt.
7. PROOFS OF CLAIM. The Holder of this Note or any trustee or
other person acting on its behalf may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Holder of this Note in respect of this Note allowed in any
bankruptcy, insolvency or other judicial proceedings relative to the Maker (or
any other obligor on this Note, including any guarantor), its creditors or its
property. Any term or provision of this Section 7 to the contrary
notwithstanding, however, if any bankruptcy, insolvency or judicial proceeding
referred to above is commenced by or against the Maker, and so long as all
Senior Debt has not been paid in full: (i) each of the Senior Debt Holders (and
the agent or trustee of such Senior Debt Holders on their behalf) is hereby
irrevocably authorized and empowered (in its own name or in the name of the
Holder of this Note or otherwise), but shall have no obligation, to demand, xxx
for, collect and receive every payment or distribution received in respect of
any such proceeding and give acquittances therefor, to file claims and proofs
of claims, to vote the claims of the Holder of this Note in any proceeding (and
for that purpose, the Holder of this Note hereby irrevocably assigns to the
Senior Debt Holders the right to file a proof of claim in the Holder's name and
to vote its claims in any such proceeding), and to take such other action as it
may deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of such Senior Debt Holders or Holder of this Note with
respect hereto, and (ii) the Holder of this Note shall duly and promptly take,
for the account of the Senior
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Debt Holders, such action as the Senior Debt Holders (or the agent or trustee
for the Senior Debt Holders on their behalf) may request (a) to collect all
amounts payable by the Maker in respect of this Note and to file the
appropriate claims or proofs of claim in respect of this Note, (b) to execute
and deliver to the Senior Debt Holders such assignments or other instruments as
the Senior Debt Holders (or the agent or trustee for the Senior Debt Holders on
their behalf) may request in order to enable the Senior Debt Holders (or the
agent or trustee for the Senior Debt Holders on their behalf) to enforce any
and all claims with respect to any and all security interests and other liens
securing payment of all amounts payable in respect of this Note and (c) to
insure that all payments and distributions made in respect of any such
proceedings are made to the Senior Debt Holders as it or their interests may
appear.
8. RELIANCE ON SUBORDINATION. The Holder of this Note by its
acceptance hereof consents and agrees that all Senior Debt shall be deemed to
have been made or incurred at the request of the Holder of this Note and in
reliance upon the subordination of this Note pursuant to the subordination
provisions hereof.
9. RESTRICTIONS ON CERTAIN ACTIONS. The Holder of this Note by
its acceptance hereof agrees not to sell, assign or transfer all or any part of
this Note while any Senior Debt remains unpaid unless such sale, assignment or
transfer is made expressly subject to these provisions. The Holder of this Note
represents that no other subordination of this Note is in existence on the date
hereof, and such Holder agrees that this Note will not be subordinated to any
indebtedness owed to any person other than the Senior Debt Holders. Until the
Senior Debt has been paid in full, no Holder of this Note will file or create,
or cause to be filed or created, any lien or encumbrance of any kind upon the
assets of the Maker or any of its subsidiaries, without the prior consent of
the Senior Debt Holders.
10. CHANGES. The Senior Debt Holders may at any time, and from
time to time, without the consent of or notice to the Holder of this Note,
without incurring responsibility to such Holder, and without impairing or
releasing any of the rights of the Senior Debt Holders, or any of the
obligations of the Holder of this Note hereunder:
(i) change the time, amount, manner, place or terms of
payment of, or change or extend the time of payment of, or renew or otherwise
alter, any of the Senior Debt Documents, or any other instrument or agreement
evidencing any Senior Debt or securing payment thereof or relating to the
Senior Debt in any manner;
(ii) sell, exchange, release or otherwise deal with any
collateral for all or any of the Senior Debt (whether or not in a commercially
reasonable manner);
(iii) release anyone liable in any manner for the payment
or collection of any Senior Debt;
(iv) exercise or refrain from exercising any rights
against the Maker or others (including the Holder of this Note);
(v) apply any sums received by the Senior Debt Holders,
by whomsoever paid and however realized, to the payment of the Senior Debt in
such manner as the Senior Debt
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Holders, in their sole discretion, shall deem appropriate; and
(vi) take any other action which might otherwise
constitute a defense available to, or a discharge of, this Note in respect of
these provisions.
11. CONTINUED EFFECTIVENESS. These provisions shall continue to
be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Debt is rescinded or must otherwise be returned by any
Senior Debt Holders upon the insolvency, bankruptcy or reorganization of the
Maker or otherwise, all as though such payment had been due but not made at
such time.
12. AMENDMENTS. The subordination provisions of this Note are for
the benefit of the Senior Debt Holders and, so long as any Senior Debt remains
unpaid, may not be amended, modified, rescinded or canceled in whole or in part
in any manner that would be adverse to any holder of Senior Debt without the
prior written consent of such holder.
13. BINDING AFFECT; ASSIGNMENT. This Note shall be binding upon
and inure to the benefit of Maker and Holder and their respective successors
and permitted assigns, and representatives. Holder may not assign its rights or
obligations under this Note (by operation of law or otherwise) other than to
any Permitted Transferee or Assignee as expressly provided in this Note without
the prior written consent of Maker, and any attempted assignment without
consent where required shall be void. The subordination provisions of this Note
shall inure to the benefit of the successors and assigns of each of the Senior
Debt Holders.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the day and year first above written.
MAKER:
MATRIA HEALTHCARE, INC.
By:
--------------------------------------------
Title:
-----------------------------------------
Accepted and agreed
this _____ day of ___________, 2000.
HOLDER:
XXXXXX MEDICAL MANAGEMENT, L.L.C.
By:
-----------------------------------
Title:
--------------------------------
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EXHIBIT B
FORM OF
XXXX OF SALE AND ASSIGNMENT
FOR VALUE RECEIVED, and in further consideration of the mutual
covenants and conditions set forth in, and pursuant to the terms of, that
certain Purchase and Sale Agreement (the "Purchase Agreement") (unless
otherwise defined herein, all capitalized terms shall have the respective
meanings assigned to such terms in the Purchase Agreement), dated as of
December 21, 1998, by and among MATRIA HEALTHCARE, INC., a Delaware corporation
("Purchaser"), and XXXXXX MEDICAL MANAGEMENT, L.L.C., a Georgia limited
liability company ("Seller"), Seller hereby grants, conveys, sells, transfers,
assigns and sets over unto Purchaser all of Seller's right, title and interest,
and good and marketable title, in and to all of the interests and assets set
forth on Exhibit A attached hereto and made a part hereof (collectively, the
"Interests and Assets").
TO HAVE AND TO HOLD FOREVER the above described property unto
Purchaser, for the use and benefit of Purchaser and its successors and assigns.
This Xxxx of Sale and Assignment is made pursuant to the terms of the
Purchase Agreement and is entitled to all benefits thereof. The
representations, warranties, covenants and indemnities provided in the Purchase
Agreement shall continue in full force and effect as provided therein and shall
not be deemed modified, waived or amended in any respect whatsoever by reason
of this Xxxx of Sale and Assignment.
This Xxxx of Sale and Assignment shall be binding upon, inure to the
benefit of and be enforceable by Seller and Purchaser and their respective
successors and assigns.
88
IN WITNESS WHEREOF, Seller has caused its duly authorized
representative to execute and deliver this Xxxx of Sale and Assignment as of
this ___ day of _________, 1999.
XXXXXX MEDICAL MANAGEMENT, L.L.C.
By:
-------------------------------------
Name: Xxxx X. Xxxxxx, President
[CORPORATE SEAL]
Accepted and agreed to this
____ day of ______________, 1999:
MATRIA HEALTHCARE, INC.
By:
--------------------------------
Name: , President
---------------------
[CORPORATE SEAL]
-2-
89
EXHIBIT A
INTERESTS AND ASSETS
90
EXHIBIT C
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is entered into as of this
______ day of January, 1999, by and between Matria Healthcare, Inc., a Delaware
corporation, (the "Company"), Lucor Holdings, LLC, a Georgia limited liability
company ("Lucor"), Xxxx X. Xxxxxx, a Georgia resident ("MJG"), and J. Michael
Highland, a Georgia resident ("JMH").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and certain subsidiaries of the Company have acquired
substantially all of the assets of Xxxxxx Medical Management, L.L.C., a Georgia
limited liability company ("GMM"), including all of the equity interests of
GMM's subsidiaries (the "Subsidiaries") pursuant to the terms of that certain
Purchase and Sale Agreement (the "Purchase Agreement") dated as of December 21,
1998, by and among Company and GMM; and
WHEREAS, MJG and JMH are stockholders, officers and directors of Lucor
and expect to provide services to the Company hereunder through Lucor and are
executing this Agreement solely for the purpose of agreeing to be bound by
Sections 9 and 10 hereof; and
WHEREAS, the execution and delivery of this Agreement is a material
condition for the Company to enter into the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereinafter set forth, Lucor and the Company hereto agree as follows:
1. RETENTION OF MANAGER. Subject to each of the terms,
conditions and provisions of this Agreement, the Company hereby retains Lucor
and Lucor hereby agrees to be retained by the Company and the Subsidiaries to
perform those managerial functions set forth in Section 4 of this Agreement.
2. TERM.
2.1 Subject to the provisions for termination set forth herein,
the term of this Agreement shall be from the date hereof through December 31,
2008.
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2.2 The Company, by written notice to Lucor, authorized by a
majority of the directors other than those who are partners, principals or
employees of Lucor (or an affiliate of Lucor), may terminate this Agreement for
justifiable cause, which shall mean any of the following events: material
breach by Lucor of any of its obligations hereunder (including, without
limitation, failure to make available the services of MJG as provided in
paragraph 4 below); misappropriation by Lucor of funds or property of the
Company or the Subsidiaries, or other willful breach in the course of its
duties hereunder; any attempt by Lucor, MJG or JMH to secure personal profit
related to the business of the Company and not fairly disclosed to and approved
by the Board of Directors of the Company or gross neglect by Lucor in the
fulfillment of its obligations hereunder.
2.3 Either party, by sixty (60) days' prior written notice to the
other party, may terminate this Agreement effective as of the end of each
calendar year during the Term hereof.
3. COMPENSATION.
3.1 As compensation to Lucor for its management services to the
Company and the Subsidiaries under this Agreement in 1999, the Company, on
behalf of itself and the Subsidiaries, agrees to pay Lucor a fee at the annual
rate of Eight Hundred Thousand Dollars ($800,000). Such fee shall be payable
monthly in arrears, on or before the last day of each month, commencing on
January 31, 1999. Payment shall be prorated for any partial month during the
term hereof.
3.2 For years subsequent to 1999, Lucor's compensation under this
Agreement will be established by agreement between Lucor and the Board of
Directors based on the level of compensation paid Lucor in 1999, the number of
employees of Lucor providing management services to the Company, Lucor's
performance in the previous year, inflation and other relevant factors.
3.3 Compensation payable hereunder is intended to cover all
expenses incurred by Lucor in connection with providing management services to
the Company hereunder. Unless approved in advance by the Chief Executive
Officer of the Company, the Company will not reimburse Lucor, MJG or JMH, for
out-of-pocket or other costs and expenses (including travel expenses) incurred
by it or any of its employees or affiliates in connection with (i) providing
the services under this Agreement; or (ii) serving as an officer of the
Company. Unbudgeted approved expenses as set forth in the preceding sentence
shall be reimbursed, if reasonable, upon receipt by the Company of invoices
from Lucor providing information reasonably required by the Company. Provided
further, MJG acknowledges and agrees that as long as this Agreement is in
effect, MJG shall not
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receive any Board of Directors' fees or participate in the Company's Director
Stock Option Plan.
4. DUTIES AS MANAGER. Lucor's duties under this Agreement shall
include providing management services to the diabetes disease management and
microsampling businesses operated by the Company, the Subsidiaries and Diabetes
Management Services, Inc., with overall responsibility for the management of
such businesses, subject to the direction and oversight of the Chief Executive
Officer of the Company (the "Services"). Services shall include, without
limitation, identifying and implementing other acquisition opportunities or
joint ventures and business development projects agreed upon by Lucor and the
Company's Chief Executive Officer. Lucor agrees that substantially the
full-time services of its officer, MJG, will be included in the Services
provided hereunder.
5. AUTHORITY OF MANAGER. Except as may be authorized by the
Chief Executive Officer of the Company, Lucor shall have no authority to enter
into any agreement or to make any representation, commitment or warranty
binding upon the Company or any Subsidiary or to obtain or incur any right,
obligation or liability on behalf of the Company.
6. INDEPENDENT CONTRACTOR. Lucor shall act as an independent
contractor and shall have complete charge of its personnel engaged in the
performance of the Services. Neither the Company nor any Subsidiary shall have
any obligation to provide health insurance, life insurance, worker's
compensation, or other benefits, or to pay or withhold employment taxes with
respect to Lucor personnel. To the extent permitted by applicable law and the
Company's insurance carriers, at the request of Lucor, the Company will include
Lucor employees in Company's group health and worker's compensation programs,
provided that Lucor shall pay the Company the Company's cost of providing such
coverage upon the Company's invoice therefor.
7. DISPUTES OVER REQUIRED EXPENDITURES WITH RESPECT TO CALENDAR
YEAR 1999. Notwithstanding the limitations on Lucor's authority and the
requirement that Lucor act under the direction of the Chief Executive Officer
of the Company, as set forth above, any dispute over required expenditures with
respect to calendar year 1999 shall be resolved in accordance with Section 1.5
of the Purchase Agreement.
8. BOOKS AND RECORDS.
(a) Lucor's books and records with respect to the
Services and any reimbursable costs ("Books and Records") shall be
kept at Lucor's office located at 0000 Xxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxx 00000. The Books
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93
and Records shall be kept in accordance with recognized accounting
principles and practices, consistently applied, and shall be made
available for the Company or the Company's representatives' inspection
and copying at all times during regular office hours. Lucor shall not
be required to maintain the Books and Records for more than three (3)
years after termination of this Agreement.
(b) Lucor shall have access at all reasonable times to
the premises, business properties, assets, financial statements and
other books and records of the Subsidiaries, to the extent necessary
for Lucor to perform its duties hereunder, and the Company agrees to
cause its officers and employees, and the officers and employees of
the Subsidiaries and DMS, to cooperate with Lucor in carrying out its
duties hereunder.
9. CONFIDENTIAL INFORMATION.
9.1 The parties acknowledge that during the course of provision
of the Services, the Company may disclose confidential information to Lucor,
MJG and JMH or its affiliated companies. Lucor, MJG and JMH shall treat such
information as the Company's confidential property and safeguard and keep
secret all such information about the Company, including reports and records,
customer lists, trade lists, trade practices, and prices pertaining to the
Company's business coming to the attention or knowledge of Lucor, MJG or JMH
because of any activities conducted by Lucor, MJG or JMH under or pursuant to
this Agreement.
9.2 Lucor, MJG and JMH shall exercise their best efforts and
shall cause any of their affiliated companies to exercise their best efforts to
prevent any confidential information from being disclosed to third parties,
except as necessarily required in the performance of the Services and except
under terms of confidentiality satisfactory to the Company. This obligation
shall remain in effect until the Company shall release Lucor or its affiliated
companies from their obligations under this paragraph 9, but in no event later
than three (3) years after the completion of the Services. Lucor shall not use
any of the Company's confidential information in any way that is detrimental to
the interests of the Company, directly or indirectly, either during the term of
this Agreement or at any time thereafter.
10. DEFINITIONS.
10.1 For purposes of this Section 10, the following terms shall
have the following respective meanings:
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(a) "Competing Business" shall mean a business that,
wholly or partly, directly or indirectly, is engaged in (i) providing,
selling or marketing lancet or lancing devices, microsampling, sale of
diabetes supplies or diabetic disease management; or (ii) designing,
developing, manufacturing, testing, selling, marketing or distributing
products or equipment relating thereto.
(b) "Competitive Position" shall mean: (i) Lucor's,
MJG's or JMH's direct or indirect equity ownership (excluding
ownership of less than one percent (1%) of the outstanding common
stock of any publicly held corporation) or control of any portion of
any Competing Business; or (ii) Lucor, MJG or JMH serving as a
director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business.
(c) "Covenant Period" shall mean the period of time
commencing with the date of this Agreement and continuing for a period
of three (3) years after the termination of this Agreement.
(d) "Restricted Territory" shall mean the United States,
the United Kingdom and Germany.
10.2 During the Covenant Period, Lucor, MJG and JMH, and each of
them, agrees that he/it will not, without the prior written consent of the
Company, either directly or indirectly, alone or in conjunction with any other
person or entity, accept, enter into or attempt to enter into a Competitive
Position in the Restricted Territory.
10.3 During the Covenant Period, Seller, MJG and JMH, and each of
them, agrees that it/he will not, without the prior written consent of the
Company, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit any customer of the Subsidiaries (or any actively
sought or prospective customer of the Subsidiaries) for or on behalf of any
Competing Business to purchase any products offered by the Company.
10.4 During the Covenant Period, Lucor, MJG and JMH, and each of
them, agrees that it/he will not, without the prior written consent of the
Company, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit or attempt to solicit any "key or material" employee,
consultant, contractor or other personnel of the Company or the Subsidiaries to
terminate, alter or lessen that party's affiliation with the Company or the
Subsidiaries or to violate the terms of any agreement or understanding between
such employee, consultant, contractor or other person and the Company or the
Subsidiaries. For purposes of this Section
5
95
10.4, "key or material" employees, consultants, contractors or other personnel
shall mean those such persons or entities who have direct access to or have had
substantial exposure to confidential information or trade secrets of the
Company or the Subsidiaries.
10.5 During the Covenant Period, Lucor, MJG and JMH, and each of
them, shall not make any statement or other communication that impugns or
attacks the reputation or character of the Company or the Subsidiaries, or
materially damages the goodwill of the Company or the Subsidiaries, take any
action that would interfere with any contractual, customer or referral source
relationships of the Company or the Subsidiaries in a way, including, without
limitation, any action that would result in a diminution of business, or
otherwise take any action that is detrimental to the best interests of the
Company or the Subsidiaries.
11. INDEMNIFICATION. The Company agrees to indemnify and hold
Lucor and its partners, officers, directors and agents harmless from damages,
losses or expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred or paid directly or indirectly, by Lucor as a result or
arising out of any actions taken by Lucor in connection with the performance of
the Services under this Agreement except to the extent that such actions
resulted solely from the gross negligence or willful misconduct of Lucor. The
Company hereby further agrees to reimburse Lucor for all reasonable fees and
expenses (including attorneys' fees) incurred in connection with defending any
such claim to which Lucor is a party, as such fees and expenses are incurred by
Lucor.
12. NOTICES AND COMMUNICATIONS.
12.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Company and Lucor, who will be designated by the parties
promptly upon commencement of the Services.
12.2 All other notices, demands and communications required or
permitted hereunder shall be in writing and shall be delivered personnally to
the respective representatives of the Company and Lucor set forth below or
shall be mailed by registered mail, postage prepaid, return receipt requested.
Notices, demands and communications hereunder shall be effective: (i) if
delivered personally, on delivery; or (ii) if mailed, 48 hours after deposit
thereof in the United States mail addressed to the party to whom such notice,
demand, or communication is given. Until changed by written notice, all such
notices, demands and communications shall be addressed as follows:
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96
If to the Company:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxxxxx LLP
NationsBank Plaza
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, III, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Lucor:
Lucor Management Company, Inc.
0000 Xxxxxxx 00 Xxxxx
XxXxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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97
If to MJG:
Xxxx X. Xxxxxx
0000 Xxxxxxx 00 Xxxxx
XxXxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to JMH:
J. Michael Highland
0000 Xxxxxxx 00 Xxxxx
XxXxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
13. ASSIGNMENTS. Lucor shall not assign this Agreement in whole
or in part without the prior written consent of the Company, and the Company
shall not assign this Agreement in whole or in part without the prior written
consent of Lucor; provided, however, that such consent shall not be
unreasonably withheld with respect to assignments to affiliates or wholly-owned
subsidiaries; and
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98
provided further, that any such assignment shall not relieve the assignor of
any of its obligations under this Agreement.
Subject to the foregoing, all the terms and conditions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
14. APPLICABLE LAW AND SEVERABILITY. This document shall, in all
respects, be governed by the laws of the State of Georgia applicable to
agreements executed and to be wholly performed within the State of Georgia.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provisions contained herein and any contrary present or future statute, law,
ordinance or regulation, the latter shall prevail, but the provision of this
document which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law.
15. FURTHER ASSURANCES. Each of the parties hereto shall execute
and deliver any and all additional papers, documents and other assurances, and
shall do any and all acts and things reasonably necessary in connection with
the performance of their obligations hereunder and to carry out the intent of
the parties hereto.
16. ATTORNEYS' FEES. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
17. CAPTIONS. The captions appearing at the commencement of the
paragraphs herein are descriptive only and for convenience and reference.
Should there be any conflicts between any such caption and the paragraph at the
head of which it appears, the paragraph and not such caption shall control and
govern in the construction of this document.
18. MODIFICATIONS OR AMENDMENTS. No amendment, change or
modification of this document shall be valid unless it is in writing and signed
by all the parties hereto and expressly states that an amendment, change or
modification of this Agreement is intended.
19. SEPARATE COUNTERPARTS. This document may be executed in one
or more separate counterparts, each of which, when so executed, shall be deemed
to be an original. Such counterparts shall, together, constitute and be one and
the same instrument.
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20. ENTIRE AGREEMENT. This Agreement shall constitute the entire
understanding and agreement between the parties hereto and shall supersede any
and all letters of intent, whether written or oral, pertaining to the subject
matter of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MATRIA HEALTHCARE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
LUCOR HOLDINGS, LLC
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
------------------------------------------
XXXX X. XXXXXX
------------------------------------------
J. MICHAEL HIGHLAND
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100
EXHIBIT D
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (the "Agreement") dated as of this _____ day
of January, 1999, is between MATRIA HEALTHCARE, INC., a Delaware corporation
("Matria"), XXXX X. XXXXXX, a Georgia resident ("MJG"), and SZ INVESTMENTS,
L.L.C., a Delaware limited liability company ("SZI").
Statement of Purpose
MJG Affiliates (as defined below) and SZI Affiliates (as defined
below) are members of Xxxxxx Medical Management, L.L.C., a Georgia limited
liability company ("GMM"). GMM and Matria have entered into a Purchase and Sale
Agreement dated as of December 21, 1998 (the "Purchase Agreement"), pursuant to
which Matria will acquire substantially all of the assets of GMM, including its
interests in its subsidiaries, for consideration consisting, in part, of
Redeemable Preferred Stock, Warrants, Convertible Preferred Stock and an
Earn-Out Note (each as defined below) of Matria. Upon consummation of the
transactions contemplated by the Purchase Agreement, MJG and SZI will own
indirectly through their respective Affiliates approximately 10.74% and 1.66%,
respectively, of the Fully Diluted Common Stock (as defined below) of Matria.
In addition, the MJG Affiliates and/or SZI Affiliates may acquire Common Stock
of Matria in the open market after the closing of the Purchase Agreement. As a
condition to consummation of the Purchase Agreement, MJG, SZI and Matria have
agreed to enter into this Agreement with respect to the ownership, voting and
disposition of the Voting Securities (as defined below) of Matria owned by the
MJG Affiliates and/or the SZI Affiliates.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the respective meanings specified below, and terms
used herein and not defined herein shall have the meaning given in the Purchase
Agreement:
"Affiliate" shall have the meaning ascribed to such term pursuant to
Rule 12b-2 under the Exchange Act, as in effect on the date hereof; provided,
that in no event shall MJG and SZI be deemed to be Affiliates of each other.
"Beneficial Ownership" means beneficial ownership as defined in Rule
13d-3 of the Exchange Act.
"Board" means the Board of Directors of Matria.
101
"Change in Control" means any of the following events: (i) any Person,
other than an "Existing Shareholder" (as hereinafter defined) is or becomes the
direct or indirect beneficial owner of shares of the Matria's capital stock
representing greater than 50% of the power to vote in the election of directors
under ordinary circumstances, or (ii) Matria sells, transfers or otherwise
disposes of all or substantially all of the assets of Matria other than in any
transaction between Matria and a wholly-owned subsidiary of Matria, or (iii)
Matria is a party to a merger or a consolidation in which the holders of
Matria's voting securities prior to such merger or consolidation own, directly
or indirectly, securities representing less than 50% of the voting power in the
surviving entity.
"Common Stock" means (a) the Common Stock of Matria, par value $.01
per share, as described in the Certificate of Incorporation of Matria or any
shares of capital stock issued in exchange, redemption or conversion thereof,
and (b) any other class of capital stock of Matria whether currently
outstanding or as may be hereafter issued or authorized for issuance having the
right to share in distributions either of earnings or assets without limit as
to amount or percentage.
"Convertible Preferred Stock" means the Series A Convertible Preferred
Stock of Matria, par value $.01 per share, issued pursuant to the Purchase
Agreement and described in the Certificate of Incorporation of Matria.
"Disinterested Majority" means a majority of the members of the Board
other than the representatives of the MJG Affiliates and/or the SZI Affiliates
nominated and elected to the Board pursuant to Section 4.1 or 4.2 below.
"Earn-Out Note" shall have the meaning ascribed to such term in the
Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Shareholder" shall mean Xxxx X. Xxxxxx, SZ Investments,
L.L.C., any holder of any of the Convertible Preferred Stock, the Redeemable
Preferred Stock or the Warrants, or any affiliate of any of them.
"Fully Diluted" means, with respect to the Common Stock, all of the
outstanding Common Stock of Matria determined as if any security or obligation
directly or indirectly exercisable for or convertible into Common Stock had
been so exercised or converted.
"Institutional Investor" shall mean any bank, thrift, investment
company registered under the Investment Company Act of 1940, pension fund or
insurance company, or any "qualified institutional buyer" as defined in Rule
144A of the Securities Act.
"Investor" means any of the MJG Affiliates and the SZI Affiliates
individually, and "Investors" means all of the MJG Affiliates and SZI
Affiliates collectively.
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"Market Price" means, per share of Common Stock, as of the date of
notice of repurchase pursuant to Section 3.5 or as of the date of any notice of
acceptance of a director's resignation pursuant to Section 4.1, (a) if such
Common Stock is listed on a national securities exchange or traded on The
Nasdaq National Market System ("NMS"), the average mean between the highest
price and the lowest price of which the Common Stock shall have been sold
regular way on the national securities exchange (or if traded on more than one
such exchange, the principal exchange on which such shares are traded) or the
NMS each day in the 20 consecutive trading days ending on said date, or (b) if
the Common Stock shall not be listed on a national securities exchange or
traded on the NMS but shall be traded in the over-the-counter market and
quotations therefor are reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), the average during the 20
consecutive trading days ending on such date of the last price (if such last
price is then reported on a real-time basis) or each such day, or, if the last
price is not then so reported, the mean between the bid and asked prices last
reported on each such day, by NASDAQ for the over-the-counter market on said
date, or (c) if at any time quotations for the Common Stock shall not be
reported by NASDAQ for the over-the-counter market and the Common Stock shall
not be listed on any national securities exchange or traded on the NMS, the
fair market value per share of Common Stock as determined by the Board on the
basis of available prices for such Common Stock or in such other manner as the
Board may deem reasonable.
"MJG Affiliates" means MJG and any Affiliate of MJG (in each case
exclusive of any SZI Affiliate).
"MJG Minimum Ownership" means the direct or indirect beneficial
ownership by any MJG Affiliates and their Permitted Transferees (other than any
SZI Affiliate) of Convertible Preferred Stock, Redeemable Preferred Stock,
Warrants, Common Stock and/or the Earn-Out Note having an aggregate value of at
least $25,000,000. For purposes of this definition, "value" shall be determined
as follows: for Convertible Preferred Stock and Redeemable Preferred Stock, the
aggregate liquidation preference of such stock plus all accrued and unpaid
dividends thereon; for Common Stock, the aggregate Market Price of such stock;
for Warrants, the excess (if any) of the aggregate Market Price of the Common
Stock issuable upon exercise of such Warrants over the aggregate exercise price
of such Warrants; and for the Earn-Out Note, the outstanding balance plus all
accrued and unpaid interest owed thereon, not to exceed $10,000,000 in the
aggregate.
"Permitted Transferee" means (i) any member of GMM as of the date of
the Purchase Agreement, (ii) any Affiliate of any such member, (iii) any
employee or consultant of any Investor or Xxxxxxxxx & Xxxxxxxxxxx, P.C., (iv)
the spouse, siblings, ancestors, and lineal descendants of any of the
foregoing, and (v) any trust, family limited partnership or similar entity
established for the benefit of any of the foregoing; provided that, in each
case, such Person agrees in a writing, delivered to Matria, to be bound by the
provisions of this Agreement (if not already so bound).
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
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"Redeemable Preferred Stock" means the Series B Redeemable Preferred
Stock of Matria, par value $.01 per share, issued pursuant to the Purchase
Agreement and described in the Certificate of Incorporation of Matria.
"Securities Act" means the Securities Act of 1933, as amended.
"SZI Affiliate" means SZI and any of its Affiliates under control of
or common control with SZI (in each case exclusive of any MJG Affiliates);
provided, however, that, notwithstanding the foregoing, no Person shall be
deemed to be an SZI Affiliate unless (i) Xxx Xxxx or any other executive
officer of SZI has actual knowledge of the relevant action to be attributed to
the SZI Affiliate hereunder or (ii) in the case of publicly held entities that
might otherwise fall within this definition, unless Xxx Xxxx or any other
executive officer of SZI took any action, directly or indirectly, to cause,
suggest, encourage or assist such publicly held entity to take the relevant
action to be attributed to the SZI Affiliate hereunder.
"Voting Securities" means, collectively, Common Stock, any preferred
stock of Matria that is entitled to vote generally for the election of
directors, any other class or series of Matria securities that is entitled to
vote generally for the election of directors and any other securities,
warrants, options or rights of any nature that are directly or indirectly
convertible into, exchangeable for, or exercisable for the purchase of, or
otherwise give the holder thereof any rights in respect of, Common Stock,
Matria preferred stock that is entitled to vote generally for the election of
directors, or any other class or series of Matria securities that is entitled
to vote generally for the election of directors.
"Warrants" means the warrants to purchase Common Stock of Matria
issued pursuant to the Purchase Agreement.
2.1 Representations and Warranties of Investors:
(a) MJG represents and warrants to Matria as follows:
(i) MJG has full legal right, power and authority to
enter into and perform this Agreement. This Agreement is a valid and binding
obligation of MJG enforceable against MJG in accordance with its terms, except
that such enforcement may be subject to (A) bankruptcy, insolvency, moratorium
and other similar laws affecting creditors' rights generally and (B) general
principles of equity (regardless of whether asserted at law or in equity).
(ii) Neither the execution and delivery of this Agreement
by MJG nor the consummation by MJG of the transactions contemplated hereby
conflicts with or constitutes a violation of or default under any statute, law,
regulation, order or decree applicable to MJG, or any contract, commitment,
agreement, arrangement or restriction of any kind to which MJG is a party or by
which MJG is bound.
(b) SZI represents and warrants to Matria as follows:
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(i) SZI has full legal right, power and authority to
enter into and perform this Agreement. The execution and delivery of this
Agreement by SZI and the consummation by SZI of the transactions contemplated
hereby have been duly authorized by all necessary limited liability company or
other action on behalf of SZI. This Agreement is a valid and binding obligation
of SZI enforceable against SZI in accordance with its terms, except that such
enforcement may be subject to (A) bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally and (B) general principles
of equity (regardless of whether asserted at law or in equity).
(ii) Neither the execution and delivery of this Agreement
by SZI nor the consummation by SZI of the transactions contemplated hereby
conflicts with or constitutes a violation of or default under the certificate
of formation or other organizational or governing documents of SZI, any
statute, law, regulation, order or decree applicable to SZI, or any contract,
commitment, agreement, arrangement or restriction of any kind to which SZI is a
party or by which SZI is bound.
2.2 Representations and Warranties of Matria. Matria hereby
represents and warrants to each Investor as follows:
(a) Matria has full legal right, power and authority to
enter into and perform this Agreement. The execution and delivery of this
Agreement by Matria and the consummation by Matria of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
other action on behalf of Matria. This Agreement is a valid and binding
obligation of Matria enforceable against Matria in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and
(ii) general principles of equity (regardless of whether asserted at law or in
equity).
(b) Neither the execution and delivery of this Agreement
by Matria nor the consummation by Matria of the transactions contemplated
hereby conflicts with or constitutes a violation of or default under the
charter or by-laws of Matria, any statute, law, regulation, order or decree
applicable to Matria, or any contract, commitment, agreement, arrangement or
restriction of any kind to which Matria is a party or by which Matria is bound.
3.1 Restrictions on Certain Actions by Investors. Subject to
Section 3.2 hereof, until the fifth anniversary of this Agreement, unless
otherwise approved by a Disinterested Majority, neither MJG, whether directly
or indirectly through any MJG Affiliate, nor SZI, whether directly or
indirectly through any SZI Affiliate, shall:
(a) acquire, announce an intention to acquire, offer or
propose to acquire, solicit an offer to sell or agree to acquire by purchase,
by gift, by joining a partnership, limited partnership, syndicate or other
"group" (as such term is used in Section 13(d)(3) of the Exchange Act, such
term to have such meaning throughout this Agreement) or otherwise, any (i)
assets, businesses or properties of Matria other than in the ordinary course of
business or (ii) any Voting Securities:
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(b) participate in the formation or encourage the
formation of any group (other than any group consisting exclusively of the
Investors and/or their Permitted Transferees), or join or in any way
participate with any Person (other than the Investors and/or their Permitted
Transferees), which owns or seeks to acquire beneficial ownership of Voting
Securities;
(c) solicit, or participate in any "solicitation" of
"proxies" (other than with respect to Voting Securities held by the Investors
and/or their Permitted Transferees and/or in compliance with this Agreement) or
become a "participant" in any "election contest" (as such terms are defined or
used in Regulation 14A under the Exchange Act, these terms to have such meaning
throughout this Agreement) with respect to Matria, in each case in opposition
to the recommendation of a Disinterested Majority;
(d) initiate, propose or otherwise solicit stockholders
for the approval of one or more stockholder proposals with respect to Matria or
induce any Person (other than the Investors and/or their Permitted Transferees)
to initiate any stockholder proposal, in each case in opposition to the
recommendation of a Disinterested Majority;
(e) except as contemplated by the terms of the
Convertible Preferred Stock, the Redeemable Preferred Stock or this Agreement,
seek to place more than one representative of each of the MJG Affiliates and
the SZI Affiliates on the Board of Directors of Matria, seek the removal of any
member of the Board of Directors of Matria or seek to have called any meeting
of the stockholders of Matria, in each case in opposition to the recommendation
of a Disinterested Majority;
(f) deposit any Voting Securities in a voting trust or,
except as specifically contemplated by this Agreement, subject them to a voting
agreement or other agreement or arrangement with respect to the voting of such
Voting Securities, other than any such trust, agreement or other arrangement
involving no Person other than the Investors and their Permitted Transferees;
(g) otherwise act, alone or in concert with any other
Person (other than the Investors and/or their Permitted Transferees), to seek
to control the management, Board, policies or affairs of Matria or solicit,
propose, seek to effect or negotiate with any other Person (including, without
limitation, Matria, but excluding any Investor and its Permitted Transferees)
with respect to any form of business combination or other extraordinary
transaction with Matria or any of its subsidiaries or any restructuring,
recapitalization, similar transaction or other transaction not in the ordinary
course of business with respect to Matria or any of its subsidiaries, solicit,
make or propose or negotiate with any other Person (other than the Investors
and/or their Permitted Transferees) with respect to, or announce an intent to
make, any tender offer or exchange offer for any securities of Matria or any of
its subsidiaries, in each case in opposition to the recommendation of a
Disinterested Majority, or publicly disclose an intent, purpose, plan or
proposal with respect to Matria, any of its subsidiaries or any securities or
assets of Matria or any of its subsidiaries, that would violate the provisions
of this Section 3.1, or assist, participate in, facilitate or solicit any
effort or attempt by any Person to do or seek to do any of the foregoing; or
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(h) request Matria (or its directors, officers,
employees or agents) to amend or waive any provision of this Agreement
(including, without limitation, this Section 3.1(h)) or otherwise seek any
modification to or waiver of any of the agreements or obligations of the
Investors under this Agreement in each case in opposition to the recommendation
of a Disinterested Majority.
3.2 Certain Permitted Actions. Notwithstanding the limitations
and restrictions set forth elsewhere in this Agreement:
(a) The Investors and their Permitted Transferees shall
have the right to acquire the Convertible Preferred Stock and the Redeemable
Preferred Stock and to convert the Convertible Preferred Stock and acquire
Common Stock issuable upon conversion of the Convertible Preferred Stock (or
upon conversion, exercise or exchange of any securities received from Matria in
exchange for the Convertible Preferred Stock) and shall have the right to
acquire any Matria securities distributed as a dividend, because of an
adjustment resulting from the operation of anti-dilution provisions, or
otherwise in respect of Convertible Preferred Stock or any securities received
from Matria in exchange for the Convertible Preferred Stock.
(b) The Investors and their Permitted Transferees shall
have the right to acquire the Warrants and to exercise the Warrants and acquire
Common Stock issuable upon exercise of the Warrants (or upon conversion,
exercise or exchange of any securities received from Matria in exchange for the
Warrants) and shall have the right to acquire any Matria securities distributed
as a dividend, because of an adjustment resulting from the operation of
anti-dilution provisions, or otherwise in respect of the Warrants or any
securities received from Matria in exchange for the Warrants.
(c) In addition to any Matria securities acquired
pursuant to paragraphs (a) or (b) of this Section 3.2, the Investors and their
Permitted Transferees shall have the right to acquire Voting Securities so long
as immediately after such acquisition the Investors and their Permitted
Transferees collectively would have Beneficial Ownership of no more than an
aggregate of 35% of the Fully Diluted Common Stock;
(d) Notwithstanding anything to the contrary in this
Agreement, the Investors shall have the right to discuss any business matters
(including but not limited to subjects that may be within the matters listed in
Section 3.1 of this Agreement) privately with the chief executive officer and
other senior executive officers of Matria (and Matria agrees that its chief
executive officer and other senior executive officers will make themselves
reasonably available for such discussions). Notwithstanding anything to the
contrary in this Agreement, the Investors also may discuss their investment in
Matria with each other, their Permitted Transferees, their own stockholders,
and members and with the investment community, provided that such discussions
are not for the purpose of circumventing Section 3.1 hereof.
(e) As a holder of Common Stock, Convertible Preferred
Stock and Warrants, the Investors and their Permitted Transferees may exercise
Rights under Matria's Stockholder Rights Plan and may acquire the securities
issuable upon exercise of those Rights.
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(f) Any purchase of Common Stock by the Investors or
their Permitted Transferees which was contemplated and permitted under the
Confidentiality Agreement referred to in Section 3.1 of the Purchase Agreement
shall be deemed a permitted action hereunder.
3.3 Voting. In connection with either (a) the election or removal
of directors of Matria or (b) any stockholder proposals with respect to Matria
in opposition to the recommendation of a Disinterested Majority, MJG shall, and
shall direct the MJG Affiliates to, and SZI shall, and shall direct the SZI
Affiliates to, vote all Voting Securities owned by them (a) in accordance with
the recommendation of Matria's Board of Directors with respect to such matter,
or (b) in the absence of a recommendation, in the same proportion as the votes
cast by all other holders of Voting Securities with respect to such matter;
provided that each Investor and its Permitted Transferees shall retain the
right to vote, in their sole and absolute discretion, all Voting Securities
owned by such Investor and its Permitted Transferees with respect to the
following matters:
(a) the election of individuals proposed by the
Investors to serve as members of the Board in accordance with Section 4.1 or
4.2 of this Agreement;
(b) the election of individuals proposed by the holders
of the Convertible Preferred Stock or the Redeemable Preferred Stock in
accordance with the terms of such securities; and
(c) matters respecting which a class or series vote of
the Convertible Preferred Stock or the Redeemable Preferred Stock is provided
pursuant to law or pursuant to Matria's charter or by-laws.
By voting as directed by Matria, the Investors and their Permitted Transferees
shall not be deemed to have waived any rights (i) that they may have to enforce
their rights under Matria's Certificate of Incorporation, Matria's Bylaws, the
Purchase Agreement or the Delaware General Corporation Law to challenge the
actions taken or (ii) which they would otherwise be entitled to exercise under
Section 262 of the Delaware General Corporation Law.
3.4 Restrictions on Transfer.
(a) Until the second anniversary of this Agreement, neither the
MJG Affiliates nor the SZI Affiliates will sell, assign, transfer, grant an
option with respect to or otherwise dispose of any interest in (or enter into
an agreement, arrangement or understanding with respect to the foregoing)
(individually and collectively, "Sell") any Voting Securities, except for the
dispositions described in Section 3.4(c) below, which, to the extent provided
in Section 5.1 hereof, are subject to the right of first offer specified in
Section 5.1 hereof.
(b) From and after the second anniversary of this Agreement and
until the fifth anniversary of this Agreement, neither the MJG Affiliates nor
the SZI Affiliates will Sell any Voting Securities except for (i) the
dispositions described in Section 3.4(c) below and (ii) the sale or other
disposition of any Voting Securities to any Person or group if, after due
inquiry, the Investor reasonably believes such Person or group would not have
Beneficial Ownership of 15%
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or more of the then outstanding Common Stock, after taking such sale or other
disposition into account, in each case, which, to the extent provided in
Section 5.1 hereof, are subject to the right of first offer specified in
Section 5.1 hereof.
(c) The Investors and their Permitted Transferees may Sell Voting
Securities (i) pursuant to a transaction approved in writing by a Disinterested
Majority; (ii) pursuant to (A) a "qualifying offer" (as hereinafter defined) or
(B) a "qualifying tender offer" (as hereinafter defined); (iii) in a transfer
made by any Investor or its Permitted Transferees to any other Investor or any
Permitted Transferee or any other Investor's Permitted Transferees provided the
transferee agrees in a writing, delivered to Matria, to be bound by the
provisions of this Agreement (if not already bound) (provided that the
transferor of such Voting Securities shall also continue to remain bound by the
terms of this Agreement, unless Matria shall otherwise, consent in writing,
such consent not to be unreasonably withheld); (iv) pursuant to a bona fide
pledge of Voting Securities by the Investor and its Affiliates as security for
bona fide indebtedness to a brokerage firm or financial institution not
affiliated with the Investor or any of its Affiliates for money borrowed or
pursuant to such pledge by such pledgee; (v) in "brokers' transactions" (as
such term is defined in Rule 144(g) of the Securities Act, which definition
shall apply for all purposes of this Agreement) on the NMS, or if any
particular series of Voting Securities is not listed on the NMS, on the
principal national securities exchange on which such Voting Securities are
listed or admitted to trading, and if not so listed or admitted, in the
over-the-counter market, subject in all cases to the volume limitations
presently set forth in Rule 144(c)(1) of the Securities Act; (vi) in a
registered public offering pursuant to the Registration Rights Agreement; (vii)
constituting 5% or less of the then outstanding Common Stock on a Fully Diluted
basis (or, with the prior written consent of Matria, more than 5%) to any
Institutional Investor whom Investor reasonably believes is Purchasing for
investment and not with a view toward effecting or assisting in a change of
control; (viii) to any Person or group if, after due inquiry, the Investor
reasonably believes such Person or group would not own 5% or more of the then
outstanding Common Stock; or (ix) as a result of a merger, consolidation, share
exchange or liquidation of the Investor in which the Investor is not the
survivor, provided that the surviving or successor entity and each entity that
"controls" (as that term is defined in Rule 405 of the Securities Act) the
surviving or successor entity agrees in writing with Matria to be bound by the
provisions of this Agreement.
For purposes of this Agreement, a "qualifying offer" shall mean (i)
any tender offer or exchange offer commenced by Matria for any Voting
Securities; and (ii) any acquisition transaction involving any Voting
Securities proposed by a Person or entity other than Matria (A) which is
approved by, or not opposed by, a Disinterested Majority of the Board of
Directors of Matria, or (B) where such third party offeror already owns at
least 50% of the outstanding Voting Securities. For purposes of this Agreement,
a "qualifying tender offer" shall mean any acquisition transaction involving
any Voting Securities which is a bona fide tender offer or exchange offer that
is commenced by a third party offeror who does not already own at least 50% of
the outstanding Voting Securities at a price per share greater than the closing
price per share on the principal securities exchange on which the Matria Common
Stock is then traded on the last trading day prior to the first public
announcement of such offer, if upon consummation thereof, such third party
offeror would be the beneficial owner of 50% or more of the shares of Matria
Common Stock then outstanding.
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3.5 Repurchase of Common Stock. In the event that MJG and SZI,
whether directly or indirectly through any Affiliate, shall at any time without
the express approval of a Disinterested Majority have in the aggregate
Beneficial Ownership of Common Stock in excess of 35% of the Fully Diluted
Common Stock of Matria (whether due to redemption, open market repurchases, an
issuer tender offer or otherwise), Matria shall have the right and option, in
addition to any other remedy for breach of this Agreement, to repurchase shares
of Common Stock held by MJG Affiliates or the SZI Affiliates (other than shares
of Common Stock acquired upon conversion of the Convertible Preferred Stock or
upon exercise of the Warrants) in order to reduce such beneficial ownership of
Common Stock to such percentage. Such right and option may be exercised by
Matria by delivering written notice to MJG or SZI, as the case may be, on any
business day at the address set forth in Section 7(h) and the closing of the
repurchase shall occur at the principal office of Matria within 10 business
days of the date of such notice. At such closing, Matria shall tender the
Market Price per share of the Common Stock subject to repurchase in immediately
available funds and the selling party shall deliver certificates for the shares
to be purchased duly endorsed for transfer to Matria together with a
certificate to the effect that such selling party owns the shares to be
transferred free and clear of any and all liens, claims and other adverse
interests other than restrictions imposed by applicable securities laws.
3.6 Dispositions in Certain Events. If an Investor acquires any
Voting Securities in violation of this Agreement, it will immediately dispose
of such Voting Securities to Persons which are not Investors in a manner
permitted by Section 3.4. If Matria shall enter into a definitive agreement
providing for a transaction that will result in a Change in Control, the
restrictions in Section 3.5 hereof shall terminate immediately.
3.7 Legend on Certificates. Any certificate representing shares
of Voting Securities held by Investors or their Affiliates shall bear a
conspicuous legend referring to the restrictions on transfer and voting
agreements set forth in this Agreement.
4.1 Nominations to the Board. Upon closing of the transactions
contemplated by the Purchase Agreement, Matria shall exercise its good faith
efforts (including effecting any increase in the size of the Board, if
necessary) and take all necessary or appropriate action to insure that (a) MJG
or such other individual as MJG shall designate shall be nominated to a class
of directors of the Board at each annual meeting at which the term of office of
such Person as a director would otherwise expire commencing as of the Closing
Date and continuing until the earlier of the fifth anniversary of this
Agreement or until the MJG Minimum Ownership is no longer satisfied; and (b)
Xxx X. Xxxxxxxx or such other individual as SZI shall designate shall be
nominated to a class of directors of the Board to serve thereon commencing as
of the Closing Date and continuing for a single three year term. In the event
that the MJG Minimum Ownership is not satisfied, MJG's nominee shall
immediately withdraw as a nominee or resign as a director, as the case may be,
and MJG shall no longer have any rights under this Section 4.1 whether or not
such party may thereafter acquire the MGJ Minimum Ownership. Provided that MJG
or his designee is otherwise qualified to serve as a director and MJG or his
designee fails to be nominated to serve as director, MJG shall be released from
his obligation under this Agreement.
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4.2 Death, Permanent Disability or Resignation of Board
Representatives. In the event that any representative nominated and elected to
the Board pursuant to Section 4.1 ceases to be a member of the Board by reason
of his death, permanent disability or resignation (other than a resignation
required pursuant to Section 4.1), Matria shall exercise its good faith
efforts, consistent with the fiduciary obligations of the Board under
applicable law, to replace any such representative with another designee of the
applicable party or his personal representative.
4.3 Reporting Obligations. As long as any Investors and/or their
Permitted Transferees holds any Convertible Preferred Stock, Redeemable
Preferred Stock, Warrants or Common Stock and/or any amount of principal or
interest is owed under the Earn-Out Note, Matria shall deliver to MJG or SZI
(who in turn shall be entitled to distribute copies of the same to any MJG
Affiliate, SZI Affiliate and/or their Permitted Transferees who hold any of the
foregoing securities or instruments) at the addresses set forth in Section 6.1
hereof:
(a) within 105 days after the close of each fiscal year and
within 50 days after the close of each of the first three quarters of each
fiscal year financial statements, including any notes thereto (and, in the case
of fiscal year end, an auditors' report by a firm of established national
reputation) and the Management's Discussion and Analysis of Financial Condition
and Results of Operations, for Matria and its subsidiaries in the form required
to be included in an annual or quarterly reports furnished pursuant to the
Exchange Act and the rules and regulations promulgated thereunder; and
(b) within 30 days after the end of each calendar month, a
consolidated and consolidating balance sheet, income statement and cash flow
statements, and consolidated shareholders' equity statement for Matria and its
subsidiaries for the immediately preceding calendar month.
4.4 Reports Under the Exchange Act. With a view to making
available to the Investors and their Permitted Transferees the benefits of Rule
144 and any other rule or regulation of the Securities and Exchange Commission
that may at any time permit an Investor to sell securities of Matria to the
public without registration or pursuant to a registration on Form S-3, Matria
agrees to:
(a) use its reasonable efforts to make and keep public
information available, as those terms are understood and defined in Rule 144;
(b) use its reasonable efforts to file with the Securities and
Exchange Commission in a timely manner all reports and other documents required
under the Securities Act and the Exchange Act; and
(c) furnish to any Investor and its Permitted Transferees
forthwith upon request (i) a written statement by Matria as to its compliance
with the reporting requirements of Rule 144, or as to whether it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of
the most recent annual or quarterly report of Matria and such other reports and
documents so filed by Matria, and (iii) such other information (and Matria
shall take such action) as may be reasonably requested in availing the Investor
or its Permitted Transferees of any rule
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or regulation of the Securities and Exchange Commission which permits the
selling of any such securities without registration or pursuant to such form.
5.1 Right of First Offer. In the event that an Investor desires
to sell all or part of its holding of Voting Securities (the "Shares") pursuant
to the terms of Section 3.4(b)(ii), Section 3.4(c)(ii)(B), Section 3.4(c)(vii),
and Section 3.4(c)(viii) hereof, such Investor shall first give written notice
of such intent to Matria. Matria shall have a period of 30 days from the
receipt of such written notice to deliver to such Investor an irrevocable
written offer (a "Purchase Offer") to purchase such Shares for cash at the
price and upon such other terms and conditions as are set forth in the Purchase
Offer. In the event Matria delivers such Purchase Offer within the 30 day
period, such Investor may accept or reject in its sole and absolute discretion
such Purchase Offer by delivering written notice of acceptance or rejection
within 30 days of the receipt of such Purchase Offer. In the event of
acceptance of such Purchase Offer, the closing of the sale of the Shares shall
occur in the manner provided in the Purchase Offer. In the event Matria fails
to deliver a Purchase Offer or such Investor rejects such Purchase Offer, such
Investor shall have a period of 120 days following the earlier of the
expiration of the 30 day period referred to above or the express rejection of
the Purchase Offer to sell the Shares in accordance with Section 3.4(b)(ii), or
Section 3.4(c)(ii)(B), or Section 3.4(c)(vii) or Section 3.4(c)(viii) hereof
free and clear of the terms of this Agreement; provided, that (i) the terms of
such sale shall be more favorable than the terms contained in the Purchase
Offer, if any, and (ii) upon the expiration of the 120 day period, such Shares,
if not then sold pursuant to Section 3.4(b)(ii), Section 3.4(c)(ii)(B), Section
3.4(c)(vii) or Section 3.4(c)(viii) shall once again be subject to the right of
first offer contained herein.
6.1 Miscellaneous.
(a) Liability of Investors. Any liability or obligation
of any kind whatsoever under this Agreement shall be several and not joint as
between any MJG Affiliate(s) and their Permitted Transferees, on the one hand,
and any SZI Affiliate(s) and their Permitted Transferees, on the other hand.
Notwithstanding anything to the contrary in this Agreement, in no event shall
any MJG Affiliate be responsible in any manner for any liability or obligation
of, or the breach of any provision of this Agreement by, any person or group
who is not an MJG Affiliate. Notwithstanding anything to the contrary in this
Agreement, in no event shall any SZI Affiliate be responsible in any manner for
any liability or obligation of, or the breach of any provision of this
Agreement by, any person or group who is not an SZI Affiliate.
(b) Interpretation. For all purposes of this Agreement,
the term Matria Common Stock shall include any securities of any issuer
entitled to vote generally for the election of directors of such issuer which
securities the holders of Matria Common Stock shall have received or as a
matter of right be entitled to receive as a result of (i) any capital
reorganization or reclassification of the capital stock of Matria, (ii) any
consolidation, merger or share exchange of Matria with or into another
corporation or (iii) any sale of all or substantially all the assets of Matria.
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(c) Enforcement.
(i) The Investors, on the one hand, and Matria,
on the other, acknowledge and agree that irreparable damage
would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties will be entitled
to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically its provisions in any
court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they may
be entitled at law or in equity.
(ii) No failure or delay on the part of either
party in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(iii) MJG and SZI each shall take all action as
may be necessary to cause its respective controlled
Affiliates to comply with the terms of this Agreement and any
violation of this Agreement by any MJG Affiliate or SZI
Affiliate shall be deemed a violation by MJG or SZI, as the
case may be.
(d) Entire Agreement. This Agreement, the Purchase
Agreement and the documents referred to as Exhibits to the Purchase Agreement
constitute the entire understanding of the parties with respect to the
transactions contemplated by them. This Agreement may be amended only by an
agreement in writing executed by all the parties.
(e) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining provisions
without including any that may be declared unenforceable.
(f) Heading. Descriptive headings are for convenience
only and will not control or affect the meaning or construction of any
provision of this Agreement.
(g) Counterparts. This Agreement may be executed in two
or more counterparts, and each such executed counterpart will be an original
instrument.
(h) Notices. All notices, consents, requests,
instructions, approvals and other communications provided for in this Agreement
and all legal process in regard to this Agreement will be validly given, made
or served, if in writing and delivered personally, by telecopy (except for
legal process) or sent by registered mail postage paid.
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If to Matria:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxx LLP
NationsBank Plaza
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, III, Esq.
Telecopy Number: (000) 000-0000
If to MJG:
Xx. Xxxx X. Xxxxxx
Xxxxxx Medical Management, LLC
0000 Xxxxxxx 00 Xxxxx
X.X. Xxx 000
XxXxxxxxx, Xxxxxxx 00000-0000
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy Number: (000) 000-0000
If to SZI:
SZ Investments, L.L.C.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxxxxxx
Telecopy Number: (000) 000-0000
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with a copy to:
Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
Telecopy Number: 000-000-0000
or to such other address or telecopy number as any party may, from time to
time, designate in a written notice given in a like manner. Notice by telecopy
shall be deemed delivered on the day telephone confirmation of receipt is
given.
(i) Successors and Assigns. This Agreement shall bind
the successors and assigns of the parties, and inure to the benefit of any
successor or assign of any of the parties; provided, however, that no party may
assign this Agreement without the other party's prior written consent.
(j) Change in Control. Notwithstanding anything to the
contrary in this Agreement, all of the provisions of this Agreement shall
terminate in the event of a Change in Control of Matria.
(k) Governing Law. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the State of
Georgia, without giving effect to the conflict of laws principles thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first referred to above.
MATRIA HEALTHCARE, INC.
By:
--------------------------------------
Title:
--------------------------------
--------------------------------------
XXXX X. XXXXXX
SZ INVESTMENTS, L.L.C.
By:
--------------------------------------
Title:
--------------------------------
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EXHIBIT E
RESTRICTIVE COVENANT AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT (the "Agreement") is made and
entered into this _____ day of January, 1999 (the "Closing Date"), by and among
XXXXXX MEDICAL MANAGEMENT, L.L.C., a Georgia limited liability company
("Seller"), XXXX X. XXXXXX, a Georgia resident ("MJG"), SZ INVESTMENTS, L.L.C.,
a Delaware limited liability company ("SZI"), and MATRIA HEALTHCARE, INC., a
Delaware corporation ("Matria").
BACKGROUND:
A. Contemporaneously with the execution of this Agreement,
Matria is effectively acquiring all of the Interests and Assets pursuant to the
terms of, and as defined in, that certain Purchase and Sale Agreement (the
"Purchase Agreement"), dated as of December 21, 1998, among Matria and Seller.
B. MJG and SZI are members of Seller and will benefit from
Matria's acquisition of the Interests and Assets pursuant to the Purchase
Agreement.
C. As a material inducement for Matria to enter into the
Purchase Agreement, Seller, MJG and SZI have agreed to enter into this
Agreement.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following respective meanings and other terms used herein
shall have the meanings given in the Purchase Agreement:
(a) "Competing Business" shall mean a business that,
wholly or partly, directly or indirectly, is engaged in (i) providing,
selling or marketing lancet or lancing devices, microsampling or
diabetic disease management; or (ii) designing, developing,
manufacturing, testing, selling, marketing or distributing products or
equipment relating thereto; provided, however, MJG's involvement
pursuant to that certain Management Agreement, by and among Matria and
MJG, among others, dated January 19, 1999, shall not constitute a
competing business for purposes of this Agreement.
117
(b) "Competitive Position" shall mean: (i) Seller, MJG
or SZI's direct or indirect equity ownership (excluding ownership of
less than two percent (2%) of the outstanding common stock or equity
interests of any publicly held company) or control of any portion of
any Competing Business; or (ii) Seller, MJG or SZI serving as a
director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business.
(c) "Confidential Information" shall mean all valuable,
proprietary and confidential business information belonging to or
pertaining to Seller or the Subsidiaries that does not constitute a
Trade Secret and that is not generally known by or available to the
competitors of Seller or the Subsidiaries but is generally known only
to Seller and Subsidiaries and those of its employees, independent
contractors, customers or agents to whom such information must be
confided for internal business purposes.
(d) "Covenant Period" shall mean the period of time
commencing with the Closing Date and continuing for a period of five
(5) years hereafter.
(e) "Restricted Territory" shall mean North America,
Europe and Japan.
(f) "Trade Secrets" shall mean all information of Seller
and the Subsidiaries defined as such under applicable law.
2. CONFIDENTIALITY. Seller, and MJG and SZI (as members of
Seller), were exposed to and had access to Trade Secrets and Confidential
Information. Seller, MJG and SZI hereby acknowledge and agree that the Trade
Secrets and Confidential Information represent a substantial investment of
Matria, and that any unauthorized disclosure or use of any of the Trade Secrets
or Confidential Information or any other violation of the confidentiality
provisions of this Section 2, would be wrongful and could cause immediate and
irreparable injury to Matria. Accordingly, each of Seller, MJG and SZI hereby
agrees severally and not jointly that he/it will not, without the express prior
written consent of Matria, distribute, sell, market, publish, disclose,
transfer, assign, disseminate or otherwise communicate to any other person or
entity, or use, copy or appropriate for or on behalf of himself/itself or any
other person or entity: (a) any Confidential Information during the Covenant
Period; or (b) any Trade Secret at any time during which such information
constitutes a trade secret under applicable law. Each of Seller, MJG and SZI
agrees severally and not jointly that he/it will adhere to all reasonable
confidentiality requirements that Matria may establish from time to time, with
respect to the Confidential Information and Trade Secrets, and will immediately
notify Matria of any unauthorized disclosure or use of any Trade Secret or
Confidential Information by him/it. Each of Seller, MJG and SZI also agrees
severally and not jointly to assist Matria, at Matria's sole expense and to the
extent reasonably necessary, in the procurement of any protection of Matria's
rights in or to any Trade Secrets or Confidential Information.
3. NONCOMPETITION. During the Covenant Period, each of Seller,
MJG and SZI agrees severally and not jointly that he/it will not, without the
prior written consent of Matria, either directly or indirectly, alone or in
conjunction with any other person or entity, accept, enter into or attempt to
enter into a Competitive Position in the Restricted Territory.
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4. NONSOLICITATION OF CUSTOMERS. During the Covenant Period,
each of Seller, MJG and SZI agrees severally and not jointly that he/it will
not, without the prior written consent of Matria, either directly or
indirectly, alone or in conjunction with any other person or entity, solicit
any customer of the Subsidiaries (or any actively sought or prospective
customer of the Subsidiaries) for or on behalf of any Competing Business to
purchase products or services offered by Matria or any Subsidiary.
5. NONSOLICITATION OF PERSONNEL. During the Covenant Period,
each of Seller, MJG and SZI agrees severally and not jointly that he/it will
not, without the prior written consent of Matria, either directly or
indirectly, alone or in conjunction with any other person or entity, solicit or
attempt to solicit any "key or material" employee, consultant, contractor or
other personnel of Matria or the Subsidiaries to terminate, alter or lessen
that party's affiliation with the Subsidiaries or to violate the terms of any
agreement or understanding between such employee, consultant, contractor or
other person and the Subsidiaries. For purposes of this Section 5, "key or
material" employees, consultants, contractors or other personnel shall mean
those such persons or entities who have direct access to or have had
substantial exposure to Confidential Information or Trade Secrets.
6. GOODWILL. During the Covenant Period, each of Seller, MJG and
SZI agree severally and not jointly to not make any statement or other
communication that impugns or attacks the reputation or character of the
Subsidiaries, or materially damages the goodwill of the Subsidiaries, take any
action that would interfere with any contractual, customer or referral source
relationships of the Subsidiaries in a way that would result in a diminution of
business, or otherwise take any action that is detrimental to the best
interests of the Subsidiaries.
7. CORPORATE NAMES. Each of Seller, MJG and SZI hereby agrees
severally and not jointly that he/it will no longer use, and is hereby
prohibited from using, any corporate name, trade name or advertising symbol
associated with, or similar to those of "Xxxxxx Medical"; provided, however,
MJG may use his name in a business not in the healthcare industry.
8. ACKNOWLEDGMENTS. Each of Seller, MJG and SZI acknowledges and
agrees severally and not jointly that the business of the Subsidiaries is
conducted and is known throughout the Restricted Territory and that the
Subsidiaries' reputation and goodwill are an integral part of its business
success throughout the Restricted Territory. If Seller, MJG or SZI deprives
Matria of any of the Subsidiaries' goodwill or in any manner utilizes the
Subsidiaries' reputation or goodwill in competition with the Subsidiaries,
Matria will be deprived of the benefits it has bargained for pursuant to the
Purchase Agreement. Accordingly, each of Seller, MJG and SZI hereby
acknowledges and agrees severally and not jointly that the covenants contained
in Sections 2, 3, 4, 5, 6, 7 and 8 hereof (the "Protective Covenants") are made
by him/it (and shall be treated) as "ancillary to the sale of the business"
under the Purchase Agreement. Each of Seller, MJG and SZI further acknowledges
and agrees severally and not jointly that the Protective Covenants are
reasonable as to time, scope and territory given Matria's need to protect the
Trade Secrets and Confidential Information of the Subsidiaries. In the event
any covenant or agreement in this Agreement shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over
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too great a geographical area or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the maximum period
of time for which it may be enforceable and/or over the maximum geographical
area as to which it may be enforceable and/or to the maximum extent in all
other respects as to which it may be enforceable, all as determined by such
court in such action.
9. SPECIFIC PERFORMANCE. Each of Seller, MJG and SZI hereby
acknowledges and agrees severally and not jointly that any breach of a
Protective Covenant by him/it will cause irreparable damage to the Subsidiaries
and Matria, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such breach will be inadequate. Accordingly, each
of Seller, MJG and SZI agrees severally and not jointly that, in addition to
any other remedy that may be available at law, in equity, or hereunder, Matria
shall be entitled to specific performance and injunctive relief, without
posting bond or other security to enforce or prevent any violation of any of
the Protective Covenants by him/it.
10. MISCELLANEOUS.
(a) This Agreement contains the entire agreement and
understanding concerning the subject matter hereof between the parties
hereto. No waiver, termination or discharge of this Agreement, or any
of the terms or provisions hereof, shall be binding upon any party
hereto unless confirmed in writing. This Agreement may not be modified
or amended, except by a writing executed by all parties hereto. No
waiver by any party hereto of any term or provision of this Agreement
or of any default hereunder shall affect such party's rights
thereafter to enforce such term or provision or to exercise any right
or remedy in the event of any other default, whether or not similar.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
(c) This Agreement may not be assigned, in whole or in
part, by Seller, MJG or SZI, without the prior written consent of
Matria, or by Matria except to one of its Affiliates, and any
attempted assignment not in accordance herewith shall be null and void
and of no force or effect.
(d) This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
(e) If any provision of this Agreement shall be held
void, voidable, invalid or inoperative, no other provision of this
Agreement shall be affected as a result thereof, and, accordingly, the
remaining provisions of this Agreement shall remain in full force and
effect as though such void, voidable, invalid or inoperative provision
had not been contained herein.
(f) This Agreement shall not be construed more strongly
against any party hereto regardless of which party is responsible for
its preparation. The headings herein
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are for convenience of reference only and shall not be deemed to be a
part of this Agreement. A pronoun in one gender includes and applies
to the other gender as well.
(g) Upon the reasonable request of any party, each party
hereto agrees to take any and all actions, including, without
limitation, the execution of certificates, documents or instruments,
necessary or appropriate to give effect to the terms and conditions
set forth in this Agreement.
(h) All rights and remedies of each party hereto are
cumulative of each other and of every other right or remedy such party
may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent
or subsequent exercise of other rights or remedies.
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute the same Agreement. Any signature
page of any such counterpart, or any electronic facsimile thereof, may
be attached or appended to any other counterpart to complete a fully
executed counterpart of this Agreement, and any telecopy or other
facsimile transmission of any signature shall be deemed an original
and shall bind such party.
(j) Liability of Seller, MJG and SZI. Any liability or
obligation of any kind whatsoever under this Agreement shall be
several and not joint as between or among any of Seller, MJG and/or
SZI. Notwithstanding anything to the contrary in this Agreement: (i)
in no event shall Seller be responsible in any manner for any
liability or obligation of, or the breach of any provision of this
Agreement by, MJG or SZI; in no event shall MJG be responsible in any
manner for any liability or obligation of, or the breach of any
provision of this Agreement by, Seller or SZI; and (ii) in no event
shall SZI be responsible in any manner for any liability or obligation
of, or the breach of any provision of this Agreement by, Seller or
MJG.
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IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representative to execute, this Agreement as of the day and
year first above written.
"MATRIA"
MATRIA HEALTHCARE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[CORPORATE SEAL]
"SELLER"
XXXXXX MEDICAL MANAGEMENT, L.L.C.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"MJG"
------------------------------------------
Xxxx X. Xxxxxx
"SZI"
SZ INVESTMENTS, L.L.C.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of this ______ day of
January, 1999, by and among MATRIA HEALTHCARE, INC., a Delaware corporation
("Matria") and Xxxxxx Medical Management, L.L.C., a Georgia limited liability
company ("GMM" or individually, an "Investor" and together with those persons
deemed to become "Investors" under Section 3.8, the "Investors").
WHEREAS, Matria and GMM entered into a Purchase and Sale Agreement
dated as of December 21, 1998 (the "Purchase Agreement"), pursuant to which
Matria acquired certain assets of GMM in exchange for cash, Convertible
Preferred Stock, Redeemable Preferred Stock, Warrants and the Earn-Out Note (as
those terms are defined in the Purchase Agreement) of Matria.
WHEREAS, the Investor will beneficially own the Convertible Preferred
Stock and Warrants to be issued pursuant to the Purchase Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and other good and valuable
consideration, the parties hereto covenant and agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the same meaning as provided in the Purchase
Agreement. "Matria Shares" means Common Stock of Matria acquired by Investors
upon conversion of the Convertible Preferred Stock or exercise of the Warrants
and any additional Common Stock acquired by the Investors, including, but not
limited to, Common Stock purchased in accordance with the Standstill Agreement,
issued as a dividend, stock split, distribution by way of merger,
consolidation, reorganization or exchange for, or in respect of, such Common
Stock.
2.1 Demand Registration.
(a) Upon the written demand of either Xxxx X. Xxxxxx
("MJG") or SZ Investments, L.L.C., a Delaware limited liability company ("SZ")
(or its successors) or any Investor who holds at least 10% of the outstanding
Matria Shares (any of such persons, an "Initiating Investor"), to Matria (a
"Demand") at any time and from time to time during the Demand Period (as
defined below), but not more than once in any 365-day period and thereafter
during the term of the Standstill Agreement so long as the person requesting
registration remains an Affiliate (as that term is defined in the Securities
Act) (the "Demand Period") requesting that Matria effect the registration under
the Securities Act, Matria will promptly give written notice (a "Demand
Notice") of such Demand to all Investors. The Demand Period shall mean the
period beginning the date hereof and ending the later of (i) the date five (5)
years after the date of this
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Agreement, (ii) as to demands made by MJG, SZ or any of their Permitted
Transferees, the date on which MJG, SZ and their Permitted Transferees own in
the aggregate less than 15% of the then outstanding Common Stock, (iii) as to
demands made by MJG or his Permitted Transferees the date on which MJG and his
Permitted Transferees own in the aggregate less than 10% of the then
outstanding Common Stock or (iv) as to demands made by SZ or its Permitted
Transferees the date on which SZ or its Permitted Transferees own in the
aggregate less than 10% of the outstanding Common Stock.
(b) Each other Investor may request that Matria effect
the registration under the Securities Act of additional Matria Shares of such
Investor by delivering written notice to Matria specifying such number of
Matria Shares within 20 days of receipt of the Demand Notice. In the event that
Matria receives requests for the registration under the Securities Act of
Matria Shares representing at least an aggregate of thirty-three percent (33%)
of the Matria Shares initially issuable upon conversion of the Convertible
Preferred Stock and exercise of the Warrants (or if a lesser number of Matria
Shares are outstanding or subject to issuance upon conversion or exercise of
outstanding Convertible Preferred Stock or Warrants, representing at least an
aggregate of the lesser of 1% of the then outstanding Common Stock or 50% of
the remainder of the Matria Shares then outstanding and subject to such
issuance but not less than 500,000) within such 20-day period Matria shall give
written notice (a "Registration Notice") to all Investors that Matria will be
filing a registration statement (including registrations filed under Section
2.3 hereof, a "Registration Statement") pursuant to this Section 2.1 and will
thereupon use its reasonable best efforts promptly to effect the registration
under the Securities Act of (i) the Matria Shares that Investors have requested
to be registered within 20 days of the receipt of the Demand Notice, (ii) any
additional Matria Shares that Investors have requested to be registered within
10 days of receipt of the Registration Notice. To the extent permitted by
paragraph (c) below, such Registration Statement may include shares to be sold
by Matria and other persons with contractual registration rights. If the
registration of which Matria gives a Demand Notice is for an underwritten
public offering, Matria Shares and shares held by other Matria shareholders
with contractual registration rights that are to be included in the
underwriting may be included in such registration, and Matria shall, with the
consent of Investors holding a majority of the Matria Shares to be registered,
which shall not be unreasonably withheld, have the right to designate the
managing underwriter(s) in any such underwritten public offering. Investors who
include Matria Shares in a registration pursuant to this Section 2.1 shall bear
the cost of any underwriters' discounts and commissions relating to their
Matria Shares that are sold and the fees and disbursements of any counsel
representing the selling Investors.
(c) If Matria shall furnish to the Investors a
certificate signed by Matria's chief executive officer stating that, because of
unannounced material pending acquisitions or other undisclosed material facts,
in the good faith judgment of the Board of Directors of Matria, it would not be
in the best interests of Matria and its shareholders generally to sell shares
pursuant to such Registration Statement for a period not to exceed 90 days from
the date of such officer's certificate, the Investors shall agree that they
shall not sell securities pursuant to such Registration Statement during such
period; provided, however, that Matria shall be entitled to
2
124
give such notice only once in any 365-day period. Matria has not previously and
will not on or after the date of this Agreement, enter into any agreement
granting to any other person the right to participate in an underwritten
offering of Common Stock under a Registration Statement filed pursuant to this
Section 2.1 unless, (i) MJG and SZ consent in writing to such grant; or (ii)
under the terms of such agreement, such person may include securities in such
registration statement only to the extent that such inclusion will not reduce
the amount of the Investors' Matria Shares included in the Registration
Statement.
(d) Unless otherwise requested by the Investors of a
majority of shares being registered, the Registration Statement filed pursuant
to this Section 2.1 shall be a shelf registration statement on an appropriate
form pursuant to Rule 415 (or similar rule that may be adopted by the
Commission, as hereinafter defined). Matria shall use its reasonable best
efforts to keep such Registration Statement continuously effective for a period
expiring, subject to Section 2.6, on the earlier of (i) the date on which all
of the Matria Shares covered by the Registration Statement have been sold
pursuant thereto or (ii) 270 days.
2.2 Expenses. Matria is obligated to use its reasonable best
efforts to effect any and all demand registrations under Section 2.1 and, with
respect to each such registration, Matria shall bear all expenses other than
underwriting discounts and commissions, if any, in connection with
registrations, filings or qualifications pursuant to Section 2.1 or 2.3,
including without limitation all registration, filing and qualification fees,
printers' and accounting fees and the fees and disbursements of counsel for
Matria.
2.3 Piggyback Registration. If, at any time during the Demand
Period, Matria proposes to register any of its securities under the Securities
Act (except pursuant to a Registration Statement filed on Form S-8 or Form S-4,
or such other form as shall be prescribed under the Act for the same purposes),
Matria will at each such time give prompt written notice to Investors (but in
no event less than 30 days before the anticipated filing of the Registration
Statement) of its intention to do so and the proposed minimum offering price
per Matria Share, and upon the written request of any Investor given within 20
days after Matria's giving of such notice, Matria will use its reasonable best
efforts to effect the registration of the Matria Shares which it shall have
been so requested to register by including the same in such Registration
Statement all to the extent required to permit the sale or other disposition
thereof in accordance with the intended method of sale or other disposition
given in each such request. If the registration of which Matria gives notice
pursuant to this Section 2.3 is for an underwritten public offering, Matria
shall have the right to designate the managing underwriter(s) in any such
underwritten public offering; provided that (i) Matria shall use its
commercially reasonable best efforts to cause the managing underwriter(s) to
include the Matria Shares requested to be included in the registration in the
underwriting; and (ii) if the managing underwriter(s) advises the Investors in
writing that it cannot sell the total amount of securities which they, Matria
and all other selling stockholders intend to include in such offering at prices
acceptable to Matria and the holders of a majority of the Common Stock being
sold (the "Majority Holders"), the amount of securities to be offered for the
accounts of all Investors shall be reduced pro rata (based upon the amount of
securities each such selling stockholder sought to include in the offering) to
the
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extent necessary to reduce the total amount of securities to be included in the
offering to the amount that may, in the opinion of such managing
underwriter(s), be sold at prices that are acceptable to Matria and the
Majority Holders (which amount may be zero, if so recommended by such managing
underwriter(s)). Any Registration Statement filed pursuant to this Section 2.3
may be withdrawn at any time at the discretion of Matria.
2.4 Registration In Connection with Underwritten Public Offering.
If a registration under Section 2.1 or 2.3 shall be in connection with an
underwritten public offering, each holder of Matria Shares shall be deemed to
have agreed by acquisition of such Matria Shares not to effect any sale or
distribution, including any sale pursuant to Rule 144 or Rule 144A, of any
Matria Shares, and to use such holder's reasonable best efforts not to effect
any such sale or distribution of any other equity security of Matria or of any
security convertible into or exchangeable or exercisable for any equity
security of Matria (other than as part of such underwritten public offering)
within such period (not to exceed 120 days) after the effective date of such
Registration Statement as shall be requested by the managing underwriter for
such offering and agreed to by all executive officers and directors of Matria.
2.5 Obligations with Respect to Registration.
(a) In connection with the registration of the Matria
Shares, Matria shall:
(i) promptly prepare and file with the
Securities and Exchange Commission (the "Commission") a
Registration Statement (which shall be available for the sale
of the Matria Shares in accordance with the intended method
or methods of distribution by the selling Investors thereof
and shall include pledgees of any selling Investor in the
"plan of distribution") (x) as soon as possible after the
lapse of the ten-day period following the Registration Notice
or (y) within the time period set forth in Section 2.3, and
file any amendments (including post-effective amendments) and
supplements to the Registration Statement and to any
prospectus included therein (the "Prospectus") as may be
necessary to keep such Registration Statement continuously
effective and respond promptly to any comments received from
the Commission with respect to the Registration Statement or
any amendment thereto and (z) comply with the provisions of
the Securities Act and the rules and regulations promulgated
thereunder with respect to the disposition of all Matria
Shares covered by such Registration Statement for the periods
specified in Section 2.1(c) or, in the case of piggyback
registration, the period necessary to complete the
distribution of the Matria Shares covered thereby, in each
case with any extension of such period under Section 2.6.
(ii) notify the Investors and confirm such
advice in writing, (v) when such Registration Statement
becomes effective, (w) when the filing of any post-effective
amendment to such Registration Statement or supplement to the
Prospectus is required, when the same is filed and, in the
case of a post-effective
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amendment, when the same becomes effective, (x) of any
request by the Commission for any amendment of or supplement
to such Registration Statement or the Prospectus or for
additional information and (y) of the entry of any stop order
suspending the effectiveness of such Registration Statement
or the initiation of any proceedings for that purpose, and,
if such stop order shall be entered, Matria shall use its
reasonable best efforts promptly to obtain the lifting
thereof (z) of the happening of any event during the period
such Registration Statement is effective as a result of which
such Registration Statement or the applicable Prospectus
contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(iii) furnish at Matria's expense to the
Investors without charge (x) at a reasonable time prior to
the filing thereof with the Commission a copy of the
Registration Statement in the form in which Matria proposes
to file the same; not later than one day prior to the filing
thereof, a copy of any amendment (including any
post-effective amendment) to such Registration Statement; and
promptly following the effectiveness thereof, a conformed
copy of the Registration Statement as declared effective by
the Commission and of each post-effective amendment thereto,
including financial statements and all exhibits and reports
incorporated therein by reference, and (y) such number of
copies of the preliminary, any amended preliminary, and final
Prospectus and of each post-effective amendment or supplement
thereto, as may reasonably be required in order to facilitate
the disposition of the Matria Shares covered by such
Registration Statement in conformity with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder, but only while Matria is required under the
provisions hereof to cause the Registration Statement to
remain effective;
(iv) use its reasonable efforts to register or
qualify the Matria Shares by the time the Registration
Statement is declared effective by the SEC under all
applicable state securities or blue sky laws of such
jurisdictions in the United States and its territories and
possessions as any Investor whose Matria Shares covered by
the Registration Statement shall reasonably request in
writing, keep each such registration or qualification
effective during the period such Registration Statement is
required to be kept effective or during the period offers or
sales are being made by a selling Investor, whichever is
shorter; provided, however, that in connection therewith,
Matria shall not be required to (x) qualify as a foreign
corporation to do business or to register as a broker or
dealer in any such jurisdiction where it would not otherwise
be required to qualify or register but for this Section
2.5(a)(iv), (y) subject itself to taxation in any such
jurisdiction or (z) file a general consent to service of
process in any such jurisdiction;
(v) cooperate with each seller of Matria Shares
and each underwriter
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participating in the disposition of such Matria Shares and
their respective counsel in connection with any filings
required to be made with the National Association of
Securities Dealers, Inc. (the "NASD");
(vi) if reasonably requested by the managing
underwriter(s) or a selling Investor in connection with an
underwritten offering, promptly incorporate in a prospectus
supplement or post-effective amendment such information as
the managing underwriter(s) and the holders of a majority in
number of the Matria Shares being sold agree should be
included therein solely relating to (x) the number of Matria
Shares being sold to such underwriter(s), (y) the purchase
price being paid therefor by such underwriter(s) and (z) with
respect to any other terms of the offering of the Matria
Shares to be sold in such offering which may affect the
underwriter(s) or the selling Investors;
(vii) cooperate with the selling Investors of
Matria Shares to facilitate the timely preparation and
delivery of certificates representing Matria Shares to be
sold and not bearing any Securities Act legend; and enable
certificates for such Matria Shares to be issued at least two
business days prior to any sale of Matria Shares;
(viii) subject to obtaining confidentiality
agreements reasonably satisfactory to Matria, make available
for inspection by the selling Investors of Matria Shares and
underwriter(s), and any counsel, accountants or other
representatives retained by such selling Investors and
underwriter(s) all financial and other records, pertinent
corporate documents and properties of Matria and cause the
officers, directors and employees of Matria to supply all
such records, documents or information reasonably requested
by such selling Investors, underwriter(s), counsel,
accountants or representatives in connection with the
Registration Statement;
(ix) use its reasonable efforts to cause all
Matria Shares to be listed on any securities exchange or
quotation system on which similar securities issued by Matria
are then listed;
(x) if requested by a selling Investor and any
underwriters engaged by such selling Investor for purposes of
distributing the Matria Shares, enter into such agreements
(including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take
all such other reasonable actions in connection therewith
(including those reasonably requested by the underwriter(s)
or such selling Investor) in order to expedite or facilitate
the disposition of such Matria Shares, and in such
connection, (v) make such representations and warranties to
the underwriter(s) with respect to the business of Matria and
the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in
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underwritten offerings, and confirm the same if and when
requested; (w) obtain opinions of counsel to Matria and
updates thereof (which shall be in form and substance
reasonably satisfactory to the underwriter(s), if any, and
their respective counsel), addressed to such selling Investor
and each of the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such
counsel and underwriters; (x) obtain "cold comfort" letters
and updates thereof from the independent certified public
accountants of Matria, addressed to each of the underwriters,
such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in
connection with underwritten offerings (in each case, to the
extent permitted by applicable accounting rules and
guidelines); (y) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and
procedures no less favorable to the underwriters than those
set forth in Section 2.8 hereof and cross indemnification by
the underwriters similar to that set forth in Section 2.8
hereof in favor of Matria or the selling Investors, as the
case may be; and (z) deliver such documents and certificates
as may be reasonably requested by the managing underwriters
and their counsel to evidence compliance with any customary
conditions contained in the underwriting agreement entered
into by Matria.
(b) Each of the Investors receiving Matria Shares shall
furnish to Matria such information regarding such Investor and the distribution
of the Matria Shares as Matria may from time to time reasonably request in
writing and as shall be required by law or by the Commission in connection
therewith.
2.6 Disclosure Notice. Notwithstanding anything set forth herein
to the contrary, in the event that Matria notifies the Investors in writing
(the "Disclosure Notice") that Matria desires to amend the Registration
Statement or to supplement the prospectus in order to disclose material
information required to be disclosed in the prospectus included in such
Registration Statement, as then in effect, in order to correct an untrue
statement of a material fact or to disclose an omitted material fact that is
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, the Investors shall
refrain from selling Matria Shares thereunder until Matria notifies the
Investors in writing that the required amendment or supplement has been filed
with the Commission or until 90 days following the Disclosure Notice, whichever
is earlier (the "Disclosure Restricted Period"). If a Registration Statement
filed pursuant to Section 2.1 is effective at any time during the Disclosure
Restricted Period, Matria's obligation under Section 2.5(a) to keep such
Registration Statement current and effective shall be extended for a number of
days equal to the number of days such Registration Statement was in effect
during the Disclosure Restricted Period.
2.7 Offering Notice. Notwithstanding any provision of this
Agreement to the contrary, in the event Matria notifies the Investors under
Section 2.3 that Matria intends to file a Registration Statement in connection
with an underwritten offering (the "Offering") by Matria of
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any of its capital stock, and a registration has become effective under Section
2.1, the Investors shall refrain from selling or otherwise distributing any
Matria Shares within the period requested in writing by the managing
underwriter for such Offering, which period shall begin no earlier than two
days (subject to prior written notice thereof) prior to the effective date of
such Registration Statement and shall end no later than 120 days after such
effective date (the "Offering Restricted Period"); provided, however, that the
Investors shall not be required to refrain from selling in connection with any
Offering unless (i) Matria and all of the directors and executive officers of
Matria are also required to refrain from selling for a comparable period with
respect to any shares not registered for sale by them in such Offering pursuant
to contractual registration rights in effect on the date of this Agreement; and
(ii) each of the Investors whose Matria Shares are covered by the Registration
Statement shall be given the opportunity to include such Matria Shares in the
Registration Statement filed in connection with such Offering to the extent
required by Section 2.3. If a Registration Statement filed pursuant to Section
2.1 is in effect at any time during the Offering Restricted Period and the
Investors are not permitted to include in the Registration Statement filed for
the Offering all shares requested by the Investors to be included in the
Offering, Matria's obligation under the Section 2.1(d) to keep such
Registration Statement current and effective shall be extended for a number of
days equal to the number of days such Registration Statement was in effect
during the Offering Restricted Period or, if earlier, until the date on which
all of the Matria Shares initially covered thereby has been disposed of.
2.8 Commission Filings. Matria covenants that, so long as it is
subject to the reporting requirements of the Exchange Act, it will file the
reports required to be filed by it under the Exchange Act so as to enable any
Investor to sell Matria Shares pursuant to Rule 144 under the Securities Act.
In connection with any sale, transfer or other disposition by any Investor of
any Matria Shares pursuant to Rule 144 under the Securities Act, Matria shall
cooperate with such Investor to facilitate the timely preparation and delivery
of certificates representing Matria Shares to be sold and not bearing any
Securities Act legend, and enable certificates for such Matria Shares to be
issued at least 2 business days prior to any sale of Matria Shares for such
number of shares and registered in such names as the selling Investors may
reasonably request upon 10 business days' prior notice. Matria's obligation set
forth in the previous sentence shall be subject to the delivery, if reasonably
requested by Matria or its transfer agent, by counsel to such Investor, in form
and substance reasonably satisfactory to Matria and its transfer agent, of an
opinion that such Securities Act legend need not appear on such certificate.
2.9 Indemnification and Contribution.
(a) By Matria. In connection with the registration under
the Securities Act of the Matria Shares pursuant to this Section 2.8, Matria
shall indemnify and hold harmless the Investors and each other person, if any,
who controls any of the Investors within the meaning of Section 15 of the
Securities Act and each of their respective partners, trustees, officers,
directors, employees, agents and affiliates ("controlling persons"), against
any losses, claims, damages or liabilities, joint or several (or actions in
respect thereof) ("Losses"), to which each such indemnified party may become
subject, under the Securities Act or otherwise, but only to the
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extent such Losses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained, on the effective date
thereof, in any Registration Statement under which such Matria Shares were
registered under the Securities Act, in any preliminary Prospectus (if used
prior to the effective date of such Registration Statement) or in any final
Prospectus or in any post-effective amendment or supplement thereto (if used
during the period during which Matria is required to keep the Registration
Statement effective) (the "Disclosure Documents"), or (ii) any omission or
alleged omission to state in any of the Disclosure Documents a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, or (iii) any violation of any federal or state laws or rules or
regulations thereunder committed by Matria in connection with the performance
of its obligations under this Section 2.8; and Matria will reimburse each such
indemnified party for all legal and other expenses reasonably incurred by such
party in investigating or defending against any such claims, whether or not
resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality with respect to any
offering of securities pursuant to this Section 2.8, but excluding any amounts
paid in settlement of any action, suit, arbitration, proceeding, litigation or
investigation (collectively "Litigation"), commenced or threatened, if such
settlement is effected without the prior written consent of Matria; provided,
however, that Matria shall not be liable to an indemnified party or any other
Investor or controlling person of any other Investor in any such case to the
extent that any such Losses arise out of or are based upon (i) an untrue
statement or omission or alleged omission (x) made in any such Disclosure
Documents in reliance upon and in conformity with written information furnished
to Matria by such indemnified party for use therein, or (y) made in any
preliminary Prospectus if a copy of the final Prospectus was not delivered to
the person alleging any loss, claim, damage or liability for which Losses arise
at or prior to the written confirmation of the sale of such Matria Shares to
such person and the untrue statement or omission concerned had been corrected
in such final Prospectus and copies thereof had timely been delivered by Matria
to such indemnified party; or (ii) the use of any Prospectus after such time as
Matria has advised such indemnified party in writing that the filing of a
post-effective amendment or supplement thereto is required, except the
Prospectus as so amended or supplemented, or the use of any Prospectus after
such time as the obligation of Matria to keep the same current and effective
has expired.
(b) By the Investors. In connection with the
registration under the Securities Act of the Matria Shares of the Investors
pursuant to this Section 2.8, each Investor receiving such Matria Shares shall,
severally and not jointly, indemnify and hold harmless Matria, each of its
directors, each of its officers who have signed such Registration Statement and
each other person, if any, who controls Matria within the meaning of Section 15
of the Securities Act, and each other Investor and each controlling person of
such Investors and each of their respective partners, trustees, officers,
directors, employees, agent and affiliates against any Losses to which such
indemnified party may become subject under the Securities Act or otherwise, but
only to the extent such Losses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any of
the Disclosure Documents or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
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and in conformity with written information furnished to Matria by such
indemnifying party for use therein; (ii) the use by such indemnifying party of
any Prospectus after such time as Matria has advised such indemnifying party in
writing that the filing of a post-effective amendment or supplement thereto is
required, except the Prospectus as so amended or supplemented, or after such
time as the obligation of Matria to keep the Registration Statement effective
and current has expired, or (iii) any information given or representation made
by such indemnifying party in connection with the sale of Matria Shares which
is not contained in and not in conformity with the Prospectus (as amended or
supplemented at the time of the giving of such information or making of such
representation); and such indemnifying party shall reimburse each such
indemnified party for all legal and other expenses reasonably incurred by such
party in investigating or defending against any such claims, whether or not
resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality relating to any such
claims with respect to any offering of securities pursuant to this Section 2.8,
but excluding any amounts paid in settlement of any Litigation, commenced or
threatened, if such settlement is effected without the prior written consent of
such indemnifying party. The indemnification obligations under this
subparagraph (b), and the contribution obligations under subparagraph (d), of
an indemnifying Investor shall be limited to the amount of proceeds received by
such Investor upon the sale of Matria Shares under a Registration Statement
filed to which Section 2.1 or 2.3 hereof applies.
(c) Actions Commenced. If a third party commences any
action or proceeding against an indemnified party related to any of the matters
subject to indemnification under Section 2.8(a) or (b) hereof, such indemnified
party shall promptly give notice to the indemnifying party in writing of the
commencement thereof, but failure so to give notice shall not relieve the
indemnifying party from any liability which it may have hereunder unless and to
the extent the indemnifying party is prejudiced thereby.
The indemnifying party shall be entitled to control
the defense or prosecution of such claim or demand in the name of the
indemnified party, with counsel satisfactory to the indemnified party, if it
notifies the indemnified party in writing of its intention to do so within 20
days of its receipt of the notice from the indemnified party without prejudice,
however, to the right of the indemnified party to participate therein through
counsel of its own choosing, which participation shall be at the indemnified
party's expense unless (i) the indemnified party shall have been advised by its
counsel that use of the same counsel to represent both the indemnifying party
and the indemnified party would represent a conflict of interest (which shall
be deemed to include any case where there may be a legal defense or claim
available to the indemnified party which is different from or additional to
those available to the indemnifying party), in which case the indemnifying
party shall not have the right to direct the defense of such action on behalf
of the indemnified party, or (ii) the indemnifying party shall fail vigorously
to defend or prosecute such claim or demand within a reasonable time. Whether
or not the indemnifying party chooses to defend or prosecute such claim, the
parties hereto shall cooperate in the prosecution or defense of such claim and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
requested in connection therewith. No indemnified party will be required to
consent to
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entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Contribution. If the indemnification provided for in
subsections (a) or (b) of this Section 2.8 is unavailable to or insufficient to
hold the indemnified party harmless under subsections (a) or (b) above in
respect of any Losses referred to therein for any reason other than as
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of and benefits
received by the indemnifying party on the one hand and such indemnified party
on the other in connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable considerations. The
relative benefits to the indemnifying party and indemnified parties shall be
determined by reference to among things, the total proceeds received by the
indemnified party and indemnifying parties in connection with the offering to
which such losses, claims, damages, liabilities or expenses relate. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
(or omitted to be supplied by) Matria or the Investors and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by an
indemnified party as a result of the Losses referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3.1 Notices. All notices and other communications required to be
given hereunder shall be in writing and shall be deemed to have been duly given
upon delivery, if delivered by hand; if given by mail, 3 days after the date of
mailing, postage prepaid, certified or registered mail to a party hereto at the
address set forth below; if given by facsimile, upon transmission to the number
set forth below provided written confirmation is sent to the address below; if
given by overnight delivery service addressed to the address set forth below,
the business day following the day on which such notice is sent:
If to Matria:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
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With a copy to:
Xxxxxxxx Xxxxxxx LLP
NationsBank Plaza
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, III, Esq.
Facsimile: (000) 000-0000
If to the Investor:
Xxxxxx Medical Management, LLC
0000 Xxxxxxx 00 Xxxxx
X.X. Xxx 000
XxXxxxxxx, Xxxxxxx 00000-0000
Attention: J. Michael Highland
Facsimile: (000) 000-0000
With copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
With copy to:
Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
Facsimile: 000-000-0000
Any party hereto may change its address for purposes of receiving notice
pursuant to this Agreement by giving notice of such new address to each other
party hereto.
3.2 Interpretation. The Sections and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Terms used in the plural include
the singular, and vice versa, unless the context otherwise requires.
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3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Telecopy transmission of
signatures shall be deemed originals.
3.4 Miscellaneous. This Agreement (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof; (ii) is not intended to and shall not confer upon any other person any
rights or remedies hereunder or otherwise with respect to the subject matter
hereof; (iii) subject to Section 3.10, shall not be assigned by operation of
law or otherwise; and (iv) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Georgia.
3.5 Binding Effect. The terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by or
against the parties and their respective legal representatives, heirs,
successors and permitted assigns.
3.6 Severability. If any part of this Agreement or other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given full force and effect to the greatest extent permitted by law.
3.7 Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is responsible for
its preparation.
3.8 Assignment of Registration Rights. The rights to cause Matria
to register the Matria Shares pursuant to this Agreement may only be assigned
by an Investor (i) to any person to whom an Investor is permitted to transfer
shares pursuant to Section 3.4(c)(i), (iii), (iv), (vii) or (viii) of the
Standstill Agreement who is restricted as to the resale of such Matria Shares
under the Securities Act, (ii) as a result of a pledge by an Investor of the
Matria Shares as security for any indebtedness or guaranty of any Investor,
upon the exercise of the pledgee's rights under such pledge; provided that in
each case such assignee agrees in a writing, delivered to Matria, to be bound
by the provisions of this Agreement. Upon each such assignment and delivery,
such assignee shall be deemed to be "Investor" for purposes on this Agreement.
3.9 Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first above written.
MATRIA
MATRIA HEALTHCARE, INC.
(CORPORATE SEAL)
By:
---------------------------------------
Name:
Title:
INVESTOR
XXXXXX MEDICAL MANAGEMENT, L.L.C.
By:
---------------------------------------
Name:
Title:
Address:
0000 Xxxxxxx 00 Xxxxx
P. O. Xxx 000
XxXxxxxxx, Xxxxxxx 00000-0000
14
000
XXXXXXX X
Xxxxxx Xxxxx Xxxxxxx No. ______
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF RECEIPT BY THE INVESTOR OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE INVESTOR THAT THE SECURITIES MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
THESE SECURITIES AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF
THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND VOTING AS SET FORTH IN
THAT CERTAIN STANDSTILL AGREEMENT, DATED AS OF JANUARY 19, 1999, A COPY OF
WHICH MAY BE OBTAINED FROM THE COMPANY.
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT ARE SUBJECT TO CANCELLATION AS SET FORTH IN SECTION 13 HEREOF.
MATRIA HEALTHCARE, INC.
Common Stock Warrant
MATRIA HEALTHCARE, INC., a Delaware corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Xxxxxx Medical Management,
L.L.C., a Georgia limited liability company ("Investor") or its permitted
assigns under the terms of this warrant (Investor or such permitted assigns at
the time being the registered holder or holders hereof being hereinafter
referred to as "Holder") is entitled, subject to the terms set forth below, to
purchase from the Company, at a purchase price per share of $3.00 (as such
amount may be adjusted from time to time pursuant to Section 3 hereof, the
"Purchase Price"), at any time or from time to time prior to 5:00 p.m., Eastern
Standard Time, on the Expiration Date, 4,000,000 fully paid and non-assessable
shares of Common Stock, $.01 par value per share, of the Company (the "Common
Stock") (such shares of Common Stock, in each case as the number and
characterization of such shares may be adjusted or otherwise modified from time
to time pursuant to Sections 3 or 4, are herein referred to as the "Warrant
Shares").
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Certain capitalized terms not otherwise defined herein shall have the
meanings set forth in Section 6 hereof.
Section 1 EXERCISE OF WARRANT.
1.1 Exercise. This Warrant may be exercised by Holder, in whole
or in part (but not for less than 1,000 of the Warrant Shares issuable under
this Warrant, or the remaining Warrant Shares, if less than such amount), at
any time and from time to time on or after the date hereof and prior to 5:00
p.m., Eastern Standard Time, on the Expiration Date by surrender of this
Warrant, together with a subscription substantially in the form of Exhibit A
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
Holder, to the Company at its principal office and accompanied by payment in
full, in cash or by check payable to the order of the Company (or in the manner
provided in Section 1.2 hereof), in the amount of the aggregate Purchase Price
for the Warrant Shares covered by such exercise.
1.2 Cashless Exercise. In lieu of exercising this Warrant
pursuant to Section 1.1 above, the Holder shall have the right at any time and
from time to time to exercise this Warrant, in whole or in part , by requiring
the Company to convert all or any part of this Warrant (the "Conversion
Right"), into Warrant Shares by surrendering this Warrant to the Company
accompanied by the form conversion notice (substantially in the form attached
hereto as Exhibit B, or a reasonable facsimile thereof) which has been duly
completed and signed. Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any cash in respect of
the Purchase Price) that number of Warrant Shares which is equal to the amount
obtained by dividing (x) an amount equal to the difference between (A) the
aggregate Current Market Price Per Share for the Warrant Shares as to which the
Conversion Right is then being exercised (the "Conversion Shares"), determined
as of immediately prior to the effective time of the exercise of the Conversion
Right, minus (B) the aggregate Purchase Price then applicable to the Conversion
Shares (such difference, the "Conversion Amount"), by (y) the Current Market
Price Per Share of one share of Common Stock determined as of immediately prior
to the effective time of the exercise of the Conversion Right. Upon exercise of
the Conversion Right, the Conversion Amount shall be deemed to have been paid
to the Company in respect of the Warrant Shares so acquired. Any references in
this Warrant to the "exercise" of this Warrant, and the use of the term
"exercise" herein, shall be deemed to include, without limitation, any exercise
of the Conversion Right. In the event this Warrant is not exercised in full,
the Warrant Shares shall be reduced by the number of Warrant Shares subject to
such partial exercise, and the Company, at its expense, shall forthwith issue
and deliver to Holder a new Warrant of like tenor in the name of Holder,
reflecting such adjusted Warrant Shares.
1.3 When Exercise Effective. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1 or 1.2 hereof, and at such time the Person
or Persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.4 shall be deemed to have become the holder or holders of
record thereof. The
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warrant or warrants surrendered upon exercise thereof shall thereafter be
canceled and of no further force or effect.
1.4 Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, the Company at its
expense (including the payment by it of any and all applicable issue taxes but
excluding any applicable transfer taxes) will issue and deliver to Holder: (a)
a certificate or certificates, in such name or names as such Holder may
designate, for the number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock to which Holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash in an amount equal to the same fraction of the
Current Market Price Per Share determined as of the Business Day preceding the
date of such exercise, and (b) in case such exercise is for less than all the
Warrant Shares issuable hereunder, a new Warrant representing such Warrant or
Warrants remaining hereunder in substantially the form of this Warrant.
Section 2 CERTAIN OBLIGATIONS OF THE COMPANY.
2.1 Reservation of Stock. The Company covenants that it will at
all times reserve and keep available, free from preemptive rights, solely for
issuance and delivery upon exercise of this Warrant, the number of shares of
Common Stock (or Other Securities) from time to time issuable upon exercise of
this Warrant. In furtherance of and not in limitation of the foregoing, the
Company will from time to time, in accordance with the laws of its state of
incorporation, take all necessary action to increase and maintain the
authorized amount of its Common Stock (or Other Securities) if at any time the
number of shares of Common Stock authorized but remaining unissued and
unreserved for other purposes shall be insufficient to permit the full exercise
of this Warrant.
2.2 Status of Warrant Shares; Corporate Actions. The Company
covenants that all Warrant Shares, upon issuance in accordance with the terms
of this Warrant Agreement and the Company's Certificate of Incorporation, as
amended from time to time (the "Certificate of Incorporation"), shall be fully
paid and nonassessable and free from all taxes with respect to the issuance
thereof (other than income taxes, if any, related to ordinary income
attributable to the Holder) and from all liens, charges and security interests.
The Company will not, by amendment of its Certificate of Incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issuance or sale of securities or any other voluntary action or
omission, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant. Without limiting the generality of the foregoing, the
Company (a) will not permit the par value or the determined or stated value of
any shares of the Common Stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise and (b) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of the Common
Stock (or Other Securities) upon the exercise of this Warrant, including,
without limitation, amending the Certificate of Incorporation.
2.3 Maintenance of Office. The Company will maintain an office
where presentations and demands to or upon the Company in respect of this
Warrant may be made. The initial
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location of such office shall be at 0000 Xxxxxxx Xxxxx, 00xx Xxxxx, Xxxxxxxx,
Xxxxxxx 00000. The Company will give notice in writing to Holder in accordance
with Section 11 hereof of each change in the location of such office.
Section 3 ADJUSTMENT OF PURCHASE PRICE.
3.1 General; Purchase Price. The number of shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 3)
be issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1 hereof, by the fraction of which (a) the numerator is $3.00, and (b)
the denominator is the Purchase Price in effect on the date of such exercise.
The "Purchase Price" shall initially be $3.00 per share, shall be adjusted and
readjusted from time to time as provided in this Section 3 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this Section 3.
3.2. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 hereof) without
consideration or for a consideration per share less than the greater of the
Current Market Price Per Share and the Purchase Price in effect immediately
prior to such issue or sale (the greater of such two numbers being referred to
herein as the "Floor Price"), then, and in each such case, such Purchase Price
shall be reduced, concurrently with such issue or sale, to a price (calculated
to the nearest .001 of a cent) determined by multiplying such Purchase Price by
a fraction,
(i) the numerator of which shall be (A) the
number of shares of Common Stock outstanding immediately
prior to such issue or sale plus (B) the number of shares of
Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the Floor
Price; and
(ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately
after such issue or sale, provided that, for the purposes of
this Section 3.2, (A) immediately after any Additional Shares
of Common Stock are deemed to have been issued pursuant to
Section 3.3 or 3.4 hereof, such Additional Shares of Common
Stock shall be deemed to be outstanding, and (B) treasury
shares shall not be deemed to be outstanding.
3.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and options therefor,
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issuable upon the conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading); provided that such Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 3.5 hereof) of such shares would be less than
the Floor Price in effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), as the case may be;
and, provided, further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(a) no further adjustment of the Purchase Price shall be
made upon the subsequent issue or sale of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities by reason of (i) a
change of control of the Company or (ii) the acquisition by any Person or group
of Persons of any specified number or percentage of the Voting Securities of
the Company;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of Additional
Shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof (by change of rate or otherwise), the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of
the record date, or date prior to the commencement of ex-dividend trading, as
the case may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
options, or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have been
exercised or the expiration of any rights of conversion or exchange under any
such Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised, the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the commencement of
ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common Stock
issued or sold were the Additional Shares of
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Common Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Company for the issue, sale,
grant or assumption of all such Options, whether or not exercised,
plus the consideration actually received by the Company upon such
exercise, or for the issue or sale of all such Convertible Securities
which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such
conversion or exchange; and
(ii) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued or sold upon
the exercise of such Options were issued at the time of the issue,
sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to Section 3.5
hereof) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c)
above shall have the effect of increasing the Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in respect of
the issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by
their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Purchase Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall be
made in the manner provided in subdivision (c) above; and
(f) notwithstanding the foregoing, there shall be no
adjustment pursuant to this subsection 3.3 if the Holder is then an "Acquiring
Person" under the Rights Agreement, dated as of January 20, 1996 between the
Company and SunTrust Bank, Atlanta, as Rights Agent, as such agreement may be
amended pursuant to Section 8.6 of the Purchase and Sale Agreement or otherwise
amended, restated or modified from time to time.
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, with respect to any
adjustment of the Purchase Price pursuant to Section 3.2, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action
becomes effective.
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3.5 Computation of Consideration. For the purposes of this
Section 3:
(a) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company, (without
deducting any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale);
(ii) insofar as it consists of property
(including securities) other than cash, be computed at the
fair value thereof at the time of such issue or sale, as
determined in good faith by the Board of Directors of the
Company; and
(iii) in case Additional Shares of Common Stock
are issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company.
(b) Additional Shares of Common Stock deemed to have
been issued pursuant to Section 3.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the issue,
sale, grant or assumption of the Options or Convertible
Securities in question plus the aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the
exercise in full of such Options or the conversion or
exchange of such Convertible Securities or, in the case of
Options for Convertible Securities, the exercise of such
options for Convertible Securities and the conversion or
exchange of such Convertible Securities, in each case
computing such consideration as provided in the foregoing
subdivision (a), by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
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(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.4 hereof, relating to stock dividends, stock splits,
etc., shall be deemed to have been issued for no consideration, unless and only
to the extent that consideration is actually paid therefor.
3.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Purchase
Price in effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become issuable upon exercise of
Options or upon conversion of Convertible Securities, as the case may be, for a
consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of this Section 3, the purchase rights
granted by this Warrant, then, and in each such case, the computations,
adjustments and readjustments provided for in this Section 3 with respect to
the Purchase Price shall be made as nearly as possible in the manner so
provided and applied to determine the amount of Other Securities from time to
time receivable upon the exercise of this Warrant, so as to protect the Holder
of this Warrant against the effect of such dilution. All computations,
adjustments and readjustments made pursuant to this Section 3.7 shall be
determined by the Board of Directors, which determination shall be made in good
faith.
Section 4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In the case of
(A) any capital reorganization, reclassification or other change of outstanding
Common Stock (or Other Securities) (other than those referred to in Section 3.4
hereof and other than a change in par value), or (B) any consolidation of the
Company with any other corporation or any merger of the Company into another
corporation or of another corporation into the Company (other than a
consolidation or merger in which the Company is the continuing or surviving
corporation and which does not result in any reclassification of, or change
(other than a change in par value, or as a result of a subdivision or
combination to which Section 3.4 hereof is applicable) in, the outstanding
Common Stock (or Other Securities)), or (C) any sale or transfer to another
Person (other than by mortgage or pledge) of all or substantially all of the
properties and assets of the Company, each Warrant shall from and after such
event or transaction be exercisable upon the terms and conditions specified in
this Warrant, for the number of shares of stock or other securities or assets
to which the Holder (at the time of transaction or event) upon exercise of this
Warrant would have been entitled upon such transaction or event as if such
Holder exercised this Warrant in full immediately prior to such transaction or
event and in any such case, if necessary, the provisions set forth in this
Section 4 with respect to the rights thereafter of the Holder shall be
appropriately adjusted so as to be applicable, as nearly as may be possible, to
any shares of stock or other securities or assets thereafter deliverable on the
exercise of the Warrant; provided, that any such resulting or surviving
corporation or purchaser, as the case may be, in any such transaction, shall
expressly assume, by delivery of written instrument delivered to the Company
and the Holder prior to consummation of the transaction in question, the
obligation to deliver, upon the exercise of the Warrant, such shares,
securities or property as the Holder of the Warrant or other securities
received by the Holder in place thereof, shall be entitled to receive pursuant
to
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the provisions hereof, and to make provisions for the protection of the
exercise rights as above provided.
Section 5 NOTICE OF CERTAIN EVENTS.
If at any time:
(a) the Company shall declare any dividend or distribution
payable to the holders of its Common Stock (whether payable in cash, Common
Stock or other consideration);
(b) the Company shall offer for subscription or issuance pro rata
to the holders of its Common Stock any additional shares of stock of any class;
(c) there shall be any capital reorganization of the Company, any
recapitalization or reclassification of the capital stock of the Company, or
consolidation or merger involving the Company, or any sale or transfer of all
or substantially all of the Company's assets to any other Person;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company as a whole or substantially as a whole
in a single transaction or a series of related transactions; or
(e) there shall be any other event which would or may require
adjustment of at least 1% of the Purchase Price or the Warrant Shares pursuant
to Section 3 or 4 hereof,
then, in any one or more of such cases, the Company shall give Holder written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights or for determining stockholders entitled to
vote upon such reorganization, recapitalization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
and of the date, if determined, when any such transaction shall take place, as
the case may be. If and to the extent applicable, such notice shall also
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such recapitalization, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Such notice shall
be given at least 30 days before the earliest date required to be specified
therein in accordance with this subparagraph, shall describe the proposed
transaction in reasonable detail and shall specify the consideration to be
received by the holders of Common Stock in respect thereto and/or any
adjustment which would be made to the number of Warrant Shares obtainable upon
the exercise of this Warrant as a result of such transaction; provided,
however, that the Company shall be obligated to give only ten 10 days prior
notice with respect to the following events: (i) any event the occurrence of
which would give rise to an adjustment pursuant to the provisions of Section 3
or (ii) any regularly-scheduled dividend or distribution which, individually or
as a policy, has been previously publicly announced. The Company shall also
furnish to each Holder all notices and materials furnished to its stockholders
in connection with such transaction as and when such notices and materials are
furnished to its stockholders.
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Section 6 DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
6.1 The term "Acquisition" shall mean any transaction, or any
series of related transactions, consummated after the date hereof, by which (a)
the Company acquires the business or all or substantially all of the assets of
any Person, or any division of any Person, whether through acquisition of
voting securities, purchase of assets, merger or otherwise or (b) any Person
that was not theretofore a subsidiary of the Company becomes a subsidiary of
the Corporation.
6.2 The term "Additional Shares of Common Stock" shall mean all
shares (including treasury shares) of Common Stock issued or sold (or, pursuant
to Section 3.3 or 3.4 hereof, deemed to be issued) by the Company after the
date hereof, whether or not subsequently reacquired or retired by the Company,
other than: (a) shares issued upon the exercise of this Warrant; (b) options
and shares issued upon the exercise of options outstanding on the date hereof
or to be granted under any Company stock option plan or stock purchase plan as
in effect on the date hereof or under any other employee or director stock
option or purchase plan or plans adopted or assumed after such date and which
have been duly approved and adopted by a vote of the stockholders of the
Company; (c) dividends paid or warrants issued pursuant to the terms of the
Series A Preferred Stock or the terms of the Series B Preferred Stock and
shares of capital stock issued upon exercise of such warrants; (d) in
connection with an Acquisition, options, and shares issued upon exercise of
such options, assumed by the Company or options, and shares issued upon
exercise of such options, issued by the Company in replacement of outstanding
options of the Person being acquired, to the extent that such options issued by
the Company have the same or greater relative exercise price per option and are
exercisable for the same or less relative number of shares of capital stock of
the Company, in each case, as the options being replaced; (e) the Company's 8%
Convertible Subordinated Debentures and Note due December 31, 2001 and shares
of Common Stock issued upon conversion thereof; (f) shares of Series A
Preferred Stock issued pursuant to the Purchase and Sale Agreement and shares
of Common Stock or other securities issued upon conversion thereof; (g) such
additional number of shares as may become issuable upon the exercise of any of
the securities referred to in the foregoing clauses (a), (b), (c) (d), (e) or
(f) by reason of adjustments required pursuant to anti-dilution provisions
applicable to such securities as in effect on the date hereof, but only if and
to the extent that such adjustments are required as the result of the original
issuance of the Warrants; (h) such additional number of shares as may become
issuable upon the exercise of any of the securities referred to in the
foregoing clauses (a), (b), (c), (d), (e) or (f) by reason of adjustments
required pursuant to anti-dilution provisions applicable to such securities as
in effect on the date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or otherwise, or any dividend
on Common Stock payable in Common Stock.
6.3 The term "Business Day" means any day other than a Saturday
or a Sunday or a day on which commercial banking institutions in New York City
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
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6.4 The term "Common Stock" shall have the meaning ascribed to it
in the introductory paragraph to this Warrant, provided that such term shall
also include any other securities or rights into which or for which the Common
Stock is converted or exchanged, whether pursuant to a plan of
reclassification, reorganization, consolidation, merger, sale of assets,
dissolution, liquidation, or otherwise.
6.5 The term "Convertible Securities" shall mean any evidence of
indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares
of Common Stock.
6.6 The term "Current Market Price Per Share" shall mean, with
respect to any of the Common Stock, as of any particular date of determination,
the average of the daily closing prices of the Common Stock as reported in The
Wall Street Journal or other reputable financial news source, for the 30
consecutive trading days immediately preceding such date.
6.7 The term "Expiration Date" shall mean 5:00 p.m., Eastern
Standard Time, on January 19, 2009.
6.8 The term "Options" shall mean any and all rights, options or
warrants to subscribe for, purchase or otherwise acquire either Additional
Shares of Common Stock or Convertible Securities.
6.9 The term "Other Securities" shall mean any stock (other than
Common Stock) and other securities of the Company or any other Person
(corporate or otherwise) which the holders of this Warrant at any time shall be
entitled to receive, or shall have received, upon the exercise of this Warrant,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 4 hereof or otherwise.
6.10 The term "Permitted Transferee" shall have the meaning given
such term in the Standstill Agreement, dated as of January 19, 1999, between
the Company, Xxxx X. Xxxxxx, and SZ Investments, L.L.C.
6.11 The term "Person" shall mean an individual, corporation,
partnership, limited liability company, association, trust, joint venture,
unincorporated organization or any government, governmental department or
agency or political subdivision thereof.
6.12 The term "Purchase and Sale Agreement" shall mean that
certain Purchase and Sale Agreement dated as of December 21, 1998 between the
Company and Xxxxxx Medical Management, L.L.C.
6.13 The term "Series A Preferred Stock" shall mean the 4% Series
A Convertible Preferred Stock, $.01 par value per share, of the Company.
6.14 The term "Voting Securities" shall mean stock of any class or
classes (or equivalent interests), if the holders of the stock of such class or
classes (or equivalent interests)
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are ordinarily, in the absence of contingencies, entitled to vote for the
election of the directors (or persons performing similar functions) of such
business entity, even though the right so to vote has been suspended by the
happening of such a contingency.
6.15 The term "Warrant Shares" shall have the meaning ascribed to
it in the introductory paragraph to this Warrant, provided that such term shall
include all Other Securities issuable from time to time upon exercise of this
Warrant in whole or in part.
Section 7 REPLACEMENT OF WARRANTS.
Upon surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant, then, the Company, at its expense, shall execute and deliver, in lieu
of and in replacement of this Warrant, a Warrant identical in form to this
Warrant.
Section 8 REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms
hereof or otherwise. The Company hereby irrevocably waives, to the extent that
it may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Company for specific performance
of this Warrant by the Holder. Such remedies and all other remedies provided
for in this Warrant shall, however, be cumulative and not exclusive and shall
be in addition to any other remedies which may be available under this Warrant.
Section 9 TRANSFER.
Subject to the restrictions set forth in the Standstill Agreement and
Section 11 of this Warrant, Holder may transfer or assign this Warrant. Upon a
transfer in accordance with this Section 9, the Company at its expense
(excluding any applicable transfer taxes) shall execute and deliver, in lieu of
and in replacement of this Warrant, Warrants identical in form to this Warrant
and in such denominations as the transferring Holder shall request; provided
that, any such transferee, by acceptance hereof, agrees to assume all of the
obligations of Holder and be bound by all of the terms and provisions of this
Warrant.
Section 10 NOTICES.
Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail or a
nationally recognized express courier, postage and other applicable charges
prepaid, (iii) sent by facsimile transmission, and shall be deemed given when
so delivered personally, sent by facsimile transmission (confirmed in writing)
or mailed. Notices shall be addressed, as follows:
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if to Holder:
Xxxxxx Medical Management, L.L.C.
0000 Xxxxxxx 00 Xxxxx
X.X. Xxx 000
XxXxxxxxx, Xxxxxxx 00000-0000
if to the Company:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
provided, that the exercise of this Warrant shall be effective in the manner
provided in Section 1 hereof.
Section 11 SALE OF WARRANT OR SHARES.
Neither this Warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act of 1933, as
amended (the "Federal Act"), or under the securities laws of any state. Neither
this Warrant nor such shares, when issued, may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement for this
Warrant, or the shares, as the case may be, under the Federal Act, such
registration or qualification as may be necessary under the securities laws of
any state, an exemption from such registration or qualification requirements.
The certificate or certificates evidencing all or any of the shares issued upon
exercise of this Warrant shall bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any state
securities act and may not be sold or transferred in the absence of
such registration or an exemption therefrom, or in the absence of
receipt by the Investor of an opinion of counsel reasonably
satisfactory to the Investor that the securities may be sold or
transferred without such registration.
These securities have been issued or sold in reliance on paragraph
(13) of Code Section 10-5-9 of the Georgia Securities Act of 1973, and
may not be sold or transferred except in a transaction which is exempt
under such Act or pursuant to an effective registration under such
Act."
This Warrant shall be registered on the books of the Company, which
shall be kept by it at its principal office for that purpose and shall be
transferable only on said books by the registered Holder's duly authorized
attorney upon surrender of this Warrant properly endorsed, and only in
compliance with the provisions of the preceding paragraph.
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Section 12 NO DIVIDENDS OR VOTING RIGHTS.
Other than as provided herein, unless and until exercised, no
provision of this Warrant shall be construed as conferring upon the Holder the
right to receive dividends or to vote as a shareholder of the Company, or as
imposing any obligation on the Holder to purchase any securities or as imposing
any liabilities on such Holder as a stockholder of the Company, whether such
obligation or liabilities are asserted by the Company or by creditors of the
Company.
Section 13 RIGHT OF CANCELLATION
If the Company is entitled under Article 9 of the Purchase and Sale
Agreement to cancel any portion of the outstanding Warrants, the Company shall
provide a notice of cancellation (the "Notice of Cancellation"), which shall be
mailed, first class, postage prepaid, to the Holder at its address set forth in
Section 10 or at such other address supplied by such holder in writing to the
Company for the purpose of such notice. The Company shall mail the Notice of
Cancellation not less than 30 nor more than 60 days prior to the effective date
of such proposed cancellation. In addition to any information required by law,
such notice shall set forth the proposed cancellation date, the number of
Warrant Shares proposed to be canceled, and the reason for the proposed
cancellation. The Purchase and Sale Agreement provides certain procedures for
resolving a dispute as to whether the Company is entitled to such cancellation.
Each Holder receiving a Notice of Cancellation shall be prohibited from
exercising any Warrant held by such Holder from the date on which the Company
mails the Notice of Cancellation through and including the actual cancellation
date. In case fewer than the total number of Warrants hereunder are canceled, a
new Warrant for the number of Warrants that were not cancelled will be issued
to the Holder upon surrender of the old Warrant without cost to such Holder.
Warrants not surrendered for cancellation shall be deemed to represent the
reduced number of Warrants from and after the actual cancellation date.
Section 14 MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if
any, that it may legally be enforced and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by a statement in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia without regard to its
principles of conflicts of laws. The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which constitute one and the same
instrument.
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Section 15 JUDICIAL PROCEEDINGS; WAIVER OF JURY TRIAL. Any judicial
proceeding brought against the Company with respect to this Warrant may be
brought in any court of competent jurisdiction in the State of Georgia or of
the United States of America for the Northern District of Georgia and, by
execution and delivery of this Agreement, the Company (a) accepts, generally
and unconditionally, the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Warrant, subject to any rights of
appeal, and (b) irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such a court or that such court is an inconvenient forum. THE COMPANY HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTION WITH THIS WARRANT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
IN WITNESS WHEREOF, the Company and the Holder have caused this
Warrant to be executed as an instrument under seal by a duly authorized officer
and, in the case of the Company, attested by its Secretary or Assistant
Secretary.
Dated as of January 19, 1999
(Corporate Seal)
MATRIA HEALTHCARE, INC.
Attest:
By:
-------------------------------- ------------------------------
Secretary/Assistant Secretary Name: Xxxxxx X. Xxxxxxx
Title: President
INVESTOR:
By:
----------------------------
Name:
-----------------------
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EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: MATRIA HEALTHCARE, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to receive thereunder, shares of
Common Stock of MATRIA HEALTHCARE, INC. (the "Company"), and herewith makes
payment of $_________ therefor, and requests that the certificates for such
shares be issued in the name of _________________________, and delivered to
_________________________ whose address is ____________________________________
________________________________________.
Dated:
------------------------------
-------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant)
-------------------------------------
(Address)
--------------------------
*Insert here the number of shares of Common Stock as to which the Warrant is
being exercised (including partial exercise), and in any event without making
any adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder of the
surrendering Warrant.
152
EXHIBIT B
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant delivered herewith, in accordance with Section 1.2
of the Warrant, to convert the Warrant represented thereby into ___ shares of
Common Stock in accordance with the terms hereof. The undersigned requests that
a certificate for such shares of Common Stock be registered in the name of
___________________________ whose address is _____________________________ and
that such certificate be delivered to _______________________ whose address is
___________________. If said number of shares of Common Stock is less than all
of the Warrant Shares obtainable hereunder, the undersigned requests that a new
Warrant representing the remaining balance of the Warrant Shares be registered
in the name of ___________________________ whose address is ___________________
and that such Warrant be delivered to __________________________ whose address
is ____________________________.
Signature:
---------------------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant.)
Date:
-------------------
153
EXHIBIT H
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is made
and entered into this ____ day of ____________, 1999, to be effective as of
January 1, 1999, by and among MATRIA HEALTHCARE, INC., a Delaware corporation
("Purchaser"), and XXXXXX MEDICAL MANAGEMENT, L.L.C., a Georgia limited
liability company ("Seller").
W I T N E S S E T H :
WHEREAS, Purchaser and Seller are parties to that certain Purchase and
Sale Agreement dated as of December 21, 1998 (the "Purchase Agreement");
WHEREAS, pursuant to the Purchase Agreement, Purchaser agreed to
assume and discharge certain specified liabilities and obligations of Seller,
all as more fully set forth in the Purchase Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements set forth herein, Ten Dollars ($10.00) in
hand paid, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Capitalized Terms. Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Purchase Agreement.
2. Assumption. Purchaser hereby assumes all of the liabilities
listed on Exhibit A hereto (the "Assumed Liabilities") and hereby agrees to
pay, perform and discharge all of the Assumed Liabilities in accordance with
their respective terms.
3. Further Assurances. Each party hereto agrees from time to
time, subsequent to the date hereof, to execute and deliver or cause to be
executed and delivered such instruments or further assurances as may, in the
reasonable opinion of the other party, be necessary or desirable to give effect
to the provisions of this Assignment.
4. Binding Effect. This Assignment shall be binding upon and
shall enure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
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5. Governing Law. The validity and effect of this Assignment and
the rights and obligations of the parties hereunder shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia
without regard to principles of conflicts of law.
6. Amendments. No amendment to the terms and conditions of this
Assignment shall be valid and binding on the parties hereto unless made in
writing and signed by an authorized representative of each of the parties.
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155
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed as of the day and year first written above.
"PURCHASER"
MATRIA HEALTHCARE, INC.
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxxx, President
"SELLER"
XXXXXX MEDICAL MANAGEMENT, L.L.C.
By:
--------------------------------------
Name: Xxxx X. Xxxxxx, President
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156
EXHIBIT A
ASSUMED LIABILITIES
4
157
EXHIBIT I
SUBSIDIARY ASSUMPTION AGREEMENT
THIS SUBSIDIARY ASSUMPTION AGREEMENT ("ASSUMPTION AGREEMENT") is made
as of the _____ day of January, 1999, to be effective as of January 1, 1999,
between Xxxxxx Medical North America, LLC, a Georgia limited liability company
("NORTH AMERICA") and Xxxxxx Medical Management, LLC, a Georgia limited
liability company ("MANAGEMENT").
WHEREAS, North America was a wholly-owned subsidiary of Management; and
WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as
of December 21, 1998 by and between Management and Matria Healthcare, Inc., a
Delaware corporation (the "PURCHASER"), Management has sold to Purchaser the
Business as defined below of Management by selling substantially all of its
assets, including its entire equity interest in its direct subsidiaries
(including North America) (the "PURCHASE AND SALE AGREEMENT"); and
WHEREAS, in order to effect the transfer of the liabilities of the
Business to North America and to limit Management's responsibility for any
liabilities related to the Business to the liabilities under the
indemnification provisions set forth in Section 9.2(a) of the Purchase and Sale
Agreement, and in consideration of Management's sale of the Business to
Purchaser as provided in the Purchase and Sale Agreement, the parties hereto
agree as follows:
1. Assumption. North America hereby assumes and agrees to timely
pay, perform, satisfy, be responsible for and discharge all liabilities of
Management incurred in North America's operation of the Business, other than
Assumed Liabilities, to the extent the same exist on the date hereof (the
"SUBSIDIARY ASSUMED LIABILITIES").
2. Covenants of North America. For a period of 18 months from
the date hereof (i) North America covenants and agrees not to transfer directly
or indirectly a significant portion of its assets other than in the ordinary
course of its business, unless the transferee of such assets expressly agrees
in a writing, in form and substance reasonably satisfactory to Management, to
assume all of North America's obligations under this Assumption Agreement and
to timely pay, perform, satisfy, be responsible for and discharge the
Subsidiary Assumed Liabilities, and (ii) North America covenants and agrees not
to merge or consolidate or engage in any similar transaction in which North
America will not be the surviving entity unless prior to doing so the successor
to North America in such merger, consolidation or other transaction expressly
agrees in a writing, in form and substance reasonably satisfactory to
Management, to assume all of North America's obligations under this Assumption
Agreement and to timely pay, perform, satisfy, be responsible for and discharge
the Subsidiary Assumed Liabilities.
3. Acknowledgment of Management. Management hereby acknowledges
its obligations under the Purchase and Sale Agreement to indemnify Purchaser,
subject to the limitations contained therein, for Subsidiary Assumed
Liabilities that constitute breaches of Management's representations and
warranties therein or otherwise give rise to a Loss thereunder,
158
as defined therein. To the extent that a Loss (as defined in the Purchase and
Sale Agreement) incurred by North America is based on the same facts that would
otherwise give rise to a Subsidiary Assumed Liability hereunder, such liability
shall not be deemed a Subsidiary Assumed Liability and Management shall not be
entitled to assert any claim against North America with respect thereto.
4. Limitation on Remedies. Subject to the foregoing limitations,
North America shall indemnify, reimburse, defend and hold harmless the Seller,
its affiliates, and their respective officers, directors, managers, members,
shareholders, employees, representatives, successors or assigns from and
against any and all Subsidiary Assumed Liabilities. No claim may be asserted by
Management against North America hereunder more than 18 months after the
Closing, and the provisions of Section 9.2(c), (f), (g), (h), (i), (j) and (k)
of the Purchase and Sale Agreement shall apply to the greatest extent
practicable to any claim asserted by Management against North America hereunder
as if it were a claim by Seller against Purchaser thereunder.
5. Definitions. As used herein, the term "Business" shall mean
the business of North America as conducted on the date hereof. Capitalized
terms used herein and not otherwise defined shall have the meaning given them
in the Purchase and Sale Agreement. Except for the definition of any terms
defined herein, if any conflict exists between the terms of this Assumption
Agreement and the Purchase and Sale Agreement, then the terms of this
Assumption Agreement shall govern and control.
6. Governing Law. This Assumption Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia, without
giving effect to the conflict of law provisions therein.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Agreement to be executed in their names as of the date first above written.
XXXXXX MEDICAL MANAGEMENT, LLC
By:
-----------------------------------------
Xxxx X. Xxxxxx, President
XXXXXX MEDICAL NORTH AMERICA, LLC
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
