UNIT PURCHASE AGREEMENT
among
PRIMESOURCE HEALTHCARE, INC.
and
THE PURCHASERS NAMED IN SCHEDULE I
Dated as of June 28, 2001
TABLE OF CONTENTS
Page
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ARTICLE I- THE UNITS
SECTION 1.01 Issuance and Sale of the Units................................1
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SECTION 1.02 Closing and Delivery of the Units.............................1
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SECTION 1.03 Additional Closings...........................................1
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ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 2.01 Organization, Qualifications and Corporate Power..............2
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SECTION 2.02 Authorization of Agreements, Etc..............................3
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SECTION 2.03 Validity......................................................3
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SECTION 2.04 Authorized Capital Stock......................................3
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SECTION 2.05 Third Party Approvals.........................................4
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SECTION 2.06 Litigation....................................................5
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SECTION 2.07 Financial Statements..........................................5
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SECTION 2.08 Absence of Certain Changes....................................6
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SECTION 2.09 Proprietary Information of Third Parties......................7
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SECTION 2.10 Patents, Trademarks, Copyrights, Etc..........................7
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SECTION 2.11 Compliance with Law...........................................8
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SECTION 2.12 Certain Other Agreements......................................9
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SECTION 2.13 Offering of the Units.........................................9
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SECTION 2.14 Brokers.......................................................9
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SECTION 2.15 Employees.....................................................9
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SECTION 2.16 U.S. Real Property Holding Corporation.......................10
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SECTION 2.17 Taxes........................................................10
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SECTION 2.18 Environmental Matters........................................11
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SECTION 2.19 Affiliate Transactions.......................................12
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SECTION 2.20 Certain Regulatory Matters...................................12
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SECTION 2.21 Certain Additional Regulatory Matters........................12
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SECTION 2.22 Medicare/Medicaid Participation..............................13
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SECTION 2.23 Compliance with Medicare/Medicaid
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and Insurance Programs.......................................14
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SECTION 2.24 Insurance....................................................15
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SECTION 2.25 Real Property and Leaseholds.................................15
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SECTION 2.26 Tangible Assets..............................................16
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SECTION 2.27 Customer and Vendor Relations................................16
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SECTION 2.28 Books and Records............................................16
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SECTION 2.29 Disclosure...................................................17
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ARTICLE III - REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PURCHASERS
SECTION 3.01 Representations..............................................17
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ARTICLE IV - CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS
SECTION 4.01 Conditions...................................................18
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ARTICLE V - COVENANTS OF THE COMPANY
SECTION 5.01 Financial Statements, Reports, Etc...........................20
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SECTION 5.02 Reserve for Conversion Shares
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and for Conversion of Series E Shares
SECTION 5.03 Corporate Existence..........................................22
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SECTION 5.04 Properties, Business, Insurance..............................22
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SECTION 5.05 Inspection, Consultation and Advice..........................23
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SECTION 5.06 Restrictive Agreements Prohibited............................23
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SECTION 5.07 Transactions with Affiliates.................................23
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SECTION 5.08 Use of Proceeds..............................................23
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SECTION 5.09 Activities of Subsidiaries...................................23
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SECTION 5.10 Compliance with Laws.........................................24
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SECTION 5.11 Keeping of Records and Books of Account......................24
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SECTION 5.12 Certain Transactions.........................................24
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SECTION 5.13 Publication Matters..........................................26
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SECTION 5.14 Certain Insurance and Liability Matters......................27
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SECTION 5.15 Indemnification..............................................27
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SECTION 5.16 Key Man Insurance............................................28
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SECTION 5.17 Termination of Covenants.....................................29
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ARTICLE VI - MISCELLANEOUS
SECTION 6.01 Expenses.....................................................29
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SECTION 6.02 Survival of Agreements.......................................29
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SECTION 6.03 Brokerage....................................................30
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SECTION 6.04 Parties in Interest..........................................30
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SECTION 6.05 Notices......................................................30
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SECTION 6.06 Governing Law; Jury Trial Waiver.............................30
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SECTION 6.07 Injunctive Relief............................................31
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SECTION 6.08 Assignment...................................................31
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SECTION 6.09 Limitation of Liability......................................31
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SECTION 6.10 Entire Agreement.............................................31
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SECTION 6.11 Counterparts.................................................32
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SECTION 6.12 Amendments...................................................32
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SECTION 6.13 Severability.................................................32
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SECTION 6.14 Titles and Subtitles.........................................32
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SECTION 6.15 Certain Defined Term.........................................32
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THIS UNIT PURCHASE AGREEMENT (this "Agreement"), dated as of June 28, 2001,
is made by and among PrimeSource Healthcare, Inc., a Massachusetts corporation
(the "Company"), and the purchasers named in the attached Schedule I
(individually, each a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers units (the
"Units"), each consisting of a share of authorized but unissued Series E
Convertible Preferred Stock, no par value, of the Company (the "Series E
Preferred Stock"), substantially in the form of Exhibit A attached hereto, and a
certain number of warrants (the "Warrants"), substantially in the form of
Exhibit B attached hereto, exercisable for shares of the Common Stock, par value
$0.01, of the Company (the "Common Stock"). The Units will have an aggregate
purchase price of up to $5,200,000; and
WHEREAS, the Purchasers, severally, wish to purchase the Units on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
THE UNITS
SECTION 1.01 Issuance and Sale of the Units. Subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell to each
Purchaser, and each Purchaser hereby agrees to purchase from the Company, the
amount and type of Units set forth opposite the name of such Purchaser under the
heading "Amount and Type of Units to be Purchased" on Schedule I, at the
purchase price set forth opposite the name of such Purchaser under the heading
"Purchase Price for Units" on Schedule I, and aggregating the "Purchase Price"
for the Units.
SECTION 1.02 CLOSING AND DELIVERY OF THE UNITS. The first closing shall take
place at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. on June 29, 2001, or at such other
location, date and time as may be agreed upon between the Purchasers of a
majority of the Units and the Company (such closing being called the "FIRST
CLOSING" and such date and time being called the "CLOSING DATE"). At the First
Closing, the Company shall issue and deliver to each Purchaser certificates,
registered in the name of such Purchaser, representing each of (i) the shares of
Series E Preferred Stock and (ii) the Warrants, comprising the Units being
purchased by it at the Closing. At the First Closing, the Purchasers shall wire
transfer in immediately available funds their respective portions of the
Purchase Price, as set forth in Schedule I hereto.
SECTION 1.03 ADDITIONAL CLOSINGS. At any time and from time to time until
ninety (90) days after the First Closing, the Company may, at one or more
additional closings (each, an "ADDITIONAL CLOSING"), without obtaining the
signature, consent or permission of any of the Purchasers, offer and sell any
remaining unsold Units authorized under Section 1.01, above. The shares of
Series E Preferred Stock comprising part of any Unit to be issued in an
Additional Closing shall be sold pursuant to, and subject to the provisions of,
this Agreement, as modified solely to add an additional signature hereto and an
additional name to SCHEDULE I hereto. Upon execution of such additional
signature page, each such additional purchaser shall be deemed a "Purchaser"
under this Agreement to the same extent as if they had been a Purchaser at the
First Closing. Notwithstanding anything to the contrary above, additional
authorized Units not sold at the First Closing or in an Additional Closing may
be sold at any time in transactions with lenders, customers, vendors, lessors or
other commercial or strategic partners that are substantially not equity based
and that are approved by the Board in accordance with the Company's Articles of
Organization. The terms "Closing" and "Closing Date" as used herein shall be
used to refer to the "First Closing" and/or each "Additional Closing" as the
context requires.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the Closing Date the Company hereby represents and warrants to each
Purchaser that, except as set forth in the Disclosure Letter (which makes
explicit reference to the particular representation or warranty as to which
exception is taken, which in each case shall constitute the sole representation
and warranty as to which such exception shall apply):
SECTION 2.01 Organization, Qualifications and Corporate Power.
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(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as currently
conducted and as proposed to be conducted. The Company is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification. Each of the Company and its Subsidiaries has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted. The Company (i) has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement, the Warrants, the Amended and Restated Co-Sale Agreement, dated as of
June 28, 2001, among the Company, the Purchasers and certain other stockholders
of the Company (the "AMENDED AND RESTATED CO-SALE AGREEMENT") and the Amended
and Restated Registration Rights Agreement, dated as of June 28, 2001, among the
Company, the Purchasers and certain other stockholders of the Company (the
"Amended and Restated Registration Rights Agreement,' and together with this
Agreement, the Warrants and the Amended and Restate Co-Sale Agreement, the
"TRANSACTION DOCUMENTS"), in the forms attached hereto as EXHIBIT B, EXHIBIT C
AND EXHIBIT D, respectively; (ii) to issue, sell and deliver the Units; and
(iii) to issue and deliver the shares of Common Stock issuable upon exercise of
the Warrants (the "CONVERSION SHARES").
(b) Neither the Company, other than with respect to a Subsidiary of the
Company, nor any of its Subsidiaries (i) owns of record or beneficially,
directly or indirectly (A) any shares of capital stock or securities convertible
into capital stock of any other corporation or (B) any participating or limited
liability company interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise or (ii) controls, directly or
indirectly, any other entity.
SECTION 2.02 Authorization of Agreements, Etc.
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(a) The execution and delivery by the Company of the Transaction Documents,
the performance by the Company of its obligations under the Transaction
Documents, and the issuance, sale and delivery of the Units have been duly
authorized by all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, the Articles of
Organization of the Company, as amended through the date hereof, a copy of which
is attached as EXHIBIT E (the "ARTICLES OF ORGANIZATION"), the By-Laws of the
Company, a copy of which are attached as EXHIBIT F, or any provision of any
indenture, agreement or other instrument to which the Company, any of its
Subsidiaries, or any of their respective properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge, restriction, claim
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company or any of its Subsidiaries.
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(b) The Units consist of shares of Series E Preferred Stock (the "SERIES E
SHARES") and the Warrants, and each has been duly authorized, and in the case of
the Series E Shares, when issued in accordance with this Agreement, will be
validly issued, fully paid and nonassessable shares of Series E Preferred Stock
with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through the Company except as set forth in the Transaction Documents. The
Conversion Shares, when issued, will be duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock with no personal liability
attaching to the ownership thereof and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in this Agreement. Neither the issuance, sale or delivery of
the Units nor the issuance or delivery of the Conversion Shares is subject to
any preemptive right of stockholders of the Company or to any right of first
refusal or other right in favor of any Person that has not been effectively
waived or exercised pursuant to this Agreement.
SECTION 2.03 VALIDITY. The Transaction Documents have been duly executed and
delivered by the Company and constitute legal, valid and binding obligations of
the Company, enforceable in accordance with their terms (subject in each case as
to the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally).
SECTION 2.04 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company consists of (i) 50,000,000 shares of Common Stock, (ii) 500,000 shares
of preferred stock, par value $1.00 per share, of which 344,864 shares have been
designated Series C Convertible Preferred Stock and 20,000 shares have been
designated Series D Exchangeable Preferred Stock and (iii) 10,000,000 shares of
preferred stock, no par value per share. Immediately prior to the First Closing,
7,818,729 shares of Common Stock, 344,863 shares of Series C Convertible
Preferred Stock and 14,008 shares of Series D Exchangeable Preferred Stock will
be validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, and no shares of Series E Preferred Stock
shall have been issued. The stockholders of record and holders by name or by
category of subscriptions, warrants, options, convertible securities, and other
rights (contingent or other) to purchase or otherwise acquire Series C
Convertible Preferred Stock and Series D Exchangeable Preferred Stock of the
Company, and the number of shares of such stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, as of immediately prior to the First Closing and as of immediately
after the Closing are as set forth in the attached SCHEDULE II. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Articles of Organization and the Certificate
of Vote of Directors Establishing the Class of Series E Convertible Preferred
Stock (the "SERIES E CERTIFICATE OF VOTE"), a copy of which is attached hereto
as EXHIBIT G, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws, and, (i) no Person owns of record or
is known to the Company to own beneficially any share of Common Stock, (ii) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding and (iii) there is no commitment by the Company to
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issue shares, subscriptions, warrants, options, convertible equity or debt
securities, or other such rights or to distribute to holders of any of its
equity or debt securities any evidence of indebtedness or asset. Except as
provided for in the Articles of Organization and the Series E Certificate of
Vote, the Company has no obligation (contingent or other) to purchase, redeem or
otherwise acquire any of its securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof. Except as set forth
in the Amended and Restated Registration Rights Agreement and the Articles of
Organization and the Series E Certificate of Vote, there are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of the Company whether or not the Company is a party thereto. All of the
outstanding securities of the Company were issued in compliance with all
applicable federal and state securities laws.
SECTION 2.05 THIRD PARTY APPROVALS. Other than the consent of the holders of
a majority of the Company's outstanding Series C Convertible Preferred Stock, no
registration or filing with, or consent or approval of or other action by any
third party, is or will be necessary for the valid execution, delivery and
performance by the Company of this Agreement, the issuance, sale and delivery of
the Units upon the Closing Date, or, upon exercise of the Warrants, the issuance
and delivery of the Conversion Shares, other than filings pursuant to state and
federal securities laws (all of which filings have been made by the Company,
other than those which are required to be made after the Closing and which will
be duly made on a timely basis) in connection with the sale of the Units.
SECTION 2.06 LITIGATION. As of the date hereof there is no action, suit,
claim, proceeding or investigation pending or, to the best of the Company's
knowledge, threatened against or affecting the Company or its Subsidiaries that
could have a Material Adverse Effect and neither the Company nor its
Subsidiaries is subject to any order, writ, injunction or decree entered in any
lawsuit or proceeding and the Company knows of no basis for any of the foregoing
that could have a Material Adverse Effect.
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SECTION 2.07 Financial Statements.
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(a) The Company's audited balance sheets and audited statements of income as
of October 31, 2000, PrimeSource Surgical, Inc.'s audited balance sheets and
audited statements of income as of June 30, 2000 and the Company's unaudited
balance sheets and unaudited statements of income for the nine-month period
ended March 31, 2001 (collectively, the "FINANCIAL STATEMENTS") are set forth on
SCHEDULE II. The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated and with each
other (except that the Financial Statements may not contain all footnotes
required by GAAP) and fairly present the financial condition of the Company and
its Subsidiaries and the results of operations as of such dates and for such
periods indicated. Except as reflected in the Financial Statements, neither the
Company nor any of its Subsidiaries is a guarantor or indemnitor of any
indebtedness or Liability (as defined herein) of any other Person. The Company
and its Subsidiaries maintain a standard system of accounting established and
administered in accordance with GAAP. The general ledger, accounts receivable,
accounts payable, bank reconciliations and payroll records of the Company and
its Subsidiaries have been maintained in all material respects in the ordinary
course and contain a materially correct and complete record of the matters
typically contained in records of such nature.
(b) Neither the Company nor any of its Subsidiaries has received any
management letters or other letters from the Company's or its Subsidiaries'
independent auditing firm(s) relating to the results of operations, financial
statements or internal controls of the Company or its Subsidiaries insofar as
the same may pertain to the business or assets of the Company or its
Subsidiaries.
SECTION 2.08 Absence of Certain Changes.
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(a) Since October 31, 2000, there has not been any change to the financial
condition of the Company or its Subsidiaries that would have a Material Adverse
Effect on the Company or any of its Subsidiaries or any Material Adverse Change
in the business or prospects of the Company or its Subsidiaries, and, except as
reflected in the Financial Statements, neither the Company nor any of its
Subsidiaries has (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock;
(ii) made capital expenditures or commitments therefore, other than such capital
expenditures or commitments made in the ordinary course consistent with past
practice; (iii) made any loans or advances to any Person exceeding $15,000
individually or $30,000 in the aggregate (other than advances for business or
travel expenses) or guaranteed the obligations of any Person; (iv) sold,
exchanged or otherwise disposed of any of its assets or rights exceeding $15,000
individually or $30,000 in the aggregate, other than the sale, exchange or other
disposition of its equipment and services in the ordinary course of business
consistent with past practice; (v) incurred any material change in the assets,
liabilities, financial condition, operating results or business of the Company
or any of its Subsidiaries from that reflected in the Financial Statements; (vi)
suffered any damage, destruction or loss, whether or not covered by insurance,
that had or would have a Material Adverse Effect; (vii) waived a right or a debt
owed to it exceeding $5,000 individually or $25,000 in the aggregate; (viii)
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satisfied or discharged any encumbrance or payment of any obligation; (ix)
agreed to or made any material change or amendment to any Material Agreement;
(x) permitted or allowed any of its assets to be subjected to any material
encumbrance; (xi) written up the value of any inventory, notes or accounts
receivable or other assets in any material respect; (xii) licensed, sold,
transferred, pledged, modified, disclosed, disposed of or permitted to lapse any
right to the use of any Intellectual Property (as defined herein); (xiii) made
any change in any method of accounting or accounting practice or any change in
depreciation or amortization policies or rates previously adopted; (xiv) paid,
lent or advanced any amount to, sold, transferred or leased any assets to or
entered into any Material Agreement or material arrangement with any of its
Subsidiaries or entered into any agreement or arrangement whatsoever with any of
its Affiliates other than its Subsidiaries, except for directors' fees, travel
expense advances and employment compensation to officers; or (xv) incurred or
suffered any other event or condition of any character that could reasonably be
expected to have a Material Adverse Effect.
(b) Since October 31, 2000, except as reflected in the Financial Statements,
neither the Company nor any of its Subsidiaries has made any material change in
any compensation arrangement or agreement with any employee that would increase
such employee's total compensation by more than ten percent (10%).
SECTION 2.09 PROPRIETARY INFORMATION OF THIRD PARTIES. No third party has
claimed or, to the Company's knowledge, has reason to claim that any Person
employed by or affiliated with the Company or any of its Subsidiaries has (a)
violated or may be violating any of the terms or conditions of his or her
employment, non-competition or non-disclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company or any of its Subsidiaries which suggests
that such a claim might be contemplated. To the Company's knowledge, no Person
employed by or affiliated with the Company or any of its Subsidiaries has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, except as licensed or
otherwise authorized or permitted to do so, and no Person employed by or
affiliated with the Company or any of its Subsidiaries has violated any
confidential relationship which such Person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company or any of its Subsidiaries, and the Company has no reason to
believe there will be any such employment or violation. None of the execution or
delivery of this Agreement, or the carrying on of the business of the Company or
any of its Subsidiaries as officers, employees or agents by any officer,
employee or agent of the Company or any of its Subsidiaries, or the conduct or
proposed conduct of the business of the Company or any of its Subsidiaries, will
conflict with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which any
such Person is obligated.
SECTION 2.10 PATENTS, TRADEMARKS, COPYRIGHTS, ETC. Set forth in the
Disclosure Letter is a list and brief description of all domestic and foreign
patents, patent rights, patent applications, trademarks, trademark applications,
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service marks, service xxxx applications, trade names and copyrights, and all
applications for such which are in the process of being prepared, owned by or
registered in the name of the Company or any of its Subsidiaries, or of which
the Company or any of its Subsidiaries is a licensor or licensee or in which the
Company or any of its Subsidiaries has any right, and in each case a brief
description of the nature of such right. The Company and its Subsidiaries own or
possess adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names, copyrights, manufacturing processes, formulae, trade
secrets, customer lists and know how (collectively, "INTELLECTUAL PROPERTY")
necessary to the conduct of their business as conducted and as proposed to be
conducted, and no claim is pending or, to the best of the Company's knowledge,
threatened on the ground that the operations of the Company or any of its
Subsidiaries infringe upon or conflict with the asserted rights of any other
Person under any Intellectual Property, and to the best of the Company's
knowledge there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or, to the best of the Company's knowledge,
threatened on the ground that any such Intellectual Property owned or licensed
by the Company or any of its Subsidiaries, or which the Company or any of its
Subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or any of its Subsidiaries, and there is no basis for any such claim
(whether or not pending or threatened). To the best of the Company's knowledge,
all technical information developed by and belonging to the Company or any of
its Subsidiaries which has not been patented has been kept confidential.
SECTION 2.11 Compliance with Law.
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(a) The Company and each of its Subsidiaries is in material compliance with
all Applicable Laws. Neither the Company nor any of its Subsidiaries has
received any notice of, nor does the Company have any knowledge of, any material
violation (or of any investigation, inspection, audit or other proceeding by any
Governmental Entity involving allegations of any material violation) of any
Applicable Law involving or related to the Company or any of its Subsidiaries
which has not been dismissed or otherwise disposed of. Neither the Company nor
any of its Subsidiaries has received notice or otherwise has any knowledge that
the Company or any of its Subsidiaries is charged with, threatened with or under
investigation with respect to, any violation of any Applicable Law, or has any
knowledge of any proposed change in any Applicable Law that would have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability which may
be material to its business, prospects, financial condition, operations,
property or affairs. There is no existing law, rule, regulation or order, and
the Company and each of its Subsidiaries is not aware of any proposed law, rule,
regulation or order, whether federal, state, county or local, which would
prohibit the Company or any of its Subsidiaries from, or otherwise materially
adversely affect the Company or any of its Subsidiaries in, conducting its
business in any jurisdiction in which it proposes to conduct business.
(b) Each of the Company and its Subsidiaries has, and, to the Company's
knowledge after due inquiry, all professional employees or agents of the Company
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and each of its Subsidiaries have, all licenses, franchises, permits,
accreditations, authorizations, including consents or orders of, or filings
with, or other approvals from all Governmental Entities ("APPROVALS") necessary
for the conduct of, or relating to the operation of, the business of the Company
and its Subsidiaries and the occupancy and operation, for its present uses, of
the real and personal property which the Company and its Subsidiaries own or
lease. Neither the Company nor any of its Subsidiaries is in material violation
of any such Approval or any terms or conditions thereof. All such Approvals are
in full force and effect, have been issued to and fully paid for by the holder
thereof and no notice or warning from any Governmental Entity with respect to
the suspension, revocation or termination of any Approval has been, to the
knowledge of the Company, threatened by any Governmental Entity or issued or
given to the Company or its Subsidiaries. No such Approvals will in any way be
affected by, terminate or lapse by reason of the consummation of all or any
portion of the transactions contemplated by this Agreement.
SECTION 2.12 CERTAIN OTHER AGREEMENTS. The Company has no legal obligation,
absolute or contingent, to any other person or firm to sell the Capital Stock,
material assets or the business of the Company or its Subsidiaries or to effect
any merger, consolidation, liquidation, dissolution, recapitalization or other
reorganization of the Company or its Subsidiaries or to enter into any agreement
with respect thereto.
SECTION 2.13 OFFERING OF THE UNITS. Neither the Company nor any Person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Units or any security of the Company
similar to the Units has offered the Units or any such similar security for sale
to, or solicited any offer to buy the Units, or any such similar security from,
or otherwise approached or negotiated with respect thereto with, any Person or
Persons, and neither the Company nor any Person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with the Units under the Securities Act
or the rules and regulations of the Commission thereunder), in either case so as
to subject the offering, issuance or sale of the Units to the registration
provisions of the Securities Act.
SECTION 2.14 BROKERS. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 2.15 EMPLOYEES. Each of the officers of the Company and its
Subsidiaries, each key employee and each other employee now employed by the
Company or its Subsidiaries who has access to confidential information of the
Company or its Subsidiaries has executed an appropriate nondisclosure agreement
in customary form, and such agreements are in full force and effect. No officer
or key employee of the Company or any of its Subsidiaries has advised the
Company (orally or in writing) that he or she intends to terminate employment
with the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has ever had any employees represented by collective bargaining
agreements. Each of the Company and its Subsidiaries is in compliance with all
material Applicable Laws respecting employment practices, terms and conditions
12
of employment and wages and hours and is not engaged in any unfair labor
practice. There is no unfair labor practice charge or complaint against the
Company or any of its Subsidiaries pending before the National Labor Relations
Board or any other governmental agency arising out of the activities of the
Company or its Subsidiaries of which the Company or any of its Subsidiaries has
received notice or of which the Company has knowledge, and the Company has no
knowledge of any facts or information which would give rise thereto. There is no
labor strike or labor disturbance pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries. No collective
bargaining representation petition is pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries. Each of the
Company or its Subsidiaries has complied with all material Applicable Laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
SECTION 2.16 U.S. REAL PROPERTY HOLDING CORPORATION. Neither the Company nor
any of its Subsidiaries is now nor has ever been a "United States real property
holding corporation", as defined in Section 897(c)(2) of the Internal Revenue
Code of 1986, as amended, and Section 1.897-2(b) of the Regulations promulgated
by the Internal Revenue Service, and the Company and each of its Subsidiaries,
as applicable, has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns which are required under Section
1.897-2(h) of such Regulations.
SECTION 2.17 TAXES. The Company and each of its Subsidiaries, as applicable,
have filed, or caused to be filed, on a timely basis all tax returns (including
payroll, unemployment and other taxes related to its employees and independent
contractors) required to be filed with any federal, state, local or municipal
governmental body, all such tax returns are true, correct and complete in all
material respects and the Company and each of its Subsidiaries, as applicable,
have paid or caused to be paid all taxes, levies, assessments, tariffs, duties
or other fees and any interest and penalties thereon ("TAXES") imposed, assessed
or collected by any governmental body that may have become due and payable
pursuant to those tax returns or otherwise. No such federal, state, local or
municipal tax returns have ever been audited by the Internal Revenue Service,
state or other authorities. No deficiency assessment with respect to or proposed
adjustment of any of the Company's or any of its Subsidiaries, as applicable,
Federal, state, municipal or local tax returns has occurred or, to the Company's
knowledge, is threatened. There has been no tax lien imposed by any governmental
body outstanding against the business or the Company's or any of its
Subsidiaries' assets or properties, except liens for current taxes not yet due.
The reserve for Taxes on the balance sheet in the Financial Statements is fully
adequate to cover all liabilities for Taxes with respect to periods ending on or
before the Closing Date.
SECTION 2.18 Environmental Matters.
---------------------
(a) Each of the Company and its Subsidiaries: (i) is, and within the period
of all applicable statutes of limitation has been, in material compliance with
13
all applicable Environmental Laws; (ii) holds all Environmental Permits (each of
which is in full force and effect) required for any of its current operations or
for any property owned, leased or otherwise operated by it; (iii) is, and within
the period of all applicable statutes of limitation has been, in material
compliance with all of its Environmental Permits; and (iv) reasonably believes
that each of its Environmental Permits currently in effect will be renewed
effective prior to the expiration of such Environmental Permit.
(b) Neither the Company nor any of its Subsidiaries has received any notice
of alleged, actual or potential responsibility for, or any inquiry or
investigation regarding, any Environmental Condition. Neither the Company nor
any of its Subsidiaries has received any notice of any other claim, demand or
action by any individual or entity alleging any actual or threatened injury or
damage to any person, property, natural resource or the environment arising from
or relating to any Release or threatened Release of any Hazardous Materials at,
on, under, in, to or from any Facility or any former Facilities, or in
connection with any operations or activities of the Company or its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has entered into or
agreed to and is not subject to any consent decree, order or settlement or other
agreement in any judicial, administrative, arbitral or other similar forum
relating to compliance with or Liability under any Environmental Law.
(d) Hazardous Materials have not been transported, disposed of, emitted,
discharged or otherwise Released or threatened to be Released to or at any real
property presently or formerly owned or leased by the Company or its
Subsidiaries, which Hazardous Materials are reasonably expected to (i) give rise
to a material Liability of the Company or any of its Subsidiaries under any
applicable Environmental Law, (ii) interfere with the Company's or any of its
Subsidiaries continued operations or (iii) materially impair the fair salable
value of any real property owned or leased by the Company or any of its
Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has assumed or retained,
by contract or, to the knowledge of the Company, by operation of law in
connection with the sale or transfer of any assets or business, Liabilities
arising from or associated with or otherwise in connection with such assets or
business of any kind, fixed or contingent, known or not known, under any
applicable Environmental Law. Neither the Company nor any of its Subsidiaries is
required to make any material capital or other expenditures to comply with any
Environmental Law nor to the knowledge of the Company is there any reasonable
basis on which any Governmental Entity could take any action that would require
any such capital expenditures.
(f) True, complete and correct copies of the written reports, and all parts
thereof, of all environmental audits or assessments which have been conducted in
respect of any Facility or any former Facility within the past five (5) years,
either by the Company, any of its Subsidiaries or any attorney, environmental
consultant or engineer or other Person engaged by the Company or any of its
Subsidiaries for such purpose, have been delivered to the Purchaser.
14
SECTION 2.19 AFFILIATE TRANSACTIONS. Except for regular salary payments,
warrants, rights, options and fringe benefits under an individual's compensation
package with the Company or any of its Subsidiaries, none of the officers,
directors, employees or other Affiliates of the Company or any of its
Subsidiaries is a party to any agreement, understanding, indebtedness or
proposed transaction with the Company or any of its Subsidiaries or, to the
Company's knowledge, is directly interested in any Material Agreement with the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has guaranteed or assumed any obligations of its officers,
directors, employees or other Affiliates or members of any of their families. To
the Company's knowledge, other than as contemplated by this Agreement, none of
the officers, directors, employees or other Affiliates of the Company or any of
its Subsidiaries has any direct or indirect ownership interest in any Person
with which the Company or any of its Subsidiaries has a business relationship or
with any Person that competes with the Company or any of its Subsidiaries.
SECTION 2.20 CERTAIN REGULATORY MATTERS. Neither the Company nor any of its
Subsidiaries has, since June 30, 1999, received notice that the Company or any
of its Subsidiaries has been, or to the Company's knowledge has been, the
subject of any investigative proceeding before any federal or state regulatory
authority or the agent of any such authority, including, without limitation,
federal and state health authorities.
SECTION 2.21 CERTAIN ADDITIONAL REGULATORY MATTERS. Neither the Company, any
of its Subsidiaries nor any of their officers, directors or managing employees,
as that term is defined in 42 C.F.R. Section 1001.1001(a)(1), nor to the
knowledge of the Company, the other employees or agents of any of the Company or
any of its Subsidiaries have engaged in any activities which are prohibited
under criminal law, or are cause for civil penalties or mandatory or permissive
exclusion from Medicare or Medicaid, or any other state health care program as
defined in SSA Section 1128(h) or any regulations promulgated thereunder ("STATE
HEALTH CARE PROGRAM") or a federal health care program as defined in the Social
Security Act ("SSA") (42 U.S.C. Section 1320a-3), Section 1128B(f) ("FEDERAL
HEALTH CARE PROGRAM") under Sections 1320a-7, 1320a-7a, 1320a-7b or 1395nn of
Title 42 of the United States Code, the federal Civilian Health and Medical Plan
of the Uniformed Services statute ("CHAMPUS"), or the regulations promulgated
pursuant to such statutes or regulations or related state or local statutes or
which are prohibited by any private accrediting organization from which the
Company or any of its Subsidiaries seeks accreditation or by generally
recognized professional standards of care or conduct, including, but not limited
to, the following activities:
(a) knowingly and willfully making or causing to be made a false statement
or representation of a material fact in any application for any benefit or
payment;
(b) knowingly and willfully making or causing to be made any false statement
or representation of a material fact for use in determining rights to any
benefit or payment;
(c) presenting or causing to be presented a claim for reimbursement under
CHAMPUS, Medicare, Medicaid or any other State Health Care Program or Federal
15
Health Care Program that is (i) for an item or service that the Person
presenting or causing to be presented knows or should know was not provided as
claimed or (ii) for an item or service that the Person presenting knows or
should know that the claim is false or fraudulent;
(d) knowingly and willfully offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind (i) in return for referring, or to
induce the referral of, 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 CHAMPUS, Medicare or Medicaid or any other State
Health Care Program or any Federal Health Care Program or (ii) in return for, or
to induce the purchase, lease or order or the arranging for or recommending of
the purchase, lease or order of, any good, facility, service or item for which
payment may be made in whole or in part by CHAMPUS, Medicare or Medicaid or any
other State Health Care Program or any Federal Health Care Program; or
(e) knowingly and willfully making or causing to be made or inducing or
seeking to induce the making of any false statement or representation (or
omitting to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading) of a material fact with
respect to (i) the conditions or operations of a facility in order that the
facility may qualify for CHAMPUS, Medicare, Medicaid or any other State Health
Care Program certification or any Federal Health Care Program certification or
(ii) information required to be provided under Section 1124(A) of the SSA.
SECTION 2.22 MEDICARE/MEDICAID PARTICIPATION. Neither (a) the Company, any
of its Subsidiaries nor any other Person who after the Closing will have a
direct or indirect ownership interest of five percent (5%) or more (as those
terms are defined in 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any of
its Subsidiaries, or who will have an ownership or control interest (as defined
in SSA Section 1124(a)(3) or any regulations promulgated thereunder) in the
Company or any of its Subsidiaries, or who will be an officer, director or
managing employee (as defined in 42 C.F.R. Section 1001.1001(a)(1)) of the
Company or any of its Subsidiaries, or, to the knowledge of the Company, any
other employee or agent thereof, nor (b) any Person with any relationship with
such entity who after the Closing will have an indirect ownership interest of
five percent (5%) or more (as that term is defined in 42 C.F.R. Section
1001.1001(a)(2)) in the Company, other than any entity in which institutional
investors of the Company which may be deemed to control the Company are deemed
to control such entity: (i) has had a civil monetary penalty assessed against it
under Section 1128A of the SSA or any regulations promulgated thereunder; (ii)
has been excluded from participation under a State Health Care Program or a
Federal Health Care Program; or (iii) has been convicted (as that term is
defined in 42 C.F.R. Section 1001.2) of any of the following categories of
offenses as described in SSA Section 1128(a) and (b)(1), (2), (3) or any
regulations promulgated thereunder:
(A) criminal offenses relating to the delivery of an item or service
under Medicare, Medicaid or any other State Health Care Program or Federal
Health Care Program;
16
(B) criminal offenses under federal or state law relating to patient
neglect or abuse in connection with the delivery of a health care item or
service;
(C) criminal offenses under federal or state law relating to fraud,
theft, embezzlement, breach of fiduciary responsibility or other financial
misconduct in connection with the delivery of a health care item or service
or with respect to any act or omission in a program operated by or financed
in whole or in part by any federal, state or local governmental agency;
(D) federal or state laws relating to the interference with or
obstruction of any investigation into any criminal offense described in (A)
through (C) above; or
(E) criminal offenses under federal or state law relating to the
unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
SECTION 2.23 Compliance with Medicare/Medicaid and Insurance Programs.
---------------------------------------------------------
(a) The Company and each of its Subsidiaries is eligible to receive payments
with respect to operations of its business under Title XVIII of the SSA and
under Title XIX of the SSA. The Company and each of its Subsidiaries has timely
filed all claims and reports required to be filed with respect to the operations
of its business in connection with all state Medicaid and federal Medicare
programs, which claims and reports are complete and correct. There are no
actions, appeals or investigations pending or, to the best of the Company's
knowledge, threatened before any entity, commission, board or agency, including
an intermediary or carrier or the administrator of the Health Care Financing
Administration, with respect to any Medicare or Medicaid claims or reports filed
by the Company or any of its Subsidiaries with respect to the operations of its
business on or before the date hereof or program compliance matters, which would
reasonably be expected to have a material adverse effect on the Company or any
of its Subsidiaries.
(b) Other than regularly scheduled audits and reviews, no validation review,
peer review or program integrity review related to the operations of the
Company, any of its Subsidiaries or their business has been conducted by any
entity, commission, board or agency in connection with the Medicare or Medicaid
program, and to the best of the Company's knowledge, no such reviews are
scheduled, pending or threatened against or affecting such business.
SECTION 2.24 INSURANCE. Each insurance policy held by or for the benefit of
the Company and its Subsidiaries is in full force and effect. The Company and
each of its Subsidiaries carry, and will continue to carry, insurance with
reputable insurers with respect to such of its properties and businesses, in
such amounts and against such risks as is customarily maintained by other
entities of similar size engaged in similar businesses. None of such insurance
was obtained through the use of materially false or misleading information or
the failure to provide the insurer with all material information requested in
order to evaluate the liabilities and risks insured. Neither the Company nor any
17
of its Subsidiaries has received any notice of cancellation or non-renewal of
any insurance policies or binders.
SECTION 2.25 Real Property and Leaseholds.
----------------------------
(a) Each lease agreement and mortgage to which the Company or any of its
Subsidiaries is a party is in full force and effect in accordance with its
terms. Neither the Company, any of its Subsidiaries nor any of the other parties
to such lease agreements and mortgages are in default (or by the lapse of time
and/or giving of notice would otherwise be in default) in respect of such leases
and mortgages.
(b) With respect to each parcel of real property leased or owned by the
Company or its Subsidiaries:
(i) the Company or its Subsidiary, as applicable, has good and
valid title to and/or a valid and subsisting leasehold interest in each
item of real property and leasehold, as appropriate, free and clear of
all mortgages, liens, encumbrances, leases, equities, claims, charges,
easements, rights-of-way, covenants, conditions and restrictions,
except for liens, if any, for property taxes not due;
(ii) no officer, director or employee of the Company, or of any
Affiliate of the Company, nor any Affiliate of the Company, owns
directly or indirectly in whole or in part, any of such real properties
or leaseholds; and
(iii) neither the Company nor any of its Subsidiaries is in
default with respect to any material term or condition of any such
mortgage or lease, nor has any event occurred which, through the
passage of time or the giving of notice or both, would constitute a
default thereunder by the Company or any of its Subsidiaries or would
cause the acceleration of any obligation of the Company or any of its
Subsidiaries or the creation of a lien or encumbrance upon any asset of
the Company or any of its Subsidiaries.
SECTION 2.26 Tangible Assets.
---------------
(a) Each of the Company and its Subsidiaries has good and valid title to or
valid and subsisting leasehold interests in all fixtures and equipment having
original cost or fair market value in excess of $25,000, including all such
fixtures and equipment reflected in the Company's or its Subsidiary's most
recent balance sheet included in the Financial Statements and all such fixtures
and equipment purchased or otherwise acquired by the Company or any of its
Subsidiaries since the date of such balance sheet. None of such fixtures and
equipment is subject to any encumbrance except for encumbrances incurred in the
ordinary course of business or which, individually or in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property or assets of the Company or any of its Subsidiaries or interfere with
the present use of such property or assets.
18
(b) The buildings and fixtures and equipment owned by the Company and each
of its Subsidiaries are in good operating condition and repair (except for
ordinary wear and tear), with no material defects, are sufficient for the
operation of the business of the Company and its Subsidiaries as presently
conducted and are in conformity, in all material respects, with all Applicable
Laws relating thereto currently in effect.
SECTION 2.27 Customer and Vendor Relations.
-----------------------------
(a) "CURRENT CUSTOMER" means any Person from whom the Company or any of its
Subsidiaries has recognized revenue since May 1, 1998 or to whom the Company or
any of its Subsidiaries has any obligation to complete work or honor any
contractual warranty or has any obligation or Liabilities. Since June 30, 2000,
no Current Customer has canceled or terminated any Material Agreement or
notified the Company or any of its Subsidiaries in writing or orally of its
intent to cancel or terminate any Material Agreement.
(b) "CURRENT VENDOR" means any Person from whom the Company or any of its
Subsidiaries has purchased goods or services since May 1, 1998. Since June 30,
2000, no Current Vendor has canceled or terminated any Material Agreement or
notified the Company or any of its Subsidiaries in writing or orally of its
intent to cancel or terminate any Material Agreement.
SECTION 2.28 BOOKS AND RECORDS. Each of the Company and its Subsidiaries has
made and kept (and given each Purchaser access to) books and records and
accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company and its Subsidiaries. The minute books of the Company
and each of its Subsidiaries previously made available to each Purchaser
accurately and adequately reflect all material action previously taken by the
stockholders, the Board of Directors and committees of the Board of Directors of
the Company and any of its Subsidiaries, as applicable.
SECTION 2.29 DISCLOSURE. Neither this Agreement, nor any Schedule or Exhibit
to this Agreement contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers in
writing and of which the Company is aware which materially and adversely affects
or could be reasonably expected to materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company.
The financial projections and other estimates provided to the Purchasers were
prepared by the Company based on assumptions of fact and opinion as to future
events which the Company, at the date of the issuance of such projections and
estimates, believed to be reasonable. As of the date hereof, no facts have come
to the attention of the Company which would, in its opinion, require the Company
19
to revise or amplify the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
SECTION 3.01 REPRESENTATIONS. Each Purchaser severally represents and
warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501 under the
Securities Act and was not organized for the specific purpose of acquiring the
Units.
(b) it has sufficient knowledge and experience in investing in companies
similar to the Company in terms of the Company's stage of development so as to
be able to evaluate the risks and merits of its investment in the Company and it
is able financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management; and
(d) the Units being purchased by it are being acquired for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof.
(e) if it is a corporation duly incorporated or a limited partnership, it is
duly formed, as the case may be, validly existing and in good standing under the
laws of its state of incorporation or formation and is duly licensed or
qualified to transact business as a foreign corporation or partnership and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification; it has the power and authority to
execute, deliver and perform this Agreement.
(f) the execution and delivery by it of the Transaction Documents and the
performance by it of its obligations thereunder, have been duly authorized by
all requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government.
(g) it has duly executed and delivered each of the Transaction Documents,
and each such document constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms (subject in each case to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally).
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
20
SECTION 4.01 CONDITIONS. The obligation of each Purchaser to purchase and
pay for the Units being purchased by it on any particular Closing Date is, at
its option, subject to the satisfaction, on or before such Closing Date of the
following conditions:
(a) OPINION OF THE COMPANY'S COUNSEL. Each Purchaser shall have received
from Skadden, Arps, Slate, Xxxxxxx & Xxxx, LLP, counsel for the Company, an
opinion dated such Closing Date, in substantially the form attached as Exhibit H
hereto.
(b) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of such Closing Date with the same effect as though such
representations and warranties had been made on and as of such Closing Date, and
the Chief Executive Officer and Chief Financial Officer of the Company shall
have certified to such effect in writing to the Purchasers purchasing Units on
such Closing Date.
(c) PERFORMANCE. The Company shall have performed and complied with all
agreements contained herein required to be performed or complied with by it
prior to or at such Closing Date and the Chief Executive Officer and Chief
Financial Officer of the Company shall have certified in writing to such effect
and to the further effect that all of the conditions set forth in this Article
IV have been satisfied to the Purchasers purchasing Units on such Closing Date.
(d) ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and other proceedings
to be taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchasers and the Purchasers shall have received all
such counterpart originals or certified or other copies of such documents as
they reasonably may request.
(e) SUPPORTING DOCUMENTS. The Purchasers shall have received copies of the
following documents:
(i) (A) the Articles of Organization, certified as of a recent
date by the Secretary of the Commonwealth of the Commonwealth of
Massachusetts and (B) a certificate of said Secretary dated as of a
recent date as to the due incorporation and good standing of the
Company and listing all documents of the Company on file with said
Secretary;
(ii) a certificate of the Clerk of the Company dated such Closing
Date and certifying: (A) that attached thereto is a true and complete
copy of the By-Laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors and/or the
stockholders of the Company authorizing the execution, delivery and
performance of each of the Transaction Documents, the issuance, sale
and delivery of each of the Units and the reservation, issuance and
delivery of the Conversion Shares, and that all such resolutions are in
full force and effect and are all the resolutions adopted in connection
21
with the transactions contemplated by the Transaction Documents; (C)
that the Articles of Organization have not been amended since the date
of the last amendment referred to in the certificate delivered pursuant
to clause (i)(B) above; and (D) to the incumbency and specimen
signature of each officer of the Company executing any of the
Transaction Documents, the certificates representing the Units and any
certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency
and signature of the officer signing the certificate referred to in
this clause (ii);
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the
Purchasers reasonably may request.
(f) AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT. The Amended and
Restated Registration Rights Agreement, in the form attached as Exhibit D, shall
have been executed and delivered by the parties thereto.
(g) WARRANTS. The Company shall have executed and delivered the Warrants,
substantially in the form of Exhibit B, to each of the Purchasers, in respect of
the Warrant component of the Units each such Purchaser is purchasing.
(h) CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING THE CLASS OF SERIES E
CONVERTIBLE PREFERRED STOCK. The Series E Certificate of Vote, a copy of which
is attached hereto as Exhibit G, shall have been filed with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts.
(i) AMENDED AND RESTATED CO-SALE AGREEMENT. The Amended and Restated Co-Sale
Agreement, in the form attached as Exhibit C, shall have been executed and
delivered by the parties thereto.
(j) ARTICLES OF ORGANIZATION. The Articles of Organization shall read in
their entirety as set forth in Exhibit E.
(k) BY-LAWS. The By-Laws shall read as set forth in Exhibit F.
(l) CONSENTS AND PREEMPTIVE RIGHTS. All third parties (including equity
holders) of the Company having any right to consent to the issuance of the Units
or the Conversion Shares shall have delivered such consents in writing. All
third parties (including equity holders) of the Company having any preemptive,
first refusal or other rights with respect to the issuance of the Units or the
Conversion Shares shall have irrevocably waived or exercised the same in
writing.
(m) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change, in the
reasonable judgment of the Purchaser, shall have occurred in the Company's
business, financial condition, prospects or results of operations since October
31, 2000.
22
(n) CS CERTIFICATE AND LETTER. Xxxxxxx Xxxxxxx Xxxxxxx Booth IV L.P. ("CS")
shall have received from the Company the certificate and letter attached hereto
as Exhibit I. All such documents shall be reasonably satisfactory in form and
substance to the Purchasers.
(o) NO DEFAULT UNDER EXISTING INDEBTEDNESS. Neither the Company nor any
Subsidiary shall be in default, other than defaults which have been waived,
under any agreement relating to any Indebtedness, including without limitation,
the Third Amendment to Amended and Restated Credit Agreement, dated as of March
2, 2001, by and among PrimeSource Surgical, Inc, a Delaware corporation, Bimeco,
Inc., a Florida corporation, Ruby Merger Sub, Inc., a Delaware corporation, the
Company and Citizens Bank of Massachusetts and the Amended and Restated Loan and
Security Agreement, dated March 2, 2001, by and among the Company, Fiber Imaging
Technologies, Inc., Cathtec Incorporated, CardioDyne, Inc. and ARK CLO 2000-1,
Limited.
(p) PAYMENT OF PURCHASER'S FEES OF COUNSEL. In connection with the First
Closing, the Company shall pay to GE Capital Equity Investments, Inc., by wire
transfer in immediately available funds to such account as GE Capital Equity
Investments, Inc. shall specify for such purpose, the sum of thirty thousand
dollars ($30,000) in payment of the fees and expenses of outside counsel
retained by GE Capital Equity Investments, Inc. in connection with the
transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers that:
SECTION 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. So long as any Purchaser
owns any shares of Series E Preferred Stock purchased pursuant to this
Agreement, it shall be entitled to the following information:
(a) within one hundred twenty (120) days after the end of each fiscal year
of the Company a consolidated balance sheet of the Company and its Subsidiaries,
if any, as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, prepared in accordance with GAAP and certified by a "Big Five" firm
of independent public accountants of recognized national standing selected by
the Board of Directors of the Company;
(b) within thirty (30) days after the end of each month in each fiscal year,
a consolidated balance sheet of the Company and its Subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with GAAP and certified by the Chief
Financial Officer of the Company, or, if there is no Chief Financial Officer,
the Chief Executive Officer, such consolidated balance sheet to be as of the end
23
of such month and such consolidated statements of income, stockholders' equity
and cash flows to be for such month and for the period from the beginning of the
fiscal year to the end of such month, in each case with comparative statements
for the prior fiscal year;
(c) at the time of delivery of each annual financial statement pursuant to
Section 5.01(a), a certificate executed by the Chief Financial Officer of the
Company or, if there is no Chief Financial Officer, the Chief Executive Officer,
stating that such officer has reviewed this Agreement and the terms of the
Series E Preferred Stock contained in the Articles of Organization to be
reviewed and has no knowledge of any default by the Company in the performance
or observance of any of the provisions of this Agreement or the terms of the
Series E Preferred Stock contained in the Articles of Organization or, if such
officer has such knowledge, specifying such default and the nature thereof;
(d) at the end of each quarter, a quarterly management narrative report
explaining all significant variances from forecasts and all significant current
developments in staffing, marketing, sales and operations;
(e) no later than thirty (30) days prior to the start of each fiscal year,
excluding the fiscal year commencing on July 1, 2001, consolidated capital and
operating expense budgets, cash flow projections and income and loss projections
for the Company and its Subsidiaries in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
(f) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the Company
by its independent public accountants in connection with an annual or interim
audit of the books of the Company or any of its Subsidiaries;
(g) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries of the type described in
Section 2.06 involving the Company or any of its Subsidiaries that could
materially adversely affect the Company;
(h) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its stockholders or files with the Commission; and
(i) promptly, from time to time, such other material information regarding
the business, prospects, financial condition, operations, property or affairs of
the Company and its Subsidiaries as the Purchaser reasonably may request.
Notwithstanding anything else contained in this SECTION 5.01, if at any time,
the Company is subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the
Company's obligations pursuant to (b), (d), (e), (f), (g) and (i) above shall be
suspended for so long as the Company remains subject to such reporting
requirements of the Exchange Act.
24
SECTION 5.02 RESERVE FOR CONVERSION SHARES AND FOR CONVERSION OF SERIES E
SHARES. The Company shall, at all times, reserve and keep available at least
2,600,000 (or such other lower number as is at any time determined to be a
definite maximum number of shares of Common Stock for which the Warrants may be
exercised) unissued shares of Common Stock, for the purpose of effecting the
issuance of the Conversion Shares upon exercise of the Warrants and otherwise
complying with the terms of this Agreement. Additionally, for each share of
Series E Preferred Stock sold hereunder, the Company shall, at all times,
reserve and keep available at least ten (10) unissued shares of Common Stock,
for the purpose of effecting a conversion of such Series E Shares to Common
Stock in accordance with the Series E Certificate of Vote. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the issuance of the Conversion Shares upon exercise of the Warrants,
to effect a conversion of the Series E Shares and/or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
The Company will obtain any authorization, consent, approval or other action by
or make any filing with any court or administrative body that may be required
under applicable state securities laws in connection with the issuance of the
Conversion Shares upon exercise of the Warrants and the issuance of shares of
Common Stock upon a conversion of Series E Shares in accordance with the Series
E Certificate of Vote.
SECTION 5.03 CORPORATE EXISTENCE. The Company shall maintain and, except as
otherwise permitted by SECTION 5.14 cause each of its Subsidiaries to maintain,
their respective corporate existence, rights and franchises in full force and
effect.
SECTION 5.04 PROPERTIES, BUSINESS, INSURANCE. The Company shall maintain and
cause each of its Subsidiaries to maintain as to their respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall not cause or permit any
assignment or change in beneficiary and shall not borrow against any such
policy. If requested by Purchasers holding at least a majority of the
outstanding Series E Preferred Stock, the Company will add one designee of such
holders as a notice party for each such policy and shall request that the issuer
of each policy provide such designee with ten (10) days' notice before such
policy is terminated (for failure to pay premiums or otherwise) or assigned or
before any change is made in the beneficiary thereof.
SECTION 5.05 INSPECTION, CONSULTATION AND ADVICE. The Company shall permit
and cause each of its Subsidiaries to permit each Purchaser (or together with
its Affiliates) holding at least ten percent (10%) of the Units issued hereunder
on the Closing Date and such Persons as it may designate, at the Purchaser's
expense, to visit and inspect any of the properties of the Company and its
Subsidiaries, examine their books and take copies and extracts therefrom,
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with their officers, employees and public accountants (and the Company hereby
25
authorizes said accountants to discuss with such Purchaser and such designees
such affairs, finances and accounts), and consult with and advise the management
of the Company and its Subsidiaries as to their affairs, finances and accounts,
all at reasonable times and upon reasonable notice. Notwithstanding anything
else contained in this Section 5.05, if at any time, the Company is subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company's obligations pursuant hereto shall be suspended for so long as the
Company remains subject to such reporting requirements of the Exchange Act.
SECTION 5.06 RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor any
of its Subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement or the Articles of
Organization.
SECTION 5.07 TRANSACTIONS WITH AFFILIATES. Except for transactions
contemplated by this Agreement and for transactions on customary and reasonable
terms related to such Person's employment by the Company or any Subsidiary and
for arms-length transactions on commercially reasonable terms approved in
advance by the Board of Directors of the Company, neither the Company nor any of
its Subsidiaries shall enter into any transaction with (i) any Affiliate of the
Company or any Subsidiary, (ii) any employee of the Company or any Subsidiary,
(iii) any holder of more than five percent (5%) of the outstanding capital stock
of any class or series of capital stock of the Company or any of its
Subsidiaries, (iv) any member of the family of any Person set forth in clauses
(i), (ii) and (iii) above, or (v) any corporation, partnership, trust or other
entity in which any Person set forth in clauses (i), (ii), (iii) or (iv) above,
or member of the family of any such Person, is a director, officer, trustee,
partner or holder of more than five percent (5%) of the outstanding capital
stock thereof.
SECTION 5.08 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Units first in order to pay any accrued liabilities which have
become due in accordance with their terms and then to fund working capital.
SECTION 5.09 ACTIVITIES OF SUBSIDIARIES. Without the consent of the
Company's Board of Directors, the Company shall not permit any of its
Subsidiaries to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any of its Subsidiaries may (i)
consolidate or merge into or with or sell or transfer assets to any other
Subsidiary or (ii) merge into or sell or transfer assets to the Company. The
Company shall not sell or otherwise transfer any shares of capital stock of any
of its Subsidiaries, except to the Company or another of the Company's
Subsidiaries, or permit any of its Subsidiaries to issue, sell or otherwise
transfer any shares of its capital stock or the capital stock of any of its
Subsidiaries, except to the Company or another of its Subsidiaries. The Company
shall not permit any of its Subsidiaries to purchase or set aside any sums for
the purchase of, or pay any dividend or make any distribution on, any shares of
its stock, except for dividends or other distributions payable to the Company or
another of its Subsidiaries.
SECTION 5.10 COMPLIANCE WITH LAWS. The operations of the Company and its
Subsidiaries will be conducted in compliance with all Applicable Laws. Without
26
limiting the generality of the foregoing, the Company and all Affiliates shall
comply in all material respects with all lawful directives, orders,
instructions, bulletins and other announcements received from third party payers
and their agents (including, without limitation, Medicare carriers and fiscal
intermediaries) regarding participation in third party payment programs,
including, without limitation, preparation and submission of claims for
reimbursement.
SECTION 5.11 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep, and cause each Subsidiary to keep, adequate records and books of account,
in which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and such
Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
SECTION 5.12 CERTAIN TRANSACTIONS. At any time when twenty-five percent
(25%) or more of the Series E Shares issued at the First Closing are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of Series E Preferred Stock is required by law or by
the Articles of Organization or the Series E Certificate of Vote, and in
addition to any other vote required by law or by the Articles of Organization or
the Series E Certificate of Vote, without limitation of the rights, restrictions
and protections contained in the Articles of Organization or otherwise available
to holders of Series E Shares, the Company shall not (and shall undertake that
each Subsidiary shall not) take any of the following actions without the
affirmative written consent of the holders of a majority of the then outstanding
Series E Shares purchased hereunder given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a series:
(a) alter, change or amend (by merger or otherwise) any of the
rights, preferences or privileges of the Series E Preferred Stock;
(b) amend, restate, alter, modify or repeal (by merger or
otherwise) the Articles of Organization or By-Laws of the Company,
including, without limitation, amending, restating, modifying or
repealing (by merger or otherwise) (i) any certificate of vote of
resolution of the Board of Directors of the Company, including the
resolution of the Series E Preferred Stock establishing a class or
series of stock relating to any series of Preferred Stock or (ii) any
of the rights, preferences and privileges of any other class of Capital
Stock or the terms or provisions of any option or Convertible Security;
(c) (i) create, authorize or issue Senior Securities, Parity
Securities, Supervoting Securities or shares of any such class or
series (including, but not limited to, any authorized but unissued
shares of Series E Preferred Stock); (ii) create, authorize or issue
any securities (including Convertible Securities) convertible into, or
exercisable, redeemable or exchangeable for, shares of Senior
Securities, Parity Securities, or Supervoting Securities; (iii)
increase or decrease the authorized number of shares of Series E
Preferred Stock; or (iv) increase or decrease the authorized number of
shares of any class or series of Senior Securities, Parity Securities,
Supervoting Securities or shares of any such class or series;
27
(d) create, authorize or issue any Junior Securities or any
securities (including Convertible Securities) convertible into, or
exercisable, redeemable or exchangeable for, Junior Securities, in each
case either (i) at a price below the original issue price of the Series
E Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) or (ii) at a price which implies a value
per share of Common Stock below the conversion price of the Series E
Preferred Stock in effect immediately prior to the time of such
creation, authorization or issuance;
(e) (i) initiate or suffer to exist any Liquidation Event, (ii)
merge or consolidate with any other Person such that the holders of
shares of the Company's Capital Stock immediately prior to such
transaction become the beneficial owners, in the aggregate, of less
than fifty percent (50%) of the voting securities of the surviving
Person immediately after the transaction (determined on a fully-diluted
basis assuming the conversion of all Convertible Securities of such
Person) or (iii) otherwise discontinue or dispose of more than 10% of
the assets of its business;
(f) initiate or suffer to exist any recapitalization of the
Company, or reclassify any authorized Capital Stock of the Company into
any other class or series of Capital Stock of the Company;
(g) declare or pay any dividend or make any distribution
(including, without limitation, by way of redemption, purchase or other
acquisition) with respect to shares of Capital Stock of the Company or
any securities convertible into or exercisable, redeemable or
exchangeable for any share of Capital Stock of the Company (including,
without limitation, any such Convertible Security) directly or
indirectly, whether in cash, obligations or shares of the Company;
except for the declaration of a dividend for the sole purpose of
effectuating a stock split with respect to the Company's Common Stock;
(h) redeem any shares of the Company's Capital Stock;
(i) acquire, in one or a series of transactions, any equity
ownership interest, by way of merger or otherwise, in any Person, or
any asset or assets of any Person, where the aggregate consideration
payable in connection with such acquisition (including, without
limitation, cash consideration, the fair market value of any securities
and the net present value of any deferred consideration) is at least
$2,000,000;
(j) make any material change in the nature of its business as
conducted on the Closing Date;
(k) sell, transfer, convey, lease or dispose of, outside the
ordinary course of business, any material assets or properties of the
Company, whether now or hereafter acquired, in any transaction or
transactions that call for payments in excess of $500,000;
28
(l) establish or purchase any Subsidiary or invest in any
Affiliate, other than a Subsidiary that is (i) wholly-owned by the
Company or (ii) wholly-owned by another Subsidiary that is wholly-owned
by the Company;
(m) enter into any agreements, transactions or leases not in the
ordinary course of the Company's business as conducted on the Closing
Date, that call for payments in excess of $500,000;
(n) grant or suffer to exist any material lien, other than liens
which arise in the ordinary course of the Company's business as
conducted on the Closing Date;
(o) (i) incur any Indebtedness in excess of $500,000, except
Indebtedness of up to $17,000,000 pursuant to the Existing Financing,
or (ii) enter into, amend, extend or restate any loan agreement,
guaranty, capital lease or other borrowing arrangement with respect to
Indebtedness in excess of $500,000;
(p) become a party to leases (whether capital leases or operating
leases) during any fiscal year with respect to which the present value
of all payments due during the term of such leases in the aggregate
(determined using a discount rate of ten percent (10%)) exceed
$500,000;
(q) make capital expenditures exceeding $1,000,000 in the
aggregate during any fiscal year;
(r) make loans, advances or investments exceeding $250,000 in the
aggregate during any fiscal year; or
(s) enter into any agreement (or otherwise take any action) which
has the effect of or results in increasing management or executive
compensation by more than 10% during any fiscal year, excluding
agreements entered into prior to the date hereof.
SECTION 5.13 PUBLICATION MATTERS. The Company shall not use the name or logo
of General Electric Capital Corporation or Xxxxxxx Xxxxxxx Xxxxxxx Xxxxx IV L.P.
or any of either of their Affiliates (including without limitation General
Electric Company) in connection with any press releases or advertisements
without the prior written consent of General Electric Capital Corporation or
Xxxxxxx Xxxxxxx Xxxxxxx Booth IV L.P. and the prior written approval by General
Electric Capital Corporation or Xxxxxxx Xxxxxxx Xxxxxxx Xxxxx IV L.P. of the
form and content of any such press release or advertisement. The Company
consents to the publication by GE Capital Equity Investments, Inc. or Xxxxxxx
Xxxxxxx Xxxxxxx Booth IV L.P. of a tombstone or similar advertising material
relating to the financing transaction contemplated herein, which may include the
Company's name, business description and size of investment. In addition, the
Company agrees that GE Capital Equity Investments, Inc. or Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxx IV L.P. may use the Company's name and logo on such Person's
intranet and extranet websites among its list of representative investments and
29
may provide the Company's name and appropriate individual contacts to certain of
its portfolio companies for the purpose of securing supplier discounts or other
similar benefits for the Company.
SECTION 5.14 Certain Insurance and Liability Matters.
---------------------------------------
(a) So long as the Series E Preferred Stock is outstanding, the Company
shall ensure that each person serving on the Board of Directors on and after the
Closing Date shall receive at least $2,000,000 in directors' and officers'
liability insurance coverage on customary terms and conditions (including
coverage for liabilities arising before the date of taking office to the extent
arising from such person's status as a prospective member of the Board of
Directors). The Company shall at all times maintain provisions in its By-Laws
and Articles of Organization indemnifying all directors against liability and
absolving all directors from liability to the maximum extent permitted under the
laws of the Commonwealth of Massachusetts.
(b) The Company shall at all times maintain general liability insurance in
an amount not less than $10,000,000.
SECTION 5.15 Indemnification.
---------------
(a) The Company shall indemnify each Purchaser and its respective directors,
officers, employees and Affiliates from and against any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses and disbursements of any kind ("LOSSES") which
may be imposed upon, incurred by or asserted against such Purchaser or any other
indemnified party, relating to or arising out of any untrue representation,
breach of warranty or failure to perform any covenants or agreement by the
Company contained herein or in any certificate or document delivered pursuant
hereto.
(b) The Company shall indemnify each Purchaser and its respective directors,
officers, employees and Affiliates from and against any Losses resulting from or
related to any claims by third parties relating to or arising out of the
transactions contemplated hereby.
(c) If any Purchaser shall believe that such Purchaser is entitled to
indemnification pursuant to Section 5.14(a) or 5.14(b) in respect of any Losses,
such Purchaser shall give the Company prompt written notice thereof. Any such
notice shall set forth in reasonable detail and to the extent then known the
basis for such claim for indemnification. The failure of such Purchaser to give
notice of any claim for indemnification promptly shall not adversely affect such
Purchaser's right to indemnity hereunder except to the extent that such failure
materially adversely affects the right of the Company to assert any reasonable
defense to such claim. Each such claim for indemnity shall expressly state that
the Company shall have only the ten (10) day period referred to in the next
sentence to dispute or deny such claim. The Company shall have ten (10) days
following its receipt of such notice either (y) to acquiesce in such claim and
its respective responsibilities to indemnify the Purchaser in respect thereof in
accordance with the terms of this Section 5.14 by giving such Purchaser written
notice of such acquiescence or (z) to object to the claim by giving such
30
Purchaser written notice of the objection. If the Company does not object
thereto within such ten (10) day period, the Company shall be deemed to have
acquiesced in such claim and its responsibility to indemnify the Purchaser in
respect thereof in accordance with the terms of this Section 5.14.
(d) The Company shall reimburse the Purchasers for any attorneys' fees and
expenses constituting Losses pursuant to this Section 5.14 promptly and in no
event later than fifteen (15) days following receipt of a written invoice
therefore.
SECTION 5.16 KEY MAN INSURANCE. The Company shall maintain key man insurance
on customary terms and conditions in an amount not less than $1,000,000 on each
of Xxxxx X. Xxxxxx, Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx, and the Company shall
be named as sole beneficiary with respect to such insurance policies, for so
long as any of the Series E Shares remain outstanding.
SECTION 5.17 TERMINATION OF COVENANTS. The covenants set forth in this
Agreement shall terminate and be of no further force and effect as to each of
the Purchasers upon exchange or redemption of all of the then outstanding shares
of Series E Preferred Stock pursuant to their respective terms.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 EXPENSES. The Company shall pay all reasonable outside legal,
accounting fees and due diligence fees and expenses of GE Capital Equity
Investments, Inc. in connection with the transactions contemplated hereby;
PROVIDED, that, in connection with the First Closing, the Company's obligations
under this Section 6.01 shall be limited to payment of the sum of thirty
thousand dollars ($30,000) in accordance with Section 4.01(p) hereof.
SECTION 6.02 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made in this Agreement or any certificate or
instrument delivered to the Purchaser pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, the
issuance, sale and delivery of the Units, and the issuance and delivery of the
Conversion Shares, and all statements contained in any certificate or other
instrument delivered by the Company hereunder or thereunder or in connection
herewith or therewith shall be deemed to constitute representations and
warranties made by the Company.
SECTION 6.03 BROKERAGE. Each party hereto will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 6.04 PARTIES IN INTEREST. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
31
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of Units.
SECTION 6.05 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in Person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at 3700 East Columbia Street, Xxxxxxxxxxx Business
Park, Xxxxxx, Xxxxxxx 00000, Attention: Chief Executive Officer, with a copy to
Xxxxxxx Xxxx, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxx Xxxx, and
(b) if to any Purchaser, at the address of such Purchaser under its, his or
her signature to this Agreement.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.06 GOVERNING LAW; JURY TRIAL WAIVER. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the internal laws of the State of New York without regard to the conflict
of law principles thereof; except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement and as to those matters, the law of the jurisdiction
under which the respective entity derives its powers shall govern. The parties
irrevocably elect as the sole judicial forum for the adjudication of any matters
arising under or in connection with this Agreement and the transactions
contemplated hereby, and consent to the jurisdiction of, the courts of the
United States of America for the Southern District of New York and of the State
of New York in Manhattan in connection with the adjudication of any matter
arising under or in connection with this Agreement and the transactions
contemplated hereby, and waive any and all objections to such jurisdiction or
venue that they may have. The parties hereby waive any right to have trial by
jury in any action, suit or proceeding brought to enforce or defend any rights
or remedies arising under or in connection with this Agreement, whether grounded
in tort, contract or otherwise.
SECTION 6.07 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and shall be entitled to enforce specifically the provisions of this
Agreement in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
32
SECTION 6.08 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by the Company without the prior written
consent of the Purchasers, or by a Purchaser without the prior written consent
of the Company, except that each Purchaser may (a) without such consent, sell,
transfer, or otherwise convey any of the Series E Shares, the Warrants or the
Common Stock issued upon exercise thereof and the rights and obligations of such
Purchaser hereunder to any Affiliate of such Purchaser. With respect to any
transfer under clause (a) of the immediately preceding sentence, the applicable
transferee shall execute a counterpart to this Agreement prior to such transfer.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, and
no other person shall have any right, benefit or obligation hereunder.
SECTION 6.09 LIMITATION OF LIABILITY. In no event shall (a) any Affiliate of
any Purchaser, (b) any member or representative of any Purchaser or of any
Affiliate of such Purchaser or (c) any direct or indirect member, stockholder,
officer, director, limited partner, employee or any other such person of any
Purchaser or any Affiliate of such Purchaser, be personally liable for any
obligation of such Purchaser under this Agreement.
SECTION 6.10 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 6.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.12 AMENDMENTS. This Agreement may not be amended or modified, and
no provisions hereof may be waived, without the written consent of the Company
and the affirmative written consent of the holders of two-thirds (2/3) of the
then-outstanding shares of Series E Preferred Stock purchased hereunder at the
First Closing.
SECTION 6.13 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.14 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 6.15 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"ADDITIONAL CLOSING" has the meaning set forth in Section 1.03 hereof.
33
"AFFILIATE" means, with respect to a specified Person, (a) any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (b) any other Person that owns,
directly or indirectly, five percent (5%) or more of such specified person's
Capital Stock, (c) any employee or director of such specified Person, (d) any
member of the family of any Person specified in clauses (a), (b), and (c), or
(e) any corporation, limited liability company, partnership, trust or other
entity in which any Person set forth in clauses (a), (b), (c) or (d) above, or
member of the family of any such Person, is a director, officer, trustee,
partner or holder of more than five percent (5%) of the outstanding Capital
Stock thereof. For the purposes of this definition, "control," when used with
respect to any specified person, means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"AMENDED AND RESTATED CO-SALE AGREEMENT" has the meaning set forth in
Section 2.01 hereof.
"AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT" has the meaning set
forth in SECTION 2.01 hereof.
"APPLICABLE LAW" or "APPLICABLE LAWS" means any statute, law, rule or
regulation or any judgment, order, writ, injunction, decree or financial
assessment (subject, in the case of financial assessments, to the exhaustion of
appeals) of any Governmental Entity to which a specified Person or its
properties or assets, or its officers, directors, employees, consultants or
agents (in their capacities as such) is subject, including, without limitation,
all such statutes, laws, rules, regulations, judgments, orders, writs,
injunctions, decrees and financial assessments relating to, without limitation,
energy regulation, public utility regulation, securities regulation, consumer
protection, equal opportunity, health care industry regulation, public health
and safety, motor vehicle safety or standards, third party reimbursement
(including Medicare and Medicaid), environmental protection, fire, zoning,
building and occupational safety and health matters and laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours.
"APPROVALS" has the meaning set forth in Section 2.11(b) hereof.
"ARTICLES OF ORGANIZATION" has the meaning set forth in Section 2.02(a)
hereof.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
34
"CHAMPUS" has the meaning set forth in Section 2.21 hereof.
"CHANGE OF CONTROL" shall be deemed to have occurred upon (i) the
consummation of a tender for or purchase of more than fifty percent (50%) of the
Company's Common Stock by a third party, excluding the initial public offering
by the Company of any class of its Common Stock, (ii) a merger, consolidation or
sale of all or substantially all of the assets of the Company such that the
stockholders of the Company immediately prior to the consummation of such
transaction possess less than fifty percent (50%) of the voting securities of
the surviving entity immediately after the transaction or (iii) the sale or
transfer by any of Xxxx X. Xxxxxx, Xxxxx X. Xxxxxx or Xxxxxxx X. Xxxxxx of more
than twenty percent (20%) of his respective shares of capital stock of the
Company, in any of cases (i), (ii) or (iii) in a single transaction or series of
related transactions.
"CLOSING" has the meaning set forth in Section 1.02 hereof.
"CLOSING DATE" has the meaning set forth in Section 1.02 hereof.
"COMMON STOCK" has the meaning set forth in the recitals hereto.
"COMPANY" has the meaning set forth in the preamble hereto.
"CONVERSION SHARES" has the meaning set forth in Section 2.01 hereof.
"CONVERTIBLE SECURITY" means any stock or security, directly or indirectly,
convertible into or exchangeable for Capital Stock, including without limitation
any option, warrant or exchangeable debt security.
"CS" has the meaning set forth in Section 4.01(n) hereof.
"CURRENT CUSTOMER" has the meaning set forth in Section 2.27(a) hereof.
"CURRENT VENDOR" has the meaning set forth in Section 2.27(b) hereof.
"ENVIRONMENTAL CONDITION" means the Release or threatened Release of any
Hazardous Material (whether or not upon a Facility or any former Facility or
other property and whether or not such Release constituted at the time thereof a
violation of any Environmental Law) as a result of which the Company has or
would reasonably be expected to become liable to any Person or by reason of
which any Facility, any former Facility or any of the assets of the Company may
suffer or be subjected to any Encumbrances.
"ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" means any and all foreign,
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, legally binding decrees or other requirements of any
35
Governmental Entity (including, without limitation, common law) regulating,
relating to or imposing liability or standards of conduct concerning protection
of the environment or of human health relating to exposure of any kind of
Hazardous Materials, as have been, are now or may at any time hereafter be in
effect.
"ENVIRONMENTAL PERMIT" or "Environmental Permits" means any and all permits,
licenses, registrations, notifications, exemptions and any other authorizations
required under any Environmental Law.
"ERISA" has the meaning set forth in Section 2.15 hereof.
"EXCHANGE ACT" has the meaning set forth in Section 5.01 hereof.
"EXISTING FINANCING" shall mean the Credit Agreement dated as of June 10,
1999 between the Company, Citizens Bank of Massachusetts, as amended, and all
related security agreements, guaranties and other loan documents, as amended and
as in effect on the Closing Date.
"FACILITY" or "FACILITIES" means one or more of the offices and buildings
and all other real property and related facilities which are owned, leased or
operated by the Company or any Subsidiary.
"FEDERAL HEALTH CARE PROGRAM" has the meaning set forth in SECTION 2.21
hereof.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 2.07(a) hereof.
"FIRST CLOSING" has the meaning set forth in SECTION 1.02 hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect as of the date of
this Agreement.
"GOVERNMENTAL ENTITY" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state or local public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"HAZARDOUS MATERIAL" or "HAZARDOUS MATERIALS" means any hazardous substance,
gasoline or petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or
asbestos-containing materials, pollutants, contaminants, radioactivity and any
other materials or substances of any kind, whether solid, liquid or gas, and
whether or not any such substance is defined as hazardous under any
Environmental Law, that is regulated pursuant to any Environmental Law or that
could give rise to liability under any Environmental Law.
36
"INDEBTEDNESS" means, as to any Person without duplication, (a) all items
which, in accordance with GAAP, would be included as a liability on the balance
sheet of such Person and its Subsidiaries (including any obligation of such
Person to the issuer of any letter of credit for reimbursement in respect of any
drafts drawn under such letter of credit), (b) capital lease obligations of such
Person and (c) all obligations of other Persons that such Person has guaranteed,
including, without limitation, all obligations of such Person consisting of
recourse liabilities with respect to accounts receivable sold or otherwise
disposed of by such Person.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 2.10 hereof.
"JUNIOR SECURITIES" means any class or series of capital stock which ranks
junior to the Series E Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"KNOWLEDGE" "KNOWN" means, with respect to any Person, the actual knowledge
of such Person, after reasonable inquiry; provided, that a Person shall be
deemed to have actual knowledge of the contents of all books and records with
respect to which such Person has reasonable access; provided, further, and
without limiting the generality of the foregoing, with respect to any Person
that is a corporation actual knowledge shall be deemed to include the actual
knowledge of all principal employees of any such Person (including without
limitation each director, the Chief Executive Officer, President, Chief
Financial Officer and all Vice Presidents of such Person).
"LIABILITY" or "LIABILITIES" means, with respect to any Person, any
liability or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, secured or unsecured, joint or several, due or to
become due, vested or unvested, executory, determined, determinable or otherwise
and whether or not the same is required to be accrued on the financial
statements of such Person.
"LIQUIDATION EVENT" means any of the following events: (i) the commencement
by the Company of a voluntary case under the bankruptcy laws of the United
States, as now or hereafter in effect, or the commencement of an involuntary
case against the Company with respect to which the petition shall not be
controverted within 15 days, or be dismissed within 60 days, after commencement
thereof; (ii) the appointment of a custodian for, or the taking charge by a
custodian of, all or substantially all of the property of the Company; (iii) the
commencement by the Company of any proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company; (iv) the commencement against the Company of any
proceeding set forth in the preceding clause (iii), which is not controverted
within 10 days thereof and dismissed within 60 days after the commencement
thereof; (v) the adjudication of the Company insolvent or bankrupt, or the
adoption by the Company of a plan of liquidation, (vi) the occurrence of any
Change of Control with respect to the Company or (vii) the filing of a
certificate of dissolution in respect of the Company with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts; in any of cases (i) through
(vi) above, in a single transaction or series of related transactions.
37
"LOSSES" has the meaning set forth in Section 5.15(a) hereof.
"MATERIAL ADVERSE EFFECT" and "MATERIAL ADVERSE CHANGE" mean, with respect
to the Company or any of its Subsidiaries, any effect or change, as the case may
be, that individually or in the aggregate is material and adverse to the
business, financial condition, results of operations or prospects of the Company
and its Subsidiaries taken as a whole, provided that a Material Adverse Effect
and a Material Adverse Change shall not be deemed to have occurred as a result
of a change in general economic conditions.
"MATERIAL AGREEMENT" means all agreements to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound that are material to the conduct and operations of its business and
properties, including without limitation any agreements (i) which are not
terminable upon less than ninety (90) days notice, (ii) which provide for
payments to or by the Company or any of its Subsidiaries in excess of $600,000
annually, (iii) which obligate the Company or any of its Subsidiaries to share,
license or develop any product or technology or (iv) which involve transactions
or proposed transactions between the Company or any of its Subsidiaries, on the
one hand, and any Affiliate of the Company, on the other hand.
"PARITY SECURITIES" means any class or series of capital stock which ranks
on a parity with the Series E Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"PERSON" shall mean an individual, corporation, trust, partnership, joint
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
"PURCHASE PRICE" has the meaning set forth in Section 1.01 hereof.
"PURCHASER" or "PURCHASERS" has the meaning set forth in the preamble
hereto.
"RELEASE" means and includes any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Law.
"SENIOR SECURITIES" means any class or series of capital stock which ranks
senior to the Series E Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"SERIES E CERTIFICATE OF VOTE" has the meaning set forth in Section 2.04
hereof.
"SERIES E PREFERRED STOCK" has the meaning set forth in the recitals hereto.
38
"SERIES E SHARES" has the meaning set forth in Section 2.02(b) hereof.
"SSA" has the meaning set forth in Section 2.21 hereof.
"STATE HEALTH CARE PROGRAM" has the meaning set forth in Section 2.21
hereof.
"SUBSIDIARY" or "SUBSIDIARIES" shall mean, as to the Company, any
corporation, limited liability company or partnership of which more than fifty
percent (50%) of the outstanding equity securities having ordinary voting power
to elect a majority of the Board of Directors or other such governing body of
such corporation (irrespective of whether or not at the time equity of any other
class or classes of such entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by the Company, or by one or more of its Subsidiaries, or by the Company and one
or more of its Subsidiaries.
"SUPERVOTING SECURITIES" means any class or series of the Company's Capital
Stock the holders of which have the right to cast more than one vote per share
and/or have the right to elect one or more members of the Board of Directors,
voting as a class or series.
"TAXES" has the meaning set forth in Section 2.17 hereof.
"TRANSACTION DOCUMENTS" has the meaning set forth in Section 2.01 hereof.
"UNITS" has the meaning set forth in the recitals hereto.
"WARRANTS" has the meaning set forth in the recitals hereto.
* * * * *
(Signatures on following page)
39
IN WITNESS WHEREOF, the Company and each of the Purchasers have executed
this Unit Purchase Agreement as of the day and year first above written.
COMPANY: PRIMESOURCE HEALTHCARE, INC.
By: /S/ XXXXX X. XXXXXX
--------------------------------------
Name:
Title: President and Chief Executive Officer
Attest:
/S/ XXXXXXX X. XXXXXX
---------------------------
Secretary
PURCHASERS: GE CAPITAL EQUITY INVESTMENTS, INC.
By: /S/ XXXXX XXXXX
----------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
Address:120 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
XXXXXXX XXXXXXX XXXXXXX BOOTH IV L.P.
By:Its General Partner,
CSHB VENTURES IV L.P.
By: /S/ XXXXX X. XXXXXXX
----------------------------------
Name:Xxxxx X. Xxxxxxx
Title: Its General Partner
Address: 000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000-0000
WEBBMONT HOLDINGS, L.P.
/S/ XXXXXX X. XXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Signatory
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
/S/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
SCHEDULE I
----------
Purchasers
----------
Amount and Type of Units Purchase Price for Units
Purchaser to Be Purchased
------------------------------------------------------- ------------------------------------ -------------------------
Series E Shares - 200,000
GE Capital Equity Investments, Inc. Warrants - 1,000,000 $2,000,000
------------------------------------------------------- ------------------------------------ -------------------------
Series E Shares - 100,000
Xxxxxxx Xxxxxxx Xxxxxxx Xxxxx IV L.P. Warrants - 500,000 $1,000,000
------------------------------------------------------- ------------------------------------ -------------------------
Series E Shares - 20,000
Webbmont Holdings, L.P. Warrants - 100,000 $200,000
------------------------------------------------------- ------------------------------------ -------------------------
Series E Shares - 5,000
Xxxxxxx X. Xxxxxxx Warrants - 25,000 $50,000
------------------------------------------------------- ------------------------------------ -------------------------
======================================================= ==================================== =========================
Total Units and Purchase Price Series E Shares - 325,000 $3,250,000
Warrants - 1,625,000
------------------------------------------------------- ------------------------------------ -------------------------
SCHEDULE II
Security Holders
EXHIBIT A
Form of Share Certificate of Series E Preferred Stock
EXHIBIT B
Form of Warrant
EXHIBIT C
Form of Amended and Restated Co-Sale Agreement
EXHIBIT D
Form of Amended and Restated Registration Rights Agreement
EXHIBIT E
Articles of Organization and All Amendments Thereto
EXHIBIT F
By-Laws
EXHIBIT G
Series E Certificate of Vote
EXHIBIT H
Form of Opinion of Xxxxxxx Xxxx, Slate, Meager & Xxxx LLP
EXHIBIT I
Form of CS Certificate and Letter
June 28, 2001
Xxxxxxx Xxxxxxx Xxxxxxx Xxxxx IV L.P.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Re: Management Rights
-----------------
Ladies and Gentlemen:
This letter will confirm our agreement that in connection with your
purchase of those certain units ("Units") consisting of 100,000 shares of Series
E Convertible Preferred Stock of PrimeSource Healthcare, Inc. (the "Company")
and 500,000 warrants to purchase a number of shares of Company common stock, you
will be entitled to the following contractual management rights, in addition to
rights to certain non-public financial information, inspection rights and other
rights specifically provided to you under Article V of the Unit Purchase
Agreement of even date herewith:
(1) You hereby represent and warrant to the Company that your
organizational documents require that you qualify at all times as a "venture
capital operating company" within the meaning of the "plan asset regulations"
under the Employee Retirement Income Security Act of 1974, as amended.
(2) If and for so long as you do not have a representative on the
Company's Board of Directors ("Unrepresented Party"), you shall be permitted to
select one representative ("Representative") to consult with and advise
management of the Company on significant business issues, including management's
proposed annual operating plans, and at your request management will make itself
available to meet with your Representative within thirty (30) days after the end
of each fiscal quarter at the Company's facilities at mutually agreeable times
for such consultation and advice and to review progress in achieving said plans.
(3) If and for so long as you are an Unrepresented Party, your
Representative may examine the books and records of the Company and inspect its
facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided.
(4) If and for so long as you are an Unrepresented Party, the Company
shall invite your Representative to attend in a nonvoting observer capacity all
meetings of its Board of Directors and, in this respect, shall give your
Representative copies of all notices, minutes, consents, and other material that
it provides to its Directors; provided, however, that the Company reserves the
right to exclude your Representative from access to any material or meeting or
portion thereof if the Company believes upon advice of counsel that such
exclusion is reasonably necessary to preserve the attorney-client privilege, to
protect highly confidential proprietary information or for other similar
reasons. Your Representative may participate in discussions of matters brought
to the Board.
The rights described herein shall terminate and be of no further force
or effect upon the earliest to occur of (a) the closing of a public offering of
shares of the Company's capital stock pursuant to a registration statement filed
by the Company under the Securities Act of 1933 which has become effective
thereunder (other than a registration statement relating solely to employee
benefit plans or a transaction covered by Rule 145), (b) such time as the
Company becomes required to file reports with the Securities and Exchange
Commission under Sections 12(g) or 15(d) of the Securities Exchange Act of 1934,
or (c) such time as you hold, in the aggregate, less than 25,000 shares of
Series E Convertible Preferred Stock (and/or such number of other securities of
the Company as the Company may issue in exchange for its Series E Convertible
Preferred Stock), as adjusted from time to time for stock splits, stock
dividends and the like.
Very truly yours,
----------------------------------
AGREED AND ACCEPTED THIS 28TH DAY OF JUNE, 2001
XXXXXXX XXXXXXX XXXXXXX
BOOTH IV L.P.
By: Its General Partner
CSHB Ventures IV L.P.
By:
-------------------------
General Partner
CERTIFICATE AS TO DISQUALIFIED PERSONS
--------------------------------------
PrimeSource Surgical, Inc. (the "Company") hereby represents, warrants
and certifies to Xxxxxxx Xxxxxxx Xxxxxxx Xxxxx IV L.P. ("Xxxxxxx XX") that, to
the Company's knowledge, none of the persons listed on Exhibit A hereto holds,
directly or indirectly, any securities of the Company, including any securities
being issued on the date hereof, except for the persons set forth on Exhibit B
hereto, who hold the number and type of securities of the Company set forth
opposite the name of each such person on such Exhibit B, which securities
represent the percentage of the outstanding voting stock of the Company,
including any voting stock being issued on the date hereof, set forth opposite
the number of securities. For purposes of this Certificate, knowledge shall mean
actual knowledge or belief of direct or indirect holdings without any
investigation other than a review of the Company's stock records and Exhibit A
hereto. If holdings of securities of the Company are disclosed on Exhibit B, the
Company has previously provided Xxxxxxx XX with a copy of such Exhibit X.
Xxxxxxx XX may rely on this Certificate in connection with its
acquisition of shares of stock of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
the 28th day of June, 2001.
---------------------------------------
