AGREEMENT AND PLAN OF MERGER
By and Among
ALARIS MEDICAL, INC.
ALARIS MEDICAL SYSTEMS, INC.
XXXXXXX X. AND XXXXXXX X. XXXXXX
INSTROMEDIX, INC.
AND THE
SHAREHOLDERS
Dated June 24, 1998
PAGE
TABLE OF CONTENTS
Page
RECITALS 1
ARTICLE I
THE MERGER 1
1.1. The Merger 1
1.2. Effective Time of the Merger 1
1.3. The Closing 2
1.4. Articles of Incorporation 2
1.5. Bylaws 2
1.6. Directors and Officers 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
MERGER SUB AND THE COMPANY; MERGER CONSIDERATION;
POST-CLOSING ADJUSTMENT 2
2.1. Effect on Capital Stock and Options 2
2.2. Closing Balance Sheet Adjustment 3
2.3. Surrender and Payment 5
2.4. Taking Necessary Action; Further Action 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SEMLERS AND THE SHAREHOLDERS 6
3.1. Ownership of Shareholders' Stock 6
3.2. Authority; Enforceability 7
3.3. Prohibitions 7
3.4. Consents and Approvals of Governmental Authorities 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY 7
4.1. Description and Lists 8
4.2. Organization; Authority; Enforceability 10
4.3. Capitalization 11
4.4. No Violation 11
4.5. Consents and Approvals of Governmental Authorities 12
4.6. Financial Statements; No Undisclosed Liabilities;
Company Debt 12
4.7. Arrangements with Shareholders, Officers or Employees 13
4.8. Absence of Certain Changes 13
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PAGE
4.9. Title to Property; Leases; Encumbrances 15
4.10. Intellectual Property 15
4.11. Litigation; Compliance with Laws 16
4.12. Environmental Matters 17
4.13. Tax Matters 18
4.14. Benefit Plans 21
4.15. Labor Matters 22
4.16. Purchase and Sale Commitments 23
4.17. Insurance 23
4.18. Contracts 23
4.19. Finders and Investment Bankers 23
4.20. Approvals 23
4.21. Products 24
4.22. Distribution Agreements 24
4.23. Regulatory Matters 24
4.24. Millennium Compliance 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER 26
5.1. Organization; Authority and Enforceability. 26
5.2. No Violation 27
5.3. Consents and Approvals of Governmental Authorities 27
5.4. Finders and Investment Bankers 27
5.5. Litigation 27
5.6. Merger Sub 27
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING 28
6.1. Conduct of Business of the Company 28
6.2. Access to Information and Facilities 29
ARTICLE VII
ADDITIONAL AGREEMENTS 30
7.1. Advice of Change 30
7.2. Public Announcements 31
7.3. Books and Records 31
7.4. Senior Credit Agreement; Financing 31
7.5. Consents and Approvals 32
7.6. Cooperation Regarding Benefit Plans 32
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PAGE
7.7. Satisfaction of Closing Conditions 32
7.8. Tax Covenants 32
7.9. No Solicitation 34
7.10. Additional Instruments; Further Assurances 34
7.11. Antitrust Notification 34
7.12. CompressAR Business 34
7.13. Real Estate Matters 35
7.14. Option Exercise Period; Option Cancellation Agreements 35
7.15. FIRPTA Certificate 35
7.16. Creation of Merger Sub 35
7.17. Shareholder Indebtedness 36
7.18. Related Party Agreements 36
7.19. Agreements Regarding Katchis Patent 36
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF EACH PARTY 37
8.1. HSR Act 37
8.2. No Action or Proceeding; Compliance with Law 37
ARTICLE IX
CONDITIONS TO PURCHASER'S OBLIGATIONS 37
9.1. Representations and Warranties 37
9.2. Performance 37
9.3. Legal Opinions 38
9.4. Required Consents 38
9.5. Certificates 38
9.6. Resignation 38
9.7. Signature Authority 38
9.8. Waiver of Rights 38
9.9. Non-Competition Agreement 38
9.10. Certification of Minimum Shareholders' Equity and Net
Current Assets 38
9.11. Company Debt Payoff; Releases 39
9.12. Option Cancellation Agreements 39
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
39
10.1. Representations and Warranties 39
10.2. Performance 40
10.3. Opinion of Purchaser's Counsel 40
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PAGE
10.4. Certificates 40
10.5. Payment of Company Debt; Release of Guarantee 40
10.6. Merger Sub 40
ARTICLE XI
TERMINATION 40
ARTICLE XII
NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION 41
12.1. Survival of Representations, Warranties, etc. 41
12.2. Semlers' and Shareholders' Agreement to Indemnify 41
12.3. Parent and Purchaser's Agreement to Indemnify 43
12.4. Third Party Claims 43
12.5. Effect of Taxes and Insurance 45
12.6. Purchase Price Adjustment 45
12.7. Due Date; Interest 45
12.8. Remedies Exclusive 45
ARTICLE XIII
MISCELLANEOUS PROVISIONS 45
13.1. Representations/Covenants of the Shareholders and the
Company 45
13.2. Amendment and Modification 46
13.3. Waiver 46
13.4. Notices 46
13.5. Binding Nature; Assignment 48
13.6. Governing Law; Submission to Jurisdiction 48
13.7. Transactional Expenses 49
13.8. Counterparts 49
13.9. Headings; References 49
13.10. Entire Agreement 49
13.11. Drafting Conventions 49
13.12. Arbitration 49
13.13. Appointment of Shareholder Representative 50
ARTICLE XIV
GLOSSARY 51
14.1. Definitions 51
14.2. Terms Defined Elsewhere in the Agreement 59
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LIST OF SCHEDULES
Schedule 3.1 Ownership of Shareholders' Stock
Schedule 4.1(a) Real Property
Schedule 4.1(b) Intellectual Property
Schedule 4.1(c) Material Contracts
Schedule 4.1(d) Employees and Compensation Arrangements
Schedule 4.1(e) Banks
Schedule 4.1(f) Capital Expenditures
Schedule 4.1(g) Major Customers, Suppliers and Distributors
Schedule 4.1(h) Product Liability and Personal Injury Claims
Schedule 4.1(i) Powers of Attorney
Schedule 4.1(j) Insurance
Schedule 4.1(k) Product Warranties
Schedule 4.1(l) Approvals
Schedule 4.1(m) Distribution and Development Agreements
Schedule 4.2 Organization; Authority; Enforceability
Schedule 4.3 Capitalization
Schedule 4.4 No Violation of the Company
Schedule 4.6 Financial Statements; No Undisclosed Liabilities
Schedule 4.7 Arrangements with Shareholders, Officers or
Employees
Schedule 4.8 Absence of Certain Changes
Schedule 4.9 Title to Property; Leases; Encumbrances
Schedule 4.10 Intellectual Property
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Schedule 4.11 Litigation; Compliance With Laws
Schedule 4.12 Environmental Matters
Schedule 4.13 Tax Matters
Schedule 4.14 Benefit Plans
Schedule 4.15 Labor Matters
Schedule 4.16 Purchase and Sale Commitments
Schedule 4.18 Contracts
Schedule 4.20 Material Approvals (Except As Set Forth on
Schedule 4.23)
Schedule 4.21 Products
Schedule 4.23 Regulatory Matters
Schedule 7.12 CompressAR Business Assets and Liabilities
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LIST OF EXHIBITS
Exhibit A Shareholder Agreement and Consent
Exhibit B Articles of Merger
Exhibit C-1 Option Cancellation Agreement(Instromedix,Inc. Employees)
Exhibit C-2 Option Cancellation Agreement (Xxxxxxx X. Xxxxxx)
Exhibit D Promissory Note
Exhibit E Ralin License Agreement
Exhibit F Assignment and Assumption Agreement
Exhibit G Transition Services Agreement
Exhibit H-1 Consent and Estoppel Certificate for Oregon Property
Exhibit H-2 Consent and Estoppel Certificate for Washington Property
Exhibit I-1 Opinion of Xxxxxx & Xxxxxxx
Exhibit I-2 Opinion of Stoel Rives LLP
Exhibit J Officer and Secretary Certificate
Exhibit K Release and Waiver (Semlers, Shareholders, Board of
Directors)
Exhibit L-1 Non-Competition Agreement (Semlers)
Exhibit L-2 Non-Competition Agreement (Xxxxxxx X. Xxxxxx)
Exhibit M Closing Certificate
Exhibit N Opinion of Xxxxxx Xxxxxx Butowsky Xxxxxxx Xxxxxx & Xxxx
Exhibit O Merger Sub Signature Page
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated June 24, 1998, by and
among ALARIS Medical, Inc., a Delaware corporation ("Parent"), ALARIS Medical
Systems, Inc., a Delaware corporation ("Purchaser"), Instromedix, Inc., an
Oregon corporation (the "Company"), Xxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx
(together, the "Semlers") and each person named on the signature page hereof
under the caption "Shareholders" (each, a "Shareholder" and collectively, the
"Shareholders"). Unless otherwise defined herein, each capitalized term used
herein shall have the meaning attributed to it in the Glossary.
W I T N E S S E T H
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, Purchaser and the Company will enter into a business combination
transaction pursuant to which a newly-formed, wholly-owned Subsidiary of
Purchaser ("Merger Sub") will merge with and into the Company ("Merger"), with
the Company continuing as the surviving corporation and a wholly-owned
Subsidiary of Purchaser ("Surviving Corporation");
WHEREAS, the board of directors of each of Parent, Purchaser and the
Company have: (i) determined that the Merger would be fair to and in the best
interests of their respective shareholders and (ii) approved this Agreement and
the transactions contemplated hereby; and
WHEREAS, concurrently with the execution hereof and as a condition to
Parent and Purchaser entering into this Agreement, all of the shareholders of
the Company have entered into a Shareholder Agreement and Consent attached
hereto as Exhibit A ("Shareholder Consent").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, agreements and covenants hereinafter set forth, the
parties hereto, desiring to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. At the Effective Time and subject to the terms and
conditions contained herein, Merger Sub shall be merged with and into the
Company in accordance with the OBCA, the separate existence of Merger Sub shall
thereupon cease, and the Company shall be the Surviving Corporation of the
Merger and shall succeed to and assume all of the rights, properties,
franchises, liabilities and obligations of Merger Sub in accordance with the
OBCA and this Agreement.
1.2. Effective Time of the Merger. Subject to the
provisions of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing articles of merger in the form
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of Exhibit B ("Articles of Merger") with the Secretary of State of the State of
Oregon, as provided in the OBCA, as soon as practicable on or after the Closing
Date. The Merger shall become effective upon such filing or at such time
thereafter as is provided in the Articles of Merger ("Effective Time").
1.3. The Closing. The closing of the transactions contemplated hereby
("Closing") shall take place at 10:00 a.m. San Francisco time at the offices of
Xxxxxx & Xxxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, on the later
of (a) July 7, 1998 or (b) the second business day after termination or
expiration of the waiting period (or any extension thereof) applicable to the
Merger under HSR, unless another date, time or place is agreed to in writing by
Purchaser and the Company (the "Scheduled Closing Date"). The date of such
Closing is referred to herein as the "Closing Date". The parties hereto agree
that they will take all commercially reasonable action necessary to close the
transactions contemplated hereby on or before the Scheduled Closing Date.
1.4. Articles of Incorporation. The articles of incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
articles of incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the OBCA.
1.5. Bylaws. The bylaws of the Company as in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Corporation, until
duly amended in accordance with the terms thereof, of the articles of
incorporation of the Surviving Corporation and of the OBCA.
1.6. Directors and Officers. The directors and officers of Merger Sub
at the Effective Time shall be the directors and officers of the Surviving
Corporation until the successors of all such persons shall have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's articles of incorporation
and bylaws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
MERGER SUB AND THE COMPANY; MERGER CONSIDERATION;
POST-CLOSING ADJUSTMENT
2.1. Effect on Capital Stock and Options. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Stock or the holder of any shares of capital stock of Merger Sub:
(a) Each share of the capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and non-assessable share of common stock, par value $.01
per share, of the Surviving Corporation;
(b) Each share of Stock which is issued and outstanding immediately
prior to the Effective Time (subject to Section 2.1(c)) shall be converted into
the right to receive the Per Share Merger Consideration subject to the
provisions of Section 2.3;
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(c) Each share of Stock that is owned by the Company shall be canceled
and retired and shall cease to exist and no consideration shall be delivered or
deliverable in exchange therefor; and
(d) (i) Each outstanding and vested option or other Right to purchase
Stock (each, an "Option" and collectively, "Options") under the Company's Stock
Option Plan, the holder of which shall have entered into an option cancellation
agreement ("Option Cancellation Agreement") substantially in the form of Exhibit
C-1, shall be canceled in accordance with the terms of such Option Cancellation
Agreement in exchange for the right to receive from Purchaser on behalf of the
Surviving Corporation on the first business day after the Effective Time ("First
Business Day") an amount in cash (subject to reduction for any applicable
withholding Taxes) equal to the Option Value;
(ii) (x) Each outstanding Option (whether or not vested) under the
Company's Stock Option Plan, the holder of which shall not have entered into an
Option Cancellation Agreement, and (y) the unvested portion of any Option the
holder of which shall have entered into an Option Cancellation Agreement, shall
be canceled in accordance with the terms of such Option and the Stock Option
Plan without regard to whether the Effective Time occurs prior to the expiration
of the Option Notice Period;
(iii) The Xxxxxx Option shall be canceled in accordance with the terms
of
the Option Cancellation Agreement substantially in the form of Exhibit C-2
executed by Xxxxxxx X. Xxxxxx concurrently with the execution of this Agreement
in exchange for the right to receive on the First Business Day from Purchaser on
behalf of the Surviving Corporation an amount in cash (subject to reduction for
any applicable withholding Taxes) equal to the Option Value;
(iv) On the business day immediately preceding the Closing Date, the
Company shall deliver to Purchaser a certificate signed by Xxxxxxx X. Xxxxxx in
his capacity as Chief Executive Officer of the Company and Xxxxxxx X. Xxxxxx in
her capacity as Executive Vice President of the Company indicating: (A) each
holder of Options that has entered into an Option Cancellation Agreement; (B)
the aggregate amount ("Total Option Cancellation Amount") payable by the
Surviving Corporation pursuant to the Option Cancellation Agreements without
reduction for applicable withholding Taxes and (C) the aggregate applicable
withholding Taxes payable with respect thereto.
2.2. Closing Balance Sheet Adjustment.
(a) Within sixty (60) days after the Closing Date, Purchaser shall
cause to be prepared in consultation with the Shareholder Representative and
shall deliver to the Shareholder Representative a balance sheet of the Company
as of the close of business on the Closing Date, which balance sheet shall
reflect, among other things, total current assets, total current liabilities and
total shareholders' equity ("Closing Balance Sheet"). The Closing Balance Sheet
shall be prepared in accordance with GAAP applied in a manner and using policies
consistent with those utilized in preparing the Financial Statements (so long as
such policies are consistent with GAAP). The Closing Balance Sheet: (i) shall
exclude the book value of the net assets (other than going concern value or
other goodwill) of the CompressAR business if such business is transferred to
Newco pursuant to Section 7.12 (and shall not include any amount paid by Newco
therefor or accruals for any Taxes
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payable by the Company as a result of such transfer); (ii) shall provide for
Taxes as though the period commencing January 1, 1998 and ending on the Closing
Date were a taxable year (excluding Taxes arising from the transfer of the
CompressAR Net Assets to Newco if such assets are transferred pursuant to
Section 7.12); (iii) shall not reflect any effect of the exercise of any Options
after the Balance Sheet Date or the execution of any Option Cancellation
Agreements and (iv) shall reflect as a liability the full amount of any Excess
Transactional Expenses (except Excess Transactional Expenses, if any, that were
subtracted from the amounts paid under the promissory notes referred to in
Section 2.3) but shall not include any other Transactional Expenses. Without
limiting the requirement that all liabilities be reflected on the Closing
Balance Sheet, the parties agree that in preparing the Closing Balance Sheet,
Company Debt shall be classified as current or long-term without regard to the
existence of any default thereunder; provided, however, that all amounts paid at
Closing to satisfy in full the Company Debt (other than principal classified as
long-term) shall be classified as a current liability.
(b) If the Shareholder Representative does not dispute the amounts set
forth in the Closing Balance Sheet within fifteen (15) days after receipt
thereof, the Closing Balance Sheet shall be conclusive. If the Shareholder
Representative disputes any amount set forth in the Closing Balance Sheet, the
Shareholder Representative shall so notify Purchaser in writing (specifying his
objections and the reasons therefor in reasonable detail) within fifteen (15)
days following receipt thereof and the parties will use all reasonable efforts
to resolve any such disputes. If any such dispute (the amount of the dispute,
hereinafter the "Disputed Amount") cannot promptly be resolved (but in any event
within fifteen (15) days after submission of the written objections of the
Shareholder Representative), the parties agree that they will submit the matter
to the office of JAMS/Endispute located in San Francisco, California (or, if
none, then the office of JAMS/Endispute located closest to San Francisco,
California). The resolution of the dispute by JAMS/Endispute will be conclusive
and binding upon the parties. The fees and expenses incurred by the parties in
connection with the dispute shall be paid by the Shareholder Representative
and/or Purchaser in proportion to the amount: (i) in the case of the Shareholder
Representative, of the Disputed Amount determined by JAMS/Endispute to be paid
by the Shareholders and (ii) in the case of Purchaser, of the Disputed Amount
determined by JAMS/Endispute that need not be paid by the Shareholders. The
Closing Balance Sheet and the information set forth thereon, as finally
determined pursuant to this Section 2.2(b), is hereinafter referred to as the
"Final Closing Balance Sheet".
(c) If either: (i) the excess of total current assets over total
current liabilities as set forth on the Final Closing Balance Sheet is less than
$2,750,000 (such deficit, the "Net Current Assets Shortfall") or (ii) total
shareholder's equity as shown on the Final Closing Balance Sheet is less than
$2,000,000 (such deficit, the "Shareholders' Equity Shortfall"), then the
Semlers and the Xxxxxx Trusts, jointly and severally, and each of the Other
Shareholders, severally (with respect to each of the Other Shareholders only, to
the extent of its Shareholder Percentage), shall be liable to pay over to
Purchaser an amount in cash equal to the excess of: (i) the greater of the Net
Current Assets Shortfall or the Shareholders' Equity Shortfall over (ii) the
amount referred to in clause (d) of the definition of Purchase Price.
(d) Any payment required to be made under Section 2.2(c) shall be made
within five (5) days after the later of : (i) the final determination thereof
either by acceptance of the Closing Balance Sheet or final JAMS/Endispute award
or (ii) the date the promissory notes delivered pursuant
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to Section 2.3 are paid in full (the fifth day after the later of such events,
the "Due Date"), without setoff for any other matter, by wire transfer to an
account designated by Purchaser and shall, in addition to such amount, include
interest on the amount required to be paid calculated from the date of delivery
of the Closing Balance Sheet through the Due Date at a rate of ten percent (10%)
per annum compounded annually. Any payment to be made pursuant to Section 2.2(c)
which is not made on the Due Date shall bear interest at the rate of fifteen
percent (15%) per annum compounded annually from the Due Date until the date
paid.
2.3. Surrender and Payment.
(a) Upon surrender to Purchaser by each of the Shareholders of all of
the Certificates representing shares of Stock owned of record by such
Shareholder immediately prior to the Effective Time (or an affidavit declaring
such Certificates lost or stolen in a form reasonably acceptable to Purchaser
and an indemnity bond issued by a commercial surety company in a form and amount
reasonably acceptable to Purchaser): (i) Purchaser will deliver to each
Shareholder on behalf of the Surviving Corporation an amount in cash equal to
the Initial Percentage of the Per Share Merger Consideration with respect to
each share of Stock represented by such Shareholder's Certificates and (ii)
Parent will deliver to each Shareholder on behalf of the Surviving Corporation a
promissory note in the form of Exhibit D. Each of the Xxxxxx Trusts expressly
acknowledges and agrees that the amount of cash delivered pursuant to this
Section 2.3(a) shall be less than the Initial Percentage of the Per Share Merger
Consideration (if the CompressAR Net Assets are purchased by Newco) in order to
reflect the payment for the CompressAR Net Assets pursuant to Section 7.12. Each
of the Semlers, the Xxxxxx Trusts, Parent and Purchaser expressly acknowledges
and agrees that the full amount of the Shareholder Indebtedness shall be
satisfied in full through offset of the amounts payable under the promissory
notes issuable to each of the Xxxxxx Trusts pursuant to this Section 2.3(a) for
each promissory note in an amount equal to fifty percent (50%) of the full
amount of the Shareholder Indebtedness.
(b) After the Effective Time, each Certificate shall, until
surrendered, represent for all purposes only the right to receive such Per Share
Merger Consideration as provided herein.
(c) After the Effective Time, there shall be no further registration
of transfers of shares of Stock outstanding prior to the Effective Time. If,
after the Effective Time, certificates representing shares of Stock are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the Per Share Merger Consideration in accordance with the procedures set forth
in this Article II.
(d) Any portion of the Merger Consideration made available to the
Surviving Corporation that remains unclaimed by the holders of shares of Stock
six (6) months after the Effective Time shall remain with the Surviving
Corporation, and any such holder who has not exchanged his shares of Stock for
the Per Share Merger Consideration in accordance with this Article II prior to
that time shall thereafter look only to the Surviving Corporation for payment of
the Per Share Merger Consideration in respect of his shares, and the Surviving
Corporation shall be obligated to pay such Per Share Merger Consideration, but
such holder shall have no greater right against the Surviving Corporation than
may be accorded to general creditors under applicable law. Notwithstanding the
foregoing, the Surviving Corporation shall not be liable to any holder of shares
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of Stock for any amount paid to a public official pursuant to applicable
abandoned property laws. Any portion of the funds remaining unclaimed by holders
of shares of Stock as of a date which is immediately prior to such time as such
portion would otherwise escheat to or become property of any governmental entity
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation free and clear of any claim or interest of any person
previously entitled thereto.
(e) On the Final Payment Date, Parent shall deposit with the Surviving
Corporation an amount of cash sufficient to pay in full the promissory notes
delivered to the Shareholders pursuant to Section 2.3(a) and amounts for the
initial cash payment for shares of Stock not tendered as of the Final Payment
Date, if any. Surviving Corporation shall, for a period of six months following
the Closing Date, or until such time as all promissory notes issued hereunder
have been fully paid and retired, maintain sufficient working capital to pay the
aggregate sum due and owing under all outstanding promissory notes issued
hereunder.
2.4. Taking Necessary Action; Further Action. Parent, Purchaser, the
Company, the Semlers and the Shareholders, respectively, shall take all such
action as may be necessary or appropriate in order to effectuate the Merger as
promptly as possible following the Closing Date. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of either of Merger Sub or the Company, the officers and
directors of such corporations are fully authorized in the name of their
corporation or otherwise to take, and shall take, all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SEMLERS AND THE SHAREHOLDERS
The Semlers, the Xxxxxx Trusts and the Company, jointly and severally, hereby
represent and warrant to Parent and Purchaser that the statements contained in
this Article III are true and correct. Each of the Other Shareholders hereby
represents and warrants to Parent and Purchaser that the statements contained in
this Article III only with respect to himself are true and correct. The
Schedules delivered pursuant to this Article III shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
III and the disclosure in any paragraph shall qualify other paragraphs in this
Article III (with the exception of Schedule 3.1) to the extent that it is
clearly apparent from a reading of such disclosure that it also qualifies or
applies to such other paragraphs.
3.1. Ownership of Shareholders' Stock. Each of the Semlers and the
Shareholders is the owner, beneficially (other than Capital Consultants, Inc.
("CCI")) and of record, of the number of shares of Stock as set forth on
Schedule 4.3, and, except as set forth on Schedule 3.1, there exists no
Encumbrance of any kind with respect to such shares of each Shareholder's Stock.
Except as set forth on Schedule 3.1, neither the Semlers nor any Shareholder is
a party to any shareholders agreement, voting trust or other voting or similar
agreement with respect to the Stock.
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3.2. Authority; Enforceability. Each of the Semlers and the
Shareholders has the full right, capacity, power and authority to enter into
this Agreement and the Documents executed and delivered by such Shareholders or
the Semlers, as the case may be, and to consummate the transactions contemplated
hereby and thereby. This Agreement and the Documents executed and delivered by
the Semlers and the Shareholders have been duly executed and delivered by the
Semlers and such Shareholders and constitute valid and binding obligations
enforceable against the Semlers and the Shareholders in accordance with their
terms.
3.3. Prohibitions. After giving effect to Section 7.18, neither the
execution and delivery of this Agreement or any of the Documents executed and
delivered by the Semlers or by any Shareholder, the performance by the Semlers
or by each Shareholder of the obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby or thereby will: (a) with
or without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a default under, or cause or permit the
termination or the acceleration of the maturity of, any debt or obligation of
either of the Semlers or any Shareholder or require the payment of any
pre-payment or other penalty; (b) require notice to or the consent of any
Person, including, without limitation, any party to any agreement, commitment,
lease, license or other arrangement, including, without limitation, any right of
first refusal or similar right, to which either of the Semlers or any
Shareholder is a party, or by which the properties of any Shareholder or either
of the Semlers are bound or subject; (c) result in the creation or imposition of
any security interest, lien, or other encumbrance upon any property or assets of
either of the Semlers or any Shareholder under any agreement or commitment to
which he is a party, or by which the properties of any Shareholder or either of
the Semlers are bound or subject or (d) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or Governmental
Authority to which either of the Semlers or any Shareholder or the properties of
any Shareholder or either of the Semlers are bound or subject.
3.4. Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Authority is required to be made or obtained by either of the
Semlers or any Shareholder in connection with the execution or delivery by the
Semlers or any Shareholder of this Agreement or the Documents executed and
delivered by the Semlers or any Shareholder, as the case may be, the performance
by the Semlers or any Shareholder of his obligations hereunder or thereunder or
the consummation by either of the Semlers or any Shareholder of the transactions
contemplated hereby or thereby, other than pursuant to the HSR Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
The Semlers, the Xxxxxx Trusts and the Company, jointly and severally, and each
of the Other Shareholders, severally, hereby represent and warrant to Parent and
Purchaser that the statements contained in this Article IV are true and correct;
provided, that the representations and warranties of each of the Other
Shareholders contained in this Article IV are made to the actual knowledge of
each of such Other Shareholders only with respect to such Other Shareholder,
-7-
regardless of whether such representations or warranties are qualified as to
knowledge or due inquiry. The Schedules delivered pursuant to this Article IV
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV and the disclosure in any paragraph
shall qualify other paragraphs in this Article IV (with the exception of
Schedules 4.1(b), 4.3, 4.10 and 4.23) to the extent that it is clearly apparent
from a reading of such disclosure that it also qualifies or applies to such
other paragraphs. Whenever a statement in this Article IV is qualified by "to
the knowledge of any Person", or a similar phrase, it is intended to indicate
that such Person does not have actual knowledge of the inaccuracy or
incompleteness of such statement. Whenever a statement in this Article IV is
qualified by "to the Company's knowledge", or a similar phrase, it is intended
to indicate that none of the executive officers of the Company has actual
knowledge of the inaccuracy of such statement. Whenever a statement in this
Article IV is qualified by "to the knowledge", or a similar phrase, of CCI, it
is intended to indicate that, as to CCI, neither Xxxx Xxxxxxx nor Xxxxx Xxxxx,
as senior officers of CCI, has actual knowledge of the inaccuracy of such
statement.
4.1. Description and Lists. Schedules 4.1(a) through 4.1(m) contain
the following information and all such information is true, correct and
complete:
(a) Real Property. Schedule 4.1(a) sets forth: (i) a list of all
interests in real property owned, leased, subleased or otherwise used or claimed
by the Company, stating the location of such property and (ii) the name and
address of each landlord under the leased real property; (iii) the current
rental payments; (iv) expiration dates of the leases and (v) any renewal options
or purchase options;
(b) Intellectual Property. Schedule 4.1(b) sets forth a list and
description of all franchises, patents, trademarks, service marks, tradenames
(whether registered or unregistered), copyrights, corporate names and licenses
used in the conduct of the Company's business, or in which the Company has an
interest ("Listed Intellectual Property"), indicating any applications,
registrations, or filings associated therewith and indicating whether such
Listed Intellectual Property is owned or licensed, whether the Company is a
licensor of or licensee thereof and also stating the expiration dates of the
patent or license underlying such Listed Intellectual Property;
(c) Material Contracts. Schedule 4.1(c) sets forth:
(i) a list of each contract, agreement, commitment or understanding to
which the Company is a party or to which the Company or its properties are or
may be bound or subject, relating to any merger, reorganization, bankruptcy
proceeding, business acquisition, transaction or transactions for the
acquisition of all or any substantial portion of the stock, securities, assets
or business of any Person or involving the assumption of the liability of any
Person;
(ii) a list of each contract, agreement, commitment or understanding,
in each case to which the Company is a party or to which it or the properties of
the Company may be bound or subject, which provide for a period of performance
which extends beyond December 31, 2000 or involves any obligation to make
payments or right to obtain receipts, after the date of this Agreement, in each
case in excess of $100,000;
-8-
(iii) a list of all contracts, agreements, commitments or
understandings not
listed in any other Schedule that are material to the business of the Company or
involve any of the following, in each case, to which the Company is a party or
to which the Company or its properties are or may be bound or subject: (x) any
partnership, joint venture or other similar agreement or arrangement; (y) any
agreement that limits the freedom of the Company to compete in any line of
business or with any person or in any area or to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any assets or which would so limit
the freedom of Purchaser or its Affiliates after the Closing or (z) any
agreement, arrangement or understanding currently in effect (or which may
hereafter result in or require performance, obligation, duty or payment of any
kind) with or for the benefit of any of the Company's shareholders, the Semlers
or any relative or spouse of any of the foregoing (including all Indebtedness or
similar obligation to the Company of any of such Persons, specifying the
outstanding principal amount and accrued interest as of the date hereof);
(d) Employees and Compensation Arrangements. Schedule 4.1(d) sets
forth a list of: (i) the job title, current annual salary rates of, and required
and/or maximum bonuses payable to, all present officers, employees and agents of
the Company having an annual compensation in excess of $75,000 per year
(including commissions, benefits and bonuses) and (ii) all employment or
compensation agreements with each officer and employee of the Company (including
all severance, "stay-put" and similar agreements and all agreements which result
in the creation or occurrence of any right, duty or obligation based upon, or as
a result of, any change of control of the Company or its assets);
(e) Banks. Schedule 4.1(e) sets forth: (i) the name of every bank in
which the Company has an account or safe deposit box; (ii) the identifying
numbers of all such accounts and safe deposit boxes and (iii) the names of all
persons having power to borrow, discount debt obligations, cash or draw checks
or otherwise act on behalf of the Company in any dealings with such banks;
(f) Capital Expenditures. Schedule 4.1(f) sets forth a list of each of
the Company's approved capital expenditure projects (including without
limitation, each construction project) involving in excess of $100,000
including: (i) projects which have been commenced but are not yet completed;
(ii) projects which have not been commenced and (iii) projects which have been
completed in respect of which payment has been made, within the past twelve (12)
months.
(g) Major Customers, Suppliers and Distributors. Schedule 4.1(g) sets
forth a list of the ten (10) largest customers of the Company (based on annual
sales), the ten (10) largest suppliers to the Company and the ten (10) largest
distributors for the Company, for the year ended December 31, 1997;
(h) Products Liability and Personal Injury Claims. Schedule 4.1(h)
sets forth a list of all claims for damages for products liability or personal
injury due to, resulting from or associated with, any product manufactured or
supplied by the Company, now pending against the Company or which have been
pending against the Company at any time during the past three years;
-9-
(i) Powers of Attorney. Schedule 4.1(i) sets forth a list of the
names of all persons holding powers of attorney from the Company or authorized
to act as agents for the Company;
(j) Insurance. Schedule 4.1(j) sets forth a list of all policies of
fire, liability, title, products liability and other forms of insurance held by
the Company and all binders of insurance and all programs of self insurance
which relate to the Company, together with a list and brief description of all
claims of the Company which have been submitted to any insurer but have not been
finally disposed of;
(k) Product Warranties. Schedule 4.1(k) sets forth the
forms of the Company's product warranties that are currently applicable to
products sold by the Company or in respect of
which the Company is obligated;
(l) Approvals. Schedule 4.1(l) sets forth a list of all material
Approvals (including FDA premarket clearances) held by the Company or necessary
to the operation of the Company's business (provided that, with respect to
matters related to Environmental Laws the same may be listed on Schedule 4.12);
(m) Manufacturing, Distribution and Development Agreements. Schedule
4.1(m) sets forth a list of all material agreements, contracts or understandings
currently in effect to which the Company is a party related to the
manufacturing, distribution or development of any products or services of the
Company or any other Person.
The Company has made available to Purchaser true, correct and complete copies of
all documents, contracts, instruments and agreements which are referred to in
Schedules 4.1(a) through 4.1(m) and all amendments, modifications, supplements
or renewals with respect thereto.
4.2. Organization; Authority; Enforceability.
(a) (i) The Company is a corporation duly organized and validly
existing under the laws of the State of Oregon with all requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as currently being conducted. Complete and correct copies of the
articles of incorporation and bylaws, each as amended to date, of the Company
have been delivered to Purchaser. Such articles of incorporation and bylaws are
in full force and effect. The Company has no Subsidiaries.
(ii) The Company is duly qualified or licensed to do business as a
foreign
corporation in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties owned or leased by it
require such qualification, except to the extent the failure to so qualify would
not have a Material Adverse Effect with respect to the Company. Schedule 4.2
sets forth a true and complete list of all such jurisdictions in which the
Company is qualified or licensed to do business.
(b) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and the Documents executed and delivered by
the Company, to perform its
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obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Documents executed and delivered by the Company, the performance of the
Company's obligations hereunder and thereunder and its consummation of the
transactions contemplated hereby and thereby, including, without limitation the
Merger, have been approved by the vote of one-hundred percent (100%) of the
combined voting power of the Company's shareholders pursuant to the Shareholder
Consents and the unanimous vote of the Company's Board of Directors. No other
corporate actions or proceedings are necessary to authorize the execution and
delivery of this Agreement or the Documents executed and delivered by the
Company or the performance by the Company of its obligations hereunder or
thereunder, including, without limitation, the Merger, and, assuming this
Agreement constitutes the valid and binding agreement of Parent and Purchaser,
this Agreement constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(c) Upon consummation of the Merger in accordance with the terms
hereof, Purchaser will be the sole holder of the capital stock of the Surviving
Corporation, free and clear of all Encumbrances, and no Person previously owning
any capital stock in the Company, or any Rights with respect thereto, will
thereafter own or have any right to acquire, any of the capital stock of the
Surviving Corporation or any Rights with respect thereto; provided that no Other
Shareholder shall be deemed hereby to make any representation or warranty with
respect to the ownership or transfer of securities of the Company held of record
or beneficially by any Shareholder other than himself.
4.3. Capitalization. The authorized capital stock of the Company
consists of 47,500,000 shares of Voting Common Stock, no par value ("Voting
Common Stock") and 2,500,000 shares of Non-Voting Common Stock, no par value
("Non-Voting Common Stock"). As of the date hereof, 47,500,000 shares of Stock
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights. As of the
date hereof: (a) 2,500,000 shares of Non-Voting Common Stock are reserved for
issuance pursuant to Options granted and outstanding under the Company's Stock
Option Plan and (b) no shares of Stock are held by the Company in its treasury.
Set forth on Schedule 4.3 is a true and complete list of the names and last
known addresses of the record holders of each outstanding share of Stock and the
number of shares of Stock held by such record holders. Set forth on Schedule 4.3
is a true and complete list of all Rights with respect to the Stock, including,
without limitation, all outstanding Options granted pursuant to any of the
Benefit Plans, the number of shares of Stock for which such options are
exercisable, the option exercise price and the identity of the optionee, each of
whom is a current employee of the Company. The Stock listed on Schedule 4.3
constitutes all of the issued and outstanding securities of the Company. Except
as set forth in Schedule 3.1, there are no agreements or understandings with
respect to the voting of the Stock. There are no existing Rights relating to the
issuance by the Company of any Stock or any other security of the Company except
as set forth on Schedule 4.3.
4.4. No Violation. Except as set forth on Schedule 4.4 , neither: (a)
the Merger; (b) any other merger, consolidation or other organic transaction the
consummation of which would result in the Company not continuing as the
surviving entity; (c) the execution and delivery of this Agreement or any of the
Documents executed and delivered by the Company; (d) the performance by the
Company of its obligations hereunder and thereunder nor (e) the consummation of
the transactions contemplated hereby or thereby will: (i) violate any provisions
of the articles of
-11-
incorporation or bylaws of the Company; (ii) with or without the giving of
notice or the passage of time, or both, violate, or be in conflict with, or
constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any Indebtedness, contract, agreement,
instrument or obligation of the Company or require the payment of any
pre-payment or other penalty with respect to, or otherwise result in the
creation or occurrence of any right, duty or obligation based upon or as a
result of any change of control of the Company or its assets, under any debt,
contract, agreement, instrument or obligation; (iii) require notice to or the
consent of any party to any agreement or commitment, including without
limitation, any lease or license, to which the Company is a party, or by which
it or its properties is bound or subject or permit any such party to
renegotiate, receive a refund with respect to, modify or otherwise change any
agreement or commitment; (iv) result in the creation or imposition of any
Encumbrance upon any property or assets of the Company under any agreement or
commitment to which it is a party, or by which it or its properties is bound or
subject or (v) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or Governmental Authority to which the Company
or its properties is bound or subject.
4.5. Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Authority is required to be made or obtained by the Company in
connection with its execution or delivery of this Agreement, the performance by
the Company of its obligations hereunder or the consummation of the transactions
contemplated hereby, other than pursuant to the HSR Act and the filing of the
Articles of Merger.
4.6. Financial Statements; No Undisclosed Liabilities;
Company Debt.
a) The Company has delivered to Purchaser accurate and complete copies
of the audited balance sheets of the Company as at December 31, 1997 and 1996
(such balance sheet as of December 31, 1997 ("Balance Sheet Date") being
referred to herein as the "Balance Sheet") and the related audited statements of
income and retained earnings, cash flows and shareholders' equity for the years
ended December 31, 1997, 1996 and 1995, together with a report thereon by Price
Waterhouse LLP (collectively, the "Financial Statements"). Each of the Financial
Statements has been prepared in accordance with GAAP consistently applied
throughout the periods presented, and presents fairly the financial position,
results of operations, cash flows and shareholders' equity of the Company as at
the dates and for the periods indicated. Schedule 4.6(a) contains a special
purpose pro forma balance sheet ("1997 Special Purpose Balance Sheet") (absent
footnotes), prepared in a manner consistent with the Financial Statements,
setting forth the financial position of the Company as of December 31, 1997 and
a statement of income and retained earnings ("1997 Special Purpose Statement of
Operations") prepared in a manner consistent with the Financial Statements for
the year ended December 31, 1997, in each case as if the CompressAR Net Assets
had not been, at such time or at any time during such period, part of the
Company and the same fairly presents the financial position and operations of
the Company as of such date and for such period as if the actions required to be
taken by the Company pursuant to Section 7.12 (without taking into account the
purchase price to be paid by Newco thereunder) had occurred on December 31,
1996. In preparing the 1997 Special Purpose Balance Sheet and the 1997 Special
Purpose Statement of Operations, no adjustments have been made to the Financial
Statements other than for amounts which are primarily attributable to the
CompressAR Net Assets.
-12-
(b) Except: (i) as disclosed in the Balance Sheet or the notes
thereto; (ii) incurred in the ordinary course of business since December 31,
1997; (iii) disclosed on Schedule 4.6 or Schedule 4.13 or (iv) otherwise
contemplated by this Agreement, as of the date hereof, the Company does not have
any material liabilities, obligations or Indebtedness of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
asserted or unasserted).
(c) Schedule 4.6(c) sets forth, as of the date hereof, the outstanding
principal amount, accrued and unpaid interest and all unpaid fees due or to
become due under the Company Debt.
4.7. Arrangements with Shareholders, Officers or Employees. Except as
set forth on Schedule 4.7, the Company does not, directly or indirectly, have
any agreement, arrangement or understanding with or commitment or obligation to
or from any of its shareholders, officers, directors or employees (or any of
their respective Affiliates or Associates), whether written or oral, except as
disclosed on Schedules 4.1(c) and 4.1(d). Without limiting the generality of the
foregoing, no shareholder, officer, director or employee of the Company (or any
of their respective Affiliates or Associates) is, directly or indirectly, a
joint investor or co-venturer with, or owner, lessor, lessee, licensor or
licensee of any property, real or personal, tangible or intangible, owned or
used, by the Company and no such person is, directly or indirectly, a lender to
or debtor of the Company.
4.8. Absence of Certain Changes. Except as set forth on Schedule 4.8
and other than having entered into the Ralin License Agreement, since the
Balance Sheet Date, the Company has operated its business in the ordinary and
usual course and in a manner consistent with past practice, and without limiting
the generality of the foregoing, there has not been:
(a) any change or any event, occurrence, development or fact that
alone or in the aggregate has had, or would reasonably be expected to have, a
Material Adverse Effect with respect to the Company;
(b) any amendment to the Company's articles of
incorporation or bylaws;
(c) any declaration, setting aside or payment of any dividends,
payments or other distributions in cash, securities or property in respect of
the outstanding Stock;
(d) any split, combinations or reclassification of Stock or any
issuance, sale or other disposition of Stock or any Right with respect to Stock
or any repurchase or redemption of Stock or Right with respect to Stock;
(e) any employment contract or collective bargaining agreement,
written or oral, entered into or materially modified by the Company, any
increase in or agreement to increase the base compensation payable to or any
other material change in employment or compensation or benefits with respect to
any director, officer or employee, or adoption, repeal, amendment or
modification of any bonus, profit-sharing, retirement, deferred compensation,
incentive, severance or other Benefit Plan, contract or commitment by the
Company;
-13-
(f) any incurrence or assumption by the Company of any
material Indebtedness;
(g) the imposition of any material Encumbrance (other than a
Permitted Lien) upon any of the assets, tangible or intangible, of the Company;
(h) any material damage, destruction or loss with respect to the
properties or assets of the Company, whether or not covered by insurance;
(i) any payment, loan or advance of any amount to, or sale, transfer
or lease of any of the Company's assets to, or any agreement or arrangement
with, any shareholder of the Company or any of their respective Affiliates or
Associates;
(j) any change in the Tax or accounting principles, methods, practices
or procedures followed by the Company or any change in the depreciation or
amortization policies or rates theretofore adopted by the Company, except as
required by GAAP and disclosed to Purchaser;
(k) any change or revocation by the Company of any Tax election or any
agreement or settlement with any Taxing Authority;
(l) any acquisition by the Company by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(m) any sale, lease, or other transfer or disposition by the Company
of a material amount of its assets, tangible or intangible, other than for fair
consideration in the ordinary course of business in a manner consistent with
past practice;
(n) any Contract (or series of related Contracts) entered into by the
Company either involving more than $50,000 individually (or $100,000 in the
aggregate) or outside the ordinary course of business;
(o) any acceleration, termination, material modification or
cancellation of any Contract to which the Company is a party or by which it or
its properties is bound;
(p) any capital expenditure (or series of related capital
expenditures) by the Company either involving more than $50,000 individually (or
$100,000 in the aggregate) or outside the ordinary course of business;
(q) any capital investment in, any loan to or any acquisition of the
securities or assets of, any other Person;
(r) any material delay or postponement of payment of accounts payable
or other liabilities of the Company outside the ordinary course of business
consistent with past practice;
(s) any cancellation, compromise, waiver or release of any material
right or claim of the Company outside the ordinary course of business;
-14-
(t) any license or sublicense of any rights of the Company under or
with respect to its Intellectual Property; or
(u) any agreement, undertaking or legal obligation, whether in writing
or otherwise, by the Company to do any of the foregoing.
4.9. Title to Property; Leases; Encumbrances.
(a) Except as set forth on Schedule 4.9, the Company has good and valid
title to all assets (other than real property or interests in real property)
reflected on the Balance Sheet or thereafter acquired, except for those since
sold or otherwise transferred or disposed of in the ordinary course of business
consistent with past practice, in each case free and clear of Encumbrances
except Permitted Liens.
(b) The Company does not own and has never owned any fee interest in
any real property. Schedule 4.1(a) sets forth a complete list of all real
property and interests in real property leased by the Company ("Leased Real
Property"). The Company has a good and valid and binding leasehold interest in
the Leased Real Property, free and clear of all Encumbrances except Permitted
Liens. The Company has no obligations to perform any capital improvements and
all capital improvements required to be made by the Company under the leases are
fully paid for.
(c) The plants, buildings, structures and equipment of the Company are
substantially free of defects, are in good operating condition and repair and
have been reasonably maintained consistent with standards generally followed in
the industry (giving due account to the age and length of use of same, ordinary
wear and tear excepted), are substantially suitable for their present uses and,
in the case of plants, buildings and other structures (including, without
limitation, the roofs thereof), are structurally sound.
4.10. Intellectual Property. Except as set forth on Schedule 4.10: (a)
the Company holds all Intellectual Property, free and clear of all Encumbrances,
restrictions on use or transfer, whether or not recorded and has sole title to
and ownership of or has the full, exclusive right to use, for the life of the
proprietary right: (i) all Listed Intellectual Property and (ii) to the
knowledge, after due inquiry, of the Semlers, the Shareholders and the Company,
all other Intellectual Property; (b) the use of the Listed Intellectual Property
by the Company does not violate or infringe on the rights of any other Person,
(c) the use of the Other Intellectual Property by the Company does not, to the
knowledge of the Semlers, the Shareholders or the Company, violate or infringe
on the rights of any other Person; (d) none of the Semlers, any Shareholder nor
the Company has received any notice of any conflict between the asserted rights
of others and the Company with respect to any Intellectual Property; (e) all
filings and other actions necessary to acquire, maintain, register, renew and
perfect the rights of the Company to all Intellectual Property used by the
Company in its business or in which it has an interest have been duly made in
all jurisdictions where such rights are used by it; (f) the Company is in
compliance with all terms and conditions of the agreements relating to any item
listed on Schedule 4.1(b); (g) the Company is not and has not been a defendant
in any action, suit, investigation or proceeding relating to infringement or
misappropriation by the Company of any Intellectual Property; (h) the Company
has not been notified of any alleged claim of infringement or misappropriation
by the Company of any Intellectual Property; (i) none of the Semlers, any
-15-
Shareholder nor the Company has knowledge of any claim of infringement or
misappropriation by the Company of any Intellectual Property; (j) to the
knowledge (after due inquiry) of the Semlers, the Shareholders or the Company,
none of the Products the Company makes, has made, uses, or sells, infringes or
misappropriates any Intellectual Property right of any third party; (k) none of
the trademarks and service marks the Company uses infringes the trademark or
service xxxx rights of any third party; (l) the Company has not entered into any
agreement to indemnify any other person against any charge of infringement of
any Intellectual Property and (m) none of the material processes and formulae,
research and development results and other know-how relating to the Company's
business, the value of which to the Company is contingent upon maintenance of
the confidentiality thereof, has been disclosed to any Person other than Persons
bound by written confidentiality agreements listed on Schedule 4.10. The Company
has not received any response, whether verbal, written or otherwise, from or on
behalf of any Person sent a letter announcing the Company's acquisition of U.S.
Patent Number 4,803,625, the Company is not aware of any action pending or
threatened against the Company by any such Person with respect to the subject
matter of such letters and the March 1, 1996 letter from the Company addressed
to CDS - Pace Link furnished by the Company to Purchaser is identical in all
material respects to all of such letters. The Company has entered into a license
agreement with Ralin Medical, Inc., a true, correct and complete executed copy
of which is attached as Exhibit E (the "Ralin License Agreement").
4.11. Litigation; Compliance with Laws.
(a) Except as set forth on Schedule 4.11(a), there are no Legal
Proceedings pending or, to the knowledge (after due inquiry) of either of the
Semlers, any Shareholder or the Company, threatened against or involving the
Company. There is no outstanding judgment, order, writ, injunction or decree
against the Company or related to its assets (including any Intellectual
Property).
(b) There are no Legal Proceedings pending against, or to the
knowledge (after due inquiry) of either of the Semlers, any Shareholder or the
Company, threatened, against or affecting, the Company before any court or
arbitrator or any Governmental Authority which in any manner challenges or seeks
to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement.
(c) Except with respect to matters related to Environmental Law to the
extent disclosed on Schedule 4.12, the Company has complied in all material
respects and is in material compliance with all applicable laws, statutes,
rules, regulations, ordinances, orders, judgments and decrees, local, federal,
state, domestic or foreign (including, without limitation, applicable insurance
requirements, requirements of any Board of Fire Underwriters or similar body,
building, zoning, pension, fair employment, equal opportunity, safety, health,
procurement, reimbursement, consumer protection or similar laws, rules,
regulations and ordinances). No notice has been received by the Company, either
of the Semlers or any Shareholder, and neither the Company, either of the
Semlers nor any Shareholder has knowledge (after due inquiry) of any notice
being given, with respect to any violation of any such legal requirements. There
is no action or proceeding by the FDA, the Health Care Financing Agency or other
agency or part of the U.S. Department of Health & Human Services or any other
governmental body, including, but not limited to, recall procedures, pending or,
to the Company's, either of the Semlers' or any Shareholder's knowledge,
threatened against the Company,
-16-
either of the Semlers or any Shareholder relating to the safety or efficacy of
or use or charges for any products developed or sold by the Company.
4.12. Environmental Matters.
(a) The operations of the Company are currently and have at all times
been in compliance in all material respects with all applicable Environmental
Laws.
(b) To the Company's knowledge (after due inquiry), there are not
currently nor have there ever been any underground storage tanks on any real
property owned, operated or leased by the Company. No Hazardous Material has
been stored, generated, treated, discharged or Released in or upon any real
property owned, operated or leased by the Company during the period of such
ownership or before the period of the Company's or a predecessor of the
Company's ownership, lease or operation in violation of, or in a quantity
reportable under, any Environmental Law or that is reasonably likely to result
in any material Environmental Costs and Liabilities.
(c) The Company is not subject to any Environmental Costs and
Liabilities, and, to the Company's knowledge (after due inquiry), no facts or
circumstances exist which could give rise to any Environmental Costs and
Liabilities.
(d) Schedule 4.12 lists all Environmental Permits maintained by the
Company. Such Environmental Permits are all Environmental Permits necessary for
the Company's operations and: (i) the Company is in compliance in all respects
with such Environmental Permits; (ii) there are no Legal Proceedings pending
nor, to the Company's knowledge, threatened to revoke such Environmental
Permits; (iii) the Company has not received any notice from any Governmental
Authority to the effect that there is lacking any Environmental Permit required
for the current use or operation of any property owned, operated or leased by
the Company or any of its Affiliates and (iv) the consummation of the
transactions contemplated hereby will not constitute a transfer or assignment of
any such Environmental Permits nor will such consummation require any filing or
registration with or notice to any Governmental Authority and all such
Environmental Permits shall remain in full force after the Effective Time.
(e) Neither the Company nor any of its Affiliates nor, to the Company's
knowledge (after due inquiry), any predecessor of the Company or such
Affiliates, are subject to any outstanding written Order of any Governmental
Authority or other Person, or, to the knowledge of the Company, any federal,
state, local or foreign investigation respecting: (i) actual or alleged
violations of Environmental Laws, (ii) any Remedial Action or (iii) any
Environmental Costs and Liabilities. Neither the Company nor any of its
Affiliates, nor to the Company's knowledge (after due inquiry), any predecessor
of the Company or its Affiliates have received any written notice from any
Governmental Authority respecting any violation of Environmental Laws.
(f) There are no Legal Proceedings pending or, to the Company's
knowledge (after due inquiry), threatened against the Company or any of its
Affiliates, alleging the violation of any Environmental Law or Environmental
Permit.
-17-
(g) Neither the Company nor any of its Affiliates nor, to the
Company's knowledge, any predecessor of the Company or any of its Affiliates,
has filed any notice under federal, state or local law indicating past or
present treatment, storage, or disposal of or reporting a Release of any
Hazardous Material.
(h) None of the operations of the Company nor any of its Affiliates or,
to the Company's knowledge, of any predecessor of the Company or any of its
Affiliates, involves or previously involved the generation, transportation,
treatment, storage or disposal of Hazardous Waste, as defined under 40 C.F.R.
Parts 260-270 or any state, local or foreign equivalent.
(i) The Company has not received notice of liability or potential
liability at, nor are there any pending or threatened Legal Proceedings with
respect to, any facility at which the Company or its Affiliates, or to the
Company's knowledge, any predecessor of the Company or such Affiliates, has
transported, disposed of, or arranged for the transportation at or disposal of
any Hazardous Material.
(j) To the Company's knowledge (after due inquiry) there is no
asbestos, asbestos-containing building materials, polychlorinated biphenyls, or
urea formaldehyde presently in use or otherwise located at any real property
currently owned, operated or leased by the Company.
(k) There has been no environmental investigation, study, audit, test,
review or other analysis conducted in relation to the current or prior business
of the Company or any of its Affiliates, nor to the Company's knowledge (after
due inquiry), any predecessor of the Company or its Affiliates or any property
or facility now or previously owned or leased by any Shareholder, the Company or
any of their respective Affiliates, other than those listed on Schedule 4.12,
copies of which have been delivered to Purchaser.
4.13. Tax Matters.
Except as set forth on Schedule 4.13:
(a) All Tax Returns that were or will be required to be filed by, or
with respect to, the Company on or before the Closing Date have been or will be
filed on a timely basis in accordance with the laws, regulations and
administrative requirements of the appropriate Taxing Authority in all
jurisdictions in which such Tax Returns were or will be required to be filed.
All such income Tax Returns that have been filed were, when filed, and continue
to be, true, correct and complete, and all other Tax Returns that have been
filed were, when filed, and continue to be, true, correct and complete in all
material respects.
(b) All Taxes due and payable on or before the Closing Date have been
or will be timely paid on or before the Closing Date. All Taxes that the Company
was or will be required by law to withhold or collect have been (in the case of
those that were already required to be withheld or collected) or will be duly
withheld or collected and, to the extent required, have been (in the case of
those that were already required to be paid) or will be paid to the appropriate
Taxing Authority. There are no Tax Liens other than Permitted Liens, and will be
no Tax Liens other than Permitted Liens on the Closing Date, with respect to
Taxes upon any of the properties or assets, real or
-18-
personal, tangible or intangible, of the Company. Any liability of the Company
for Taxes not yet due and payable has adequately been provided for by the
Company on its Financial Statements (whether or not required to be disclosed
under GAAP).
(c) There is no action, dispute, suit, proceeding, investigation,
assessment, audit or claim now pending against, or with respect to, the Company
in respect of any Tax nor, to the knowledge of the Semlers, the Shareholders or
the Company, is any such action, dispute, suit, procedure, investigation,
assessment, audit or claim for additional Tax expected to be asserted by any
Taxing Authority. No Taxing Authority has proposed any adjustment with respect
to any action, dispute, suit, proceeding, investigation, assessment, audit or
claim against or with respect to the Company. All deficiencies proposed (plus
any interest, penalties and additions to Tax that were or are proposed to be
assessed thereon, if any) with respect to the Company have been paid. There are
no outstanding waivers or extensions of any statute of limitations relating to
either the filing of any Tax Return or the payment of any Tax for which the
Company may be liable and no Taxing Authority has either formally or informally
requested such a waiver or extension.
(d) To the knowledge of the Semlers, the Shareholders and the Company,
no claim has ever been made by any Taxing Authority in any jurisdiction in which
no Tax Return is filed by, or with respect to, the Company that the Company may
be subject to taxation by that jurisdiction.
(e) The Company has never been included in a consolidated, combined or
unitary Tax Return nor has the Company ever been a party to any tax sharing or
similar agreement or arrangement.
(f) The Company does not have any liability (whether contingent or
otherwise) for Taxes of any other Person: (i) under Treasury Regulations Section
1.1502-6 (or any successor provision thereto or any similar provision under
state, local or foreign law); (ii) as a successor or transferee or (iii) by
contract (whether written or unwritten).
(g) No consent to the application of Section 341(f)(2) of the Code has
been filed with respect to any property or assets held or acquired (or to be
acquired) by the Company.
(h) No property owned by the Company is property that Parent,
Purchaser or the Company will be required to treat as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately before the enactment of the
Tax Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code.
(i) The Company is neither subject to an adjustment, other than an
adjustment, if any, as a result of or following the Merger, under Section 481 of
the Code nor has been required by, nor has requested or received the permission
of, any Taxing Authority to change its method of accounting.
(j) Neither the Shareholders nor the Company are foreign persons within
the meaning of Section 1445 of the Code and the Company is not and has not been
a United States real
-19-
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(k) The Company does not have in effect any tax elections for Federal
income tax purposes under Sections 108, 168(g), 338 or 4977 of the Code.
(l) The Company was a validly electing "S" corporation within the
meaning of Sections 1361 and 1362 of the Code for the period commencing January
1, 1992 and terminating on July 10, 1996 and during that same period qualified
as an "S" corporation for state and local income tax purposes in all
jurisdictions which recognize such corporations in which Tax Returns were
required to be filed or Taxes required to be paid. Effective July 10, 1996, the
Company terminated all of its "S" elections for federal, state and local income
tax purposes in all jurisdictions in which Tax Returns were required to be filed
or Taxes were required to be paid. The Company has provided Purchaser with
copies of all "S" elections filed by the Company (or any predecessor) with any
Taxing Authority.
(m) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, give rise to the payment of any
amount that would not be deductible by Parent, Purchaser or the Company by
reason of Sections 162(m) or 280G of the Code or as excessive or unreasonable
compensation.
(n) The Company is not a party (other than as an investor) to any
industrial development bond.
(o) The Company has not, within the past three years, engaged in any
exchange with a "related person" (within the meaning of Code Section 1031(f))
under which the gain realized on such exchange was not recognized due to Section
1031 of the Code.
(p) Schedule 4.13(p) sets forth, as of December 31, 1997, for United
States Federal, state, local and foreign income tax purposes, the liabilities of
the Company, and the adjusted basis of the assets of the Company. Schedule
4.13(p) sets forth, as of December 31, 1997, for United States Federal income
Tax purposes, and where applicable, for state, local and foreign income Tax
purposes, the net operating losses, capital losses and credits, including any
carryovers thereof, of the Company. The Company does not have any net operating
loss carryover, capital loss carryover or credit carryover which is, prior to
the Merger, subject to restriction under Section 382 or Section 383 of the Code
(or any similar provisions under state, local or foreign law).
(q) The Company has provided Purchaser with copies of: (i) all Tax
Returns of the Company set forth on Schedule 4.13(q); (ii) any and all notices,
protests, or closing agreements relating to issues arising, or potentially
arising, in any audit, litigation or similar proceeding with respect to the
liability for Taxes of the Company; (iii) any and all elections or disclosures
of any controversial positions filed by or on behalf of the Company with any
Taxing Authority (whether or not filed with any Tax Return); and (iv) any and
all letter rulings, determination letters or similar documents issued by any
Taxing Authority with respect to the Company.
-20-
4.14. Benefit Plans.
(a) Schedule 4.14 sets forth a complete and correct list of all
"employee benefit plans", as defined in Section 3(3) of ERISA, and all plans,
programs, policies, arrangements or agreement with respect to employment,
termination, severance pay, vacation pay, company awards, salary continuation,
disability, sick leave, retirement, deferred compensation, bonus or other
incentive compensation, stock purchase, stock option or other equity-based
compensation, hospitalization, medical insurance, life insurance, educational
assistance, arrangements or other employee benefit arrangements (whether written
or oral) covering employees or former employees of the Company, or with respect
to which the Company has any obligation or liability ("Benefit Plans").
(b) True, correct and complete copies of the following documents, with
respect to each of the Benefit Plans, have been provided to Purchaser: (i) any
plans and related trust documents, including all amendments thereto, (ii) the
three most recent annual reports (Forms 5500) and schedules thereto, (iii) the
most recent financial statements and actuarial valuations if any, (iv) the most
recent IRS determination letter, (v) the most recent summary plan descriptions,
and (vi) the premium expenses and claims experience for each Benefit Plan which
is a welfare benefit plan for the period from January 1, 1996 to the last day of
the month preceding the date hereof.
(c) Each of the Benefit Plans intended to qualify under Section 401 of
the Code has been so qualified since its inception and has received a favorable
determination letter from the IRS as to such qualified status, and nothing has
occurred with respect to the operation of any such plan which could cause the
loss of such qualification or the imposition of any material liability, penalty
or tax under ERISA or the Code.
(d) Each of the Benefit Plans has been administered in accordance with
its terms and has been maintained in material compliance, in form and operation,
with all applicable laws, including, without limitation, ERISA and the Code.
Neither the Company nor, to the Company's knowledge, any "party in interest" or
"disqualified person" with respect to the Benefit Plans has engaged in a
non-exempt prohibited transaction within the meaning of Section 4975 of the Code
or Section 406 of ERISA.
(e) All contributions and premiums required to be made by law or by
the terms of any Benefit Plan or any agreement relating thereto have been timely
made, and no accumulated funding deficiency (as defined in Section 412 of the
Code) exists with respect to any of the Benefit Plans subject to Section 412 of
the Code. With respect to the Benefit Plans, individually and in the aggregate,
there are no funded benefit obligations for which contributions are due and have
not been made or for which contributions have not been properly accrued as
required by GAAP, and there are no unfunded benefit obligations which have not
been (i) accounted for by reserves (if required by GAAP) or (ii) if required
(and to the extent required, if any), properly disclosed in accordance with
GAAP, in the Balance Sheet.
(f) The Company does not currently maintain, sponsor, or contribute to
(nor is it required to contribute to) any "defined benefit plan" as defined in
Section 3(35) of ERISA, any "multiemployer plan" as defined in Section 3(37) of
ERISA or any "multiple employer plan" within the meaning of Sections 4063 or
4064 of ERISA. With respect to any "employee benefit plan" (as
-21-
defined in Section 3(3) of ERISA), or any similar plan maintained outside of the
United States, whether or not terminated, currently or formerly maintained or
contributed by the Company or any entity which was at any time treated as a
single employer, determined under Section 414(b), (c), (m) or (o) of the Code,
with the Company, no material liability currently exists (other than routine
benefit claims which in the aggregate are not material) and no event has
occurred and no condition exists, which could subject the Company, Parent and/or
Purchaser directly or indirectly (through an indemnification agreement or
otherwise) to any material liability (other than routine benefit claims which in
the aggregate are not material), including without limitation, any liability
under Title IV of ERISA, including without limitation Sections 4064, 4069 or
4204 of ERISA, or Section 412, 4971, 4975 or 4980B of the Code. The Company has
not engaged in, and is not a successor or parent corporation to an entity that
has engaged in, a transaction described in Section 4069 of ERISA.
(g) There have been no Legal Proceedings instituted or claims asserted
against any of the Benefit Plans, the assets of any such plans or the Company,
or the plan administrator or any fiduciary of the Benefit Plans with respect to
the operation of such plans (other than routine benefit claims), and, to the
knowledge of the Company, the Semlers and the Shareholders, there are no facts
or circumstances which are reasonably likely to form the basis for any such
Legal Proceeding or claims.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) result in any
payment becoming due to or increase any compensation of any current or former
director, officer or employee of the Company, (ii) increase any benefits
otherwise payable under any Benefit Plan, or (iii) result in the acceleration of
the time of payment or vesting of any such compensation or benefits.
(i) The Company does not provide, and is not obligated to provide,
medical, hospital, dental, life or other similar benefits to any current or
former employee after his or her termination of employment with the Company,
except as may be required under Section 4980B of the Code and Part 6 of Subtitle
B of Title I of ERISA.
(j) Except as set forth on Schedule 4.14, there is no contract,
agreement, plan or arrangement, covering any employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by virtue of Section 280G of the Code.
4.15. Labor Matters. Except as set forth on Schedule 4.15, since
December 31, 1996, the Company has not experienced any labor disputes or any
work stoppages due to labor disagreements and there is no such dispute or work
stoppage threatened against the Company. No employee of the Company is
represented by any union or collective bargaining agent and to the knowledge of
either of the Semlers, the Shareholders or the Company, there has been no union
organizational effort in respect of any employees of the Company since December
31, 1996. There are no pending or, to the knowledge of either of the Semlers,
the Shareholders or the Company, threatened Legal Proceedings by any Person or
Governmental Authority against the Company with respect to any violation or
alleged violation of any applicable federal, state or local laws, rules or
regulations: (a) prohibiting discrimination on any basis, including, without
limitation, on the basis of
-22-
race, color, religion, sex, disability, national origin or age or (b) relating
to employment or labor, including, without limitation, those related to
immigration, wages, hours or plant closing.
4.16. Purchase and Sale Commitments. Except as set forth on Schedule
4.16, none of the customers, suppliers or distributors listed on Schedule 4.1(g)
or (m) or Cygnus, Inc. has given any notification that any such Person will
cease to continue its relationship with the Company or will substantially reduce
the extent of such relationship.
4.17. Insurance. The insurance policies listed on Schedule 4.1(j) (or
other policies providing substantially similar insurance coverage) remain in
full force and effect. All premiums payable under all such policies have been
paid timely and the Company has otherwise complied fully with the terms and
conditions of all such policies. Neither the Company, either of the Semlers nor
any Shareholder has received any notice of any claims by the Company against any
policies of insurance owned by the Company, as to which any insurer is denying
liability or defending under any reservation of rights clause. The Company has
not received any notice of cancellation, non-renewal or termination in respect
of any of the insurance policies listed on Schedule 4.1(j).
4.18. Contracts. Except as set forth on Schedule 4.18, all of the
contracts, agreements, indentures, instruments, plans, leases, policies and
licenses listed or required to be listed on Schedule 4.1(c) to which the Company
is a party or by which it or any of its properties or assets may be bound or
subject and the Ralin License Agreement, are legal, valid and binding
obligations of the Company and the other parties thereto, enforceable in
accordance with their terms, are in full force and effect, and: (a) neither the
Company nor, to the knowledge (after due inquiry) of either of the Semlers, any
Shareholder or the Company, any other party thereto is in default or breach
under the terms of any such contract, nor, has any event or circumstance
occurred that, with notice or lapse of time or both, would constitute an event
of default thereunder and (b) there is no claimed or purported or alleged breach
or default of any obligation to be performed on the part of the Company
thereunder or of any other party thereto.
4.19. Finders and Investment Bankers. Neither the Shareholders nor the
Company nor any of their Affiliates have employed any broker, finder, investment
banker or financial advisor as to whom Parent, Purchaser or the Company has or
hereafter may have, an obligation to pay monies, or incurred any liability for
any brokerage fees or commissions or for any finders', investment banking or
financial advisory fees for which Parent, Purchaser or the Company may be
responsible, in connection with the transactions contemplated hereby, except
that the Company has retained BT Alex.Xxxxx Incorporated ("BT Alex.Xxxxx") as
its financial adviser, and Xxxxx XxxXxxxxx Incorporated as its financial
consultant, both of whose fees and expenses shall be paid by the Company
concurrently with the Closing. The Company has delivered to Purchaser a copy of
any retention or other agreement with BT Alex. Xxxxx and Xxxxx XxxXxxxxx
Incorporated (including all supplements and amendments thereto).
4.20. Approvals. The Company has obtained all material Approvals and
clearances applicable to its business and operations as presently conducted. All
such Approvals are held directly by the Company and not by a distributor or
other Person. The Company is not in default under any such Approvals and there
exists no basis for the termination, suspension or revocation of any of such
Approvals. Except as set forth on Schedule 4.20, the Merger will not constitute
a transfer or
-23-
assignment of any such Approval nor will such consummation require any filing or
registration with or notice to any Governmental Authority and all such Approvals
shall remain in full force and effect to the benefit of the Company following
the Merger.
4.21. Products. Set forth on Schedule 4.21 is a list of all of the products
manufactured or sold by the Company. Each of the products manufactured or sold
by the Company: (a) is, and at all times up to and including the sale thereof
has been, in compliance in all material respects with all applicable federal,
state, local and foreign laws and regulations and (b) is, and at all relevant
times has been, fit for the ordinary purposes for which it is intended to be
used and conforms in all material respects to any promises or affirmations of
fact made in all regulatory filings pertaining thereto, made on the container or
label for such product or made in connection with its sale. There is no design
or manufacturing defect with respect to any of such products. The Company has
not received written notice of any product warranty claims other than such
claims as do not exceed, in the aggregate, the applicable reserve therefor
reflected on the Balance Sheet. Warranty reserves are established and reflected
on the Financial Statements to insure that the estimated costs of providing
warranty services or upgrades, improvements and extended service pursuant to
contractual obligations are recognized in the period in which the sale of
products is recorded.
4.22. Distribution Agreements. Other than the distribution agreements
listed on Schedule 4.1(m), the Company is not a party to any agreement, Contract
or understanding which, following the Merger, would require Parent, Purchaser or
any of their Affiliates to distribute any products or services (other than the
products or services currently sold or offered by the Company) through any
Person, including, any distributor or dealer.
4.23. Regulatory Matters.
(a) Except as set forth on Schedule 4.23: (i) the Company, and the products sold
by the Company, are in compliance in all material respects with all current and
otherwise applicable statutes, rules, regulations, standards, guides or orders
administered or issued by the FDA and all other federal, foreign or state
agencies or governmental bodies (except for environmental agencies or bodies)
having regulatory authority over the products of the Company (except with
respect to environmental matters) and its business and (ii) the Company, and the
products sold by the Company, are in material compliance with all current and
otherwise applicable statutes, rules, regulations, standards, guides or orders
administered or issued by local agencies or governmental bodies (except for
environmental agencies or bodies) having regulatory authority over the products
of the Company (except with respect to environmental matters) and its business.
(b) Except as set forth on Schedule 4.23, since January 1, 1995 none
of the following communications have been given with respect to the Company or
its business and no facts exist which furnish any reasonable basis for, any
Notice of Inspectional Observation (Form FDA 483), Notice of Adverse Findings,
Warning Letters, Section 305 notices, subpoena, an Unacceptable Determination
under a GWQAP or other similar communication by any Governmental Authority, and
there have been no recalls, field notifications, alerts or seizures requested or
threatened relating to the products sold by the Company.
-24-
(c) The Company has made available to Purchaser a copy of all
premarket approval applications ("PMA") and premarket notification ("510(k)")
clearance or concurrence letters received from the FDA. A list identifying all
said PMAs and 510(k)s is contained in Schedule 4.23. The 510(k) or PMA for each
of the products of the Company is in compliance in all material respects with
the applicable federal, state and local statutes, rules, regulations, standards,
guides or orders administered or promulgated by the FDA and state or local
jurisdictions and all preclinical and clinical studies have been conducted with
recognized good clinical and good laboratory practices in all material respects.
Schedule 4.23 contains a complete list of all of the Company's products not
marketed under an approved PMA or 510(k).
(d) The Company has made available to Purchaser for each clinical
investigational use of a device conducted by or on behalf of the Company since
March 1, 1995 a copy of each claimed investigational device exemptions ("IDE")
including those filed with or approved by the FDA, by or on behalf of the
Company, and not otherwise encompassed within the preceding two paragraphs.
Schedule 4.23 contains a complete list of all such IDEs. All such IDEs are in
compliance in all material respects with the applicable federal, state and local
statutes, rules, regulations, standards, guides or orders administered or
promulgated by the FDA or state or local jurisdiction, including but not limited
to those pertaining to informed consent. Schedule 4.23 contains a complete list
of all of the Company's clinical investigations not conducted under an IDE.
(e) Except as set forth on Schedule 4.23, neither any Shareholder, the
Company, nor the Semlers knows of any facts which are reasonably likely to
cause: (i) the denial, withdrawal, recall or suspension of any product sold or
intended to be sold by the Company; (ii) a change in the marketing
classification or labeling of any such products or (iii) a termination or
suspension of marketing of any such products.
(f) Schedule 4.23 contains an accurate and complete list of: (i) all
products manufactured, marketed or sold by the Company or in connection with its
business which have been recalled or subject to a field notification (whether
voluntarily or otherwise) since January 1, 1995 and (ii) all proceedings
occurring on or after January 1, 1995 (whether completed or pending) seeking
recall, suspension or seizure of any product sold or proposed to be sold by the
Company or in connection with its business.
(g) The Company has made available to Purchaser in a manner so as to
provide Purchaser an opportunity to review all FDA inspection reports ("Forms
483s") since January 1, 1995, and the Company's Responses to such Form 483s and,
to the extent it has a copy, all of the FDA Establishment Inspection Reports for
all FDA inspections of the Company's facilities since January 1, 1995. The
Company has also furnished Purchaser with access to selected internal audit
reports (as required by 21 C.F.R. ss.820.22) conducted by the Company since
January 1, 1995. Schedule 4.23 contains an accurate and complete list of all
such Forms 483s, Responses and FDA Established Inspection Reports and internal
audit reports.
(h) The Company has made available to Purchaser in a manner so as to
provide Purchaser an opportunity to review copies of all Medical Device Reports
(as required by 21 C.F.R. Part 804) filed by the Company, and maintained by such
person (as required by 21 C.F.R. Part 804).
-25-
Schedule 4.23 contains a complete list of all Medical Device Reports sent to or
received by the Company since March 1, 1996.
(i) The Company has made available to Purchaser all Complaints (as
required by 21 C.F.R. Part 820) maintained by the Company (as required by 21
C.F.R. Part 820) since March 1, 1996. Schedule 4.23 contains a complete list of
all Complaints received by the Company since March 1, 1996.
(j) The Company has made available to Purchaser copies of all labels
for all of the Company's products in the Company's possession. Except as set
forth on Schedule 4.23, all labels are in material compliance with all
applicable FDA and similar federal, state, local and foreign requirements.
(k) The Company has made available to Purchaser copies of all
regulatory approvals obtained from any foreign regulatory agencies related to
the products distributed and sold by the Company. Schedule 4.23 contains a list
of all non-FDA approvals and all products marketed by the Company outside the
United States for which regulatory clearance or authority to market will not
reasonably be expected to be completed on or before June 1, 1998.
4.24. Millennium Compliance. All computer and
information programs and technology included in the assets of the Company are
Millennium Compliant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Each of Parent and Purchaser hereby represents and warrants to the Company that
the statements contained in this Article V are true and correct. Whenever a
statement in this Article V is qualified by "to the knowledge of Parent or
Purchaser", or a similar phrase, it is intended to indicate that neither the
executive officers of Purchaser nor the executive officers of Parent have actual
knowledge of the inaccuracy of such statement.
5.1. Organization; Authority and Enforceability.
(a) Each of Parent and Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation with all requisite power to enable it to own, lease and operate
its assets and properties and to conduct its business as currently being
conducted and is qualified to do business as a foreign corporation in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it requires such
qualification, except to the extent the failure so to qualify would not have a
Material Adverse Effect with respect to Parent or Purchaser. Complete and
correct copies of the certificate of incorporation or articles of incorporation
and bylaws, each as amended to date, of Parent and Purchaser have been made
available to the Company.
-26-
(b) Each of Parent and Purchaser has all requisite corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the Documents executed by either or both of Parent and
Purchaser and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of Parent and Purchaser, as applicable. This Agreement has been duly executed
and delivered by Parent and Purchaser, and the Documents to be signed by them
will at the Closing have been duly executed and delivered by Parent and
Purchaser, and this Agreement constitutes the legal, valid and binding
obligation of Parent and Purchaser, and the Documents to be signed by them will
at the Closing constitute the legal, valid and binding obligations of Parent and
Purchaser, enforceable against Parent and Purchaser in accordance with their
respective terms.
5.2. No Violation. Except for the approvals, waivers or consents
under, and required amendments to, the Senior Credit Agreement, neither (a) the
Merger, (b) the execution and delivery of this Agreement or the other Documents
executed and delivered by Parent or Purchaser, (c) the performance by Parent and
Purchaser of their obligations hereunder and thereunder nor (d) the consummation
of the transactions contemplated hereby or thereby will violate any provisions
of the certificates of incorporation or bylaws of Parent or Purchaser or
violate, or be in conflict with, or allow the termination, or constitute a
default under, or cause the acceleration of the maturity of, any debt or
obligation pursuant to any agreement or commitment to which Parent or Purchaser
is a party or by which it is bound, or violate any statute, any law or any
judgment, decree, order, regulation or rule of any court or Governmental
Authority to which Parent or Purchaser is subject.
5.3. Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Authority is required to be made or obtained by Parent or Purchaser
in connection with the execution, delivery and performance of this Agreement or
the Documents executed and delivered by Parent or Purchaser or the consummation
by Parent and Purchaser of the transactions contemplated hereby and thereby,
other than pursuant to the HSR Act and filing the Articles of Merger.
5.4. Finders and Investment Bankers. Neither Purchaser nor any of its
Affiliates have employed any broker, finder, investment banker or financial
advisor as to whom any Shareholder has or hereafter may have, an obligation to
pay monies, or incurred any liability for any brokerage fees or commission or
for any finders', investment banking or financial advisory fees for which the
Company would incur any liability in the event the transactions contemplated
hereby are not consummated.
5.5. Litigation. There are no Legal Proceedings pending against, or to
the knowledge (after due inquiry) of Parent or Purchaser threatened against or
affecting, Parent or Purchaser before any court or arbitrator or any
Governmental Authority which in any manner challenges or seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement.
5.6. Merger Sub. The representations are warranties contained in
Section 5.1 through 5.5 shall be applicable to and deemed to have been made by
Merger Sub as of the Closing with respect to itself, Parent and Purchaser.
-27-
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING
6.1. Conduct of Business of the Company. Except as otherwise
contemplated by this Agreement (including Section 7.12) or without the prior
written consent of the Purchaser, from the date of this Agreement to the Closing
Date, the Company shall (and the Semlers shall cause the Company to), conduct
its operations in the ordinary and usual course of business consistent with past
practice, and in connection therewith the Company shall use its best efforts to
preserve its business and the business organization of the Company intact, keep
available the services of the Company's officers and employees and maintain
satisfactory relationships with suppliers, customers, distributors and others
having business relationships with the Company (and in connection therewith will
pay payables and collect receivables in the ordinary course consistent with past
practice). Except as expressly contemplated by this Agreement, the Company will
not do any of the following, without the prior written consent of Purchaser:
(a) amend its articles of incorporation or bylaws;
(b) declare or pay any dividend or make any other distributions to its
shareholders;
(c) redeem or otherwise acquire, issue or sell any Stock or issue any
capital stock or any Right or amend any material term of any Stock or Right;
(d) adopt, enter into, terminate or amend any Benefit Plan or
collective bargaining agreement that would increase the expense of maintaining
any Benefit Plan or collectively bargained agreement;
(e) make or grant to any executive officer, director or employee any
increase in compensation or benefits, except as may be required under existing
agreements disclosed to Purchaser, or grant, agree or otherwise become obligated
to pay (whether on the occurrence of any future event or otherwise) any
severance or termination pay to any officer, director or employee of the
Company;
(f) incur or assume any liabilities or obligations other than in the
ordinary course of business consistent with past practice, or incur or assume
any Indebtedness (other than drawings on the Company's existing $3,000,000
revolving credit facility with the U.S. National Bank of Oregon which drawings
shall be used solely for the Company's working capital purposes and other than
an extension (for which no material consideration shall be paid) to no later
than September 1, 1998 of the Company's guaranty of the Xxxxxx'x indebtedness to
CCI); provided, that any such extension shall not relieve CCI from its
obligations under Sections 7.18 and 9.8 to release the Company from the
Company's obligations to CCI at the Closing;
(g) enter into any agreement or arrangement with any shareholder of
the Company or any Affiliate or Associate thereof, or make any additional
advances to any such Person;
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(h) make any change in any accounting practice or policy other than as
required in accordance with GAAP;
(i) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets (other
than inventory and raw materials acquired in the ordinary course of business
consistent with past practice);
(j) sell, lease or otherwise dispose of any assets (other than
inventory or raw materials sold or otherwise disposed of in the ordinary course
of business in a manner consistent with past practice or as contemplated in
Section 7.12);
(k) abandon, surrender, terminate or amend in any material manner the
terms of any Approval or material contract;
(l) enter into any agreement, contract or understanding which,
following the Merger, would require Purchaser to distribute any products or
services (other than the products or services currently being sold or offered by
the Company) through any Person, including, without limitation, any distributor
or dealer, except in connection with action permitted by Section 6.1(m);
(m) enter into any license agreement, contract or any other arrangement
or understanding regarding, or waive or abandon any rights with respect to,
Intellectual Property, terminate or amend in any respect the Ralin License
Agreement or settle any claims with respect to the matter referred to on
Schedule 4.10 relating to PaceArt (the "PaceArt Matter"); provided, however,
that the Company may, in consultation with Purchaser, enter into arrangements
relating to the PaceArt Matter to the extent such arrangements are disclosed on
Schedule 4.10 and which in all material respects are consistent with the terms
disclosed on Annex I to Schedule 4.10 (PaceArt Term Sheet); or
(n) agree to any of the foregoing.
6.2. Access to Information and Facilities. From the date hereof until
the Closing Date, the Company will afford the officers, employees,
representatives, consultants, financing sources and agents of Purchaser full and
complete access to any and all premises, properties, contracts, books, records,
employees, representatives, consultants, Tax Returns and affairs of the Company
(including, without limitation, access to properties in order to conduct
environmental audits and reviews and access to all documents maintained or
required to be maintained by the FDA and other United States, foreign, state
and/or local agencies) and will cause its officers to furnish any and all
financial, technical and operating data and other information pertaining to the
Company (including any and all information relating to Intellectual Property),
as Purchaser shall from time to time reasonably request in order to conduct
operational and organizational reviews, strategic and tactical planning, due
diligence and environmental audits and reviews, all in a manner that will not
unnecessarily or unreasonably disrupt the Company's operations. To the extent
commercially reasonable, Purchaser will confine its investigation, requests and
presence on the Company's property to normal business hours. The Company shall
also make available to Purchaser's transition structuring team of
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employees, consultants and advisors reasonable working space at its facilities.
The Semlers shall direct the Company's officers, employees, representatives,
consultants and agents to furnish any and all financial, technical and
operational data and other information (including any and all information
relating to Intellectual Property) relating to the Company, as Purchaser shall
reasonably request in connection with the foregoing activities, the transactions
contemplated hereby and Purchaser's anticipated conduct of the Company's
business. The parties understand that the purpose of this provision is to permit
Purchaser to conduct an ongoing due diligence review (acknowledging that
Purchaser may not condition the Closing based on its due diligence review) and
to permit Purchaser to arrange for a smooth transition in connection with the
transactions contemplated hereby. The Semlers shall cause the Company to
cooperate reasonably so as to permit Purchaser to achieve these goals. All
information provided to Purchaser in connection with the transactions
contemplated hereby shall be subject to the terms of that certain
confidentiality agreement entered into between the parties on March 1, 1998
("Confidentiality Agreement") and all originals and copies shall be returned to
the Company upon termination of this Agreement. No discussions, investigations
or review of material with professionals engaged by the Company will be deemed
to or result in the waiver of any privilege that may exist between the Company
or any of its shareholders and such professionals (and Purchaser and its
Affiliates hereby waive any such claims); provided, however, that the foregoing
shall not be deemed to create any privilege that does not otherwise exist.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Advice of Change.
(a) The Company shall promptly advise Purchaser in writing, upon
obtaining knowledge of: (i) any event which occurred or state of facts which
existed on or prior to the date of execution of this Agreement that is not
disclosed herein and any event which occurs after the date of this Agreement, in
each case that, under this Agreement or any Schedule or Document delivered
pursuant hereto, would have been required to have been disclosed by the Semlers,
any Shareholder or the Company on the date of execution of this Agreement and
(ii) any change in the business, operations, properties, assets or financial
condition of the Company, if such change has had or would reasonably be expected
to have, a Material Adverse Effect with respect to the Company.
(b) Parent and Purchaser shall promptly advise the Company in writing,
upon obtaining knowledge of: (i) any event which occurred or state of facts
which existed on or prior to the date of execution of this Agreement, in each
case that, under this Agreement or any Document executed and delivered by Parent
or Purchaser pursuant hereto, would have been required to have been disclosed by
them on the date of execution of this Agreement and (ii) any event that occurs
or state of facts that exists that would adversely impact the ability of
Purchaser to deliver, on behalf of the Surviving Corporation, the Initial
Percentage of the Merger Consideration as provided in Section 2.3(a) or make the
deposit called for under Section 2.3(e) or for Parent to make the payments under
the promissory notes issued hereunder. The covenant in Section 7.1(b)(ii) shall
survive the Closing until such time as all amounts due under the promissory
notes issued hereunder are fully paid and retired.
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(c) The Company shall promptly notify Purchaser and Purchaser shall
promptly notify the Company of: (i) any notice or other communication from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; (ii) any notice
or other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement and (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge threatened
against, relating to or involving or otherwise affecting the Semlers, the
Shareholders, the Company, Parent, Purchaser or their respective Affiliates, as
the case may be, that, if pending on the date of this Agreement, would have been
required to have been disclosed under this Agreement or that relate to the
consummation of the transactions contemplated by this Agreement.
7.2. Public Announcements. The Semlers, the Company, Parent and
Purchaser agree that, prior to the Closing, press releases and other
announcements with respect to the transactions contemplated hereby shall be
subject to mutual agreement; provided, however, that any party may make such
announcements as, in the opinion of its counsel, such party is required to make
pursuant to applicable law or the requirements of a stock exchange or other
applicable self-regulatory organization, but in such event such party shall, to
the extent practicable, give the other party reasonable prior notice and an
opportunity to comment on the proposed announcement.
7.3. Books and Records. On the Closing Date, the Semlers and each
Shareholder shall deliver and shall cause to be delivered to Purchaser, all of
the books and records of the Company not then in the possession of the Company.
Purchaser agrees to preserve all records of the Company delivered by the Semlers
or any Shareholders to Purchaser pursuant to this Agreement or in the possession
of Purchaser in the same manner in which it maintains its own books and records
under its then current document maintenance programs. Purchaser shall give
thirty (30) days' notice to the Shareholder Representative to permit the Semlers
or any Shareholder to examine, duplicate or take possession of such records
prior to any destruction thereof by Purchaser. Notice having been given, at the
end of the such thirty (30) day period, if the Shareholder Representative shall
not have requested any such records or copies thereof, Purchaser may dispose of,
alter or destroy any such records at any time. During the period such records
are so required to be preserved and kept, the Shareholder Representative shall,
on reasonable prior notice, have access thereto during normal business hours to
examine, inspect and copy (at his expense) such records. Purchaser and each
Shareholder shall provide each other with reasonable access to any records or
information relevant to any return, audit or examination by any Taxing
Authority, or judicial or administrative proceeding or determination relating to
liability for Taxes (including refunds) as are in its possession or subject to
its control pursuant to this Section 7.3.
7.4. Senior Credit Agreement; Financing. Parent and Purchaser will use
commercially reasonable efforts to obtain, and the Company shall (and the
Semlers shall cause the Company to) use commercially reasonably efforts in
taking such action as may be reasonably requested by Purchaser in order to
assist Parent, Purchaser and their respective Affiliates, in obtaining all
consents, waivers and approvals from the lenders party to the Senior Credit
Agreement, which Purchaser determines are necessary for the consummation of the
transactions contemplated under this Agreement and the Documents and in order to
permit Parent to obtain subordinated debt financing in connection with the
transactions contemplated by this Agreement and the Documents, which actions
shall include making senior executive and technical personnel of the Company
available to
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assist Parent in preparing relevant portions of its offering materials and other
information to be delivered to potential lenders and purchasers of debt
securities subject to reasonable confidentiality restrictions that may be
requested by the Company; provided, however, that the Company shall not be
required to make or be responsible for any payment required in order to obtain
any of the forgoing. The parties agree that the complete responsibility for and
the entire risk that such financing is obtained is on Parent and Purchaser and
breach of any part of this covenant by the Company or any of its officers or
Shareholders (other than a material breach which has a direct and demonstrable
material adverse effect on Parent's ability to obtain such financing) or the
failure of the financing to occur shall not be the basis for termination of this
Agreement by Parent or Purchaser or any delay of the closing of the transactions
contemplated hereby. To the extent possible, Parent and Purchaser will confine
their requests for assistance to normal business hours and will not disrupt the
normal business operations of the Company.
7.5. Consents and Approvals. The Company will (and the Semlers shall
cause the Company to) use commercially reasonable efforts to obtain the
necessary approvals, consents and releases of other Persons which may be
required to consummate the transactions contemplated by this Agreement, which
approvals, consents and releases shall include those of the other parties to the
agreements referred to on Schedule 4.4. Parent and Purchaser will use
commercially reasonable efforts in taking such actions as may be reasonably
requested by the Company in order to assist the Company in satisfying its
obligations under the preceding sentence, but neither Purchaser nor its
Affiliates shall be required to make or be responsible for any payment required
in order to obtain any such approval, consent or release.
7.6. Cooperation Regarding Benefit Plans. The Company shall (and the
Semlers shall cause the Company to) cooperate with Purchaser and its advisers in
preparing, filing, and diligently pursuing any and all filings, applications, or
notifications that may be necessary or advisable with respect to any of the
Benefit Plans in connection with the transactions contemplated by this
Agreement.
7.7. Satisfaction of Closing Conditions. Subject to the terms and
conditions of this Agreement, each party shall use commercially reasonable
efforts to take, or cause to be taken, all actions necessary to consummate the
transactions contemplated by this Agreement in a manner that will provide to
each party hereto the full benefits of the transactions contemplated hereby. The
parties shall cooperate with one another: (a) in determining whether any action
by or in respect of, or filing with, any Governmental Authority is required, or
any actions, consents, approvals or waivers are required to be obtained from
parties to any contracts and (b) subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, furnishing
information required in connection therewith and seeking to obtain in a timely
fashion any such consents, approvals or waivers. Each Shareholder, the Semlers
and the Company shall use commercially reasonable efforts to cause all of the
conditions set forth in Articles VIII and IX to be satisfied by the Scheduled
Closing Date. Purchaser shall use its commercially reasonable efforts to cause
all of the conditions set forth in Articles VIII and X to be satisfied by the
Scheduled Closing Date.
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7.8. Tax Covenants.
(a) The Company shall prepare and timely file with the appropriate
Taxing Authority all Tax Returns required to be filed on or prior to the Closing
Date and shall timely pay all Taxes either: (i) required to be shown on any such
Tax Returns or (ii) which are not required to be shown on such Tax Returns but
which will be required to be paid by or with respect to the Company on or prior
to the Closing Date. All such income Tax Returns that are filed after the date
hereof through the Closing Date will be true, correct and complete when filed
and all other Tax Returns that are filed after the date hereof through the
Closing Date will be true, correct and complete in all material respects when
filed. The Purchaser shall, on behalf of the Company, be responsible for filing
all Tax Returns of the Company required to be filed after the Closing Date and
paying all Taxes required to be shown on such Tax Returns.
(b) At least ten (10) days prior to the Closing Date, the Company
shall provide Purchaser with copies of all Tax Returns of the Company filed or
required to be filed during the period beginning on the date hereof and ending
fifteen (15) days prior to the Closing Date.
(c) If during the period beginning on the date hereof and ending on
the Closing Date, the Company or the Semlers receive or file: (i) any notices,
protests, or closing agreements relating to issues arising, or potentially
arising, in any audit, litigation or similar proceeding with respect to the
liability for Taxes of the Company; (ii) any elections or disclosures of any
controversial positions filed by or on behalf of the Company with any Taxing
Authority (whether or not filed with any Tax Return) or (iii) any letter
rulings, determination letters or similar documents issued by any Taxing
Authority with respect to the Company, prior to the Closing, the Semlers shall
provide or shall cause the Company to provide Purchaser, with copies of those
items that are received or filed.
(d) All transfer, documentary, sales, use, registration and other such
Taxes (including, but not limited to, all applicable real estate transfer or
gains taxes but excluding any prospective increase in real property taxes of the
Company as a result of a revaluation of real property as a result of the
Merger), any penalties, interest and additions to Tax, and fees incurred in
connection with this Agreement and the transactions contemplated hereby
(including any Taxes due as a result of the Merger but excluding any Taxes to
the extent such Taxes arise from or result out of subsequent transactions
involving the Company) shall be borne by the Shareholders. The Semlers and the
Shareholders and Purchaser shall cooperate in the timely making of all filings,
returns, reports and forms as may be required in connection therewith. At the
Closing, Purchaser will provide the Company with a resale certificate relating
to the Company's inventory.
(e) The Semlers and the Shareholders will provide such cooperation and
information as the Purchaser or the Company reasonably may request in: (i)
filing any Tax Return, amended return or claim for refund, (ii) determining a
liability for Taxes or a right to a refund of Taxes or (iii) conducting any
audit or other proceeding in respect of Taxes of the Company.
(f) Without the prior written consent of Purchaser, the Company shall
not, on or prior to the Closing Date, make or change any Tax election, adopt or
change any method of Tax accounting, file any amended return, enter into any
closing agreement, settle any Tax claim or
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assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitations period applicable to any Tax or Tax Return.
(g) For income Tax purposes and for purposes of this Agreement, the
parties shall treat the Merger as a taxable purchase of the Stock by Purchaser
and shall take no position or action inconsistent with such treatment.
(h) For income Tax purposes, no portion of the Merger Consideration
shall be allocable to any of the covenants set forth in the Non-Competition
Agreements.
7.9. No Solicitation. The Company shall immediately cease and cause to
be terminated any existing solicitation, encouragement, activity, discussion or
negotiation with any Person heretofore conducted by or on behalf of the Company
with respect to any Acquisition Proposal. From the date hereof until the
termination of this Agreement, the Company shall not (nor shall it authorize or
permit any of its officers, directors, employees, agents, shareholders,
investment bankers, attorneys, financial advisors or other representatives
("Company Representatives") to, directly or indirectly): (a) take any action to
initiate, solicit, encourage, respond to or otherwise facilitate, any offer or
inquiry from any person with respect to any Acquisition Proposal or (b) engage
in negotiations or discussions with, or disclose any non-public information
relating to the Company or its business or afford access to the properties,
books or records of the Company to, any person with respect to an Acquisition
Proposal. The Semlers, each Shareholder and the Company shall promptly notify
Purchaser if he or it receives any inquiry from any Person or has any
discussions with any Person with respect to an Acquisition Proposal, which
notice shall contain the name of the person involved and the nature of the
Acquisition Proposal.
7.10. Additional Instruments; Further Assurances. At and after the
Closing, at the request of Purchaser, each Shareholder shall, or shall cause its
Affiliates to, execute, acknowledge and deliver to Purchaser without further
consideration, all such further assignments, conveyances, endorsements, deeds,
powers of attorney, consents and other documents and take such other action as
Purchaser may reasonably request to consummate the transactions contemplated by
this Agreement.
7.11. Antitrust Notification. Each of the parties shall, within three
(3) business days following the date hereof, or as promptly as practicable
thereafter, file with the Federal Trade Commission and the Department of Justice
the notification and report form required in order to consummate the
transactions contemplated hereby and any supplemental information which may be
reasonably requested in connection therewith pursuant to the HSR Act. Each of
the parties shall coordinate to seek early termination of the waiting period
applicable to the filing. Each of the parties shall furnish to each other's
counsel such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission that is
necessary under the HSR Act.
7.12. CompressAR Business. (a) Schedule 7.12 sets forth a list and
description of the assets and liabilities of the Company which relate primarily
to the CompressAR business and which would be included on a balance sheet
prepared in accordance with GAAP (the "CompressAR Net Assets"). The Semlers
shall have the option to cause Newco, not later than the business day
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immediately prior to the Closing Date, to purchase from the Company, and the
Company shall sell to Newco, for the Appraised Value, the CompressAR Net Assets
and Newco shall assume the CompressAR Business Liabilities, pursuant to an
Assignment and Assumption Agreement in the form attached hereto as Exhibit F.
(b) If Newco purchases the CompressAR Net Assets as provided herein,
then the purchase price therefor shall be paid, at the Semlers' option, either
in cash at that time or by a reduction of the amounts otherwise payable to each
of the Xxxxxx Trusts upon surrender of their Certificates representing their
shares of Stock as provided in Section 2.3(a)(i) by fifty percent (50%) of the
Appraised Value. If Newco purchases the CompressAR Net Assets as provided
herein, the Semlers shall be deemed to have represented and warranted that the
tax basis of the Company in such assets is equal to the sum of the book value of
the CompressAR Net Assets.
(c) If Newco purchases the CompressAR Net Assets as provided herein,
then at the Closing, the Company and Newco shall enter into a Transition
Services Agreement in the form of Exhibit G.
7.13. Real Estate Matters. The Company will use commercially
reasonable efforts, and the Semlers will cause the Company to, obtain estoppel
certificates in the form and substance of the Tenant Estoppel Certificates
attached hereto as Exhibits H-1 and H-2 with respect to all of the Leased Real
Property.
7.14. Option Exercise Period; Option Cancellation
Agreements.
(a) The Company shall provide to each holder of outstanding Options not later
than the first business day after the date hereof, a written notice stating that
during the period (the "Option Notice Period") commencing on the first business
day after the date hereof and ending on the twentieth (20th) calendar day
thereafter, such holder shall have the right to exercise in accordance with
their terms any Options which are then vested, and the Company shall permit the
exercise of such Options in accordance with their terms.
(b) The Company shall use commercially reasonable efforts to obtain
from all holders of outstanding Options executed Option Cancellation Agreements
which will be delivered to Purchaser prior to the Closing Date. The Semlers, the
Shareholders and the Company agree not to enter into any agreement to provide
any holder of outstanding Options an alternative to either: (i) the Option
Cancellation Agreement or (ii) exercise of the Options in accordance with their
terms as of the date hereof.
7.15. FIRPTA Certificate. The Company shall execute and deliver to
Purchaser, prior to the Closing Date, an affidavit by the Company, dated not
more than twenty (20) days prior to the Closing Date, certifying, under penalty
of perjury, that the Company is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
and that, as of the Closing Date, interests in the Company shall not constitute
United States real property interests (within the meaning of Section 897(c)(1)
of the Code). The aforementioned affidavit shall be in the form and
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meet the requirements prescribed by the Code and the applicable Treasury
Regulations (and shall be acceptable to Purchaser).
7.16. Creation of Merger Sub. Purchaser will create Merger Sub under
the OBCA as soon as practicable after Parent and Purchaser receive from the
lenders under the Senior Credit Agreement all consents, waivers and approvals
required from such lenders for Purchaser to create that Subsidiary. The parties
agree that the complete responsibility for and the entire risk that such
consents, waivers and approvals are obtained and that the creation of Merger Sub
occurs is on Parent and Purchaser and failure shall not be the basis for
termination of this Agreement by Parent or Purchaser or any delay of the closing
of the transactions contemplated hereby.
7.17. Shareholder Indebtedness. Each of the Semlers and the Xxxxxx
Trusts, Parent and Purchaser acknowledges and agrees that the Shareholder
Indebtedness shall be satisfied in full through offset of the amounts payable
under the promissory notes issuable to each of the Xxxxxx Trusts pursuant to
Section 2.3(a) for each promissory note in an amount equal to fifty percent
(50%) of the full amount of the Shareholder Indebtedness, notwithstanding that
the Shareholder Indebtedness is not an obligation of the Xxxxxx Trusts. Each of
the Semlers hereby acknowledges and agrees that by executing this Agreement, the
Company has given the Semlers proper demand for payment on the Closing Date of
the full amount of the Shareholder Indebtedness.
7.18. Related Party Agreements. Each of the Semlers, the Shareholders
and the Company: (a) agrees that, notwithstanding any contrary provision
contained in any of the Related Party Agreements, neither the execution and
delivery of this Agreement or any of the Documents executed and delivered by the
Semlers, any Shareholder or the Company, the performance by the Semlers, any
Shareholder or the Company of the obligations hereunder or thereunder nor the
consummation of the transactions contemplated hereby or thereby, violates, is in
conflict with or constitutes a default under any of the Related Party
Agreements; (b) waives any notice, consent or approval otherwise required
pursuant to the Related Party Agreements for such execution, delivery,
performance and consummation and (c) agrees that without any further action
required by any of the parties thereto, that each of the Related Party
Agreements shall be deemed to be terminated and of no further force or effect as
of immediately preceding the Effective Time, provided, however, that nothing
contained in this Section 7.18 shall affect any payment obligations for money
borrowed which the Semlers or the Xxxxxx Trusts may have to CCI under the Loan
and Stock Option Agreement and Loan Modification Agreement included within the
definition of Related Party Agreements so long as such obligations remain
recourse only to the personal assets of the Semlers. CCI agrees that, at the
Closing, it shall release the Company pursuant to the release required by
Section 9.8 from any and all obligations or claims against the Company,
including claims against the Stock, that CCI may have under any Related Party
Agreement.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF EACH PARTY
The obligations of each party to consummate the transactions contemplated hereby
shall be subject to the fulfillment, at or prior to the Closing Date, of the
following conditions:
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8.1. HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have expired or been
terminated.
8.2. No Action or Proceeding; Compliance with Law. No claim, action,
suit or other proceeding shall be pending or threatened by any Governmental
Authority or private Person before any court, agency or administrative body
which creates a substantial likelihood that the consummation of the transactions
contemplated by this Agreement will be restrained, enjoined or otherwise
prevented or that any material damages will be recovered or other relief (the
effect of which would materially impair the value of the Merger to Parent or
Purchaser) obtained as a result of the transactions contemplated hereby. No
provision of any applicable law or any judgment, injunction, order or decree
shall prohibit the Merger.
ARTICLE IX
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Parent and Purchaser to cause Merger Sub to consummate the
Merger and the transactions contemplated by this Agreement shall be subject to
the satisfaction, at or before the Closing, of each of the following conditions:
9.1. Representations and Warranties. The representations and
warranties made by the Semlers, the Shareholders and the Company in this
Agreement and in the Documents executed and delivered by any Shareholder, the
Semlers or the Company shall be true and correct on the date hereof and on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date, except that any such representations or warranties made
with reference to a specified date shall have been true on and with reference to
such date and except for breaches of any such representations or warranties that
do not have, individually or in the aggregate, a Material Adverse Effect with
respect to the Company.
9.2. Performance. With respect to agreements, covenants, obligations
and conditions set forth herein and required to be performed or complied with by
the Semlers, the Shareholders and/or the Company on or prior to the Closing
Date, the Semlers, the Shareholders and the Company shall have performed in all
material respects (except that any thereof which, by the terms thereof, are
qualified so as to require material performance or compliance must be performed
and complied with as written), each such agreement, covenant, obligation and
condition; provided, however, that the failure of Purchaser, Parent or their
Affiliates to obtain bank consent or financing with respect to any part of the
transactions contemplated hereby shall not be a precondition to the obligations
of Parent or Purchaser hereunder, unless such failure results primarily from the
actions or failure to act on the part of the Semlers, the Company or the
Shareholders.
9.3. Legal Opinions. Parent and Purchaser shall have been furnished
with opinions of counsel, dated the Closing Date, in the form attached as
Exhibit I-1 and Exhibit I-2.
9.4. Required Consents. The Company shall have
delivered to Purchaser executed consents to the Merger of the other parties to
the agreements referred to in Schedule 4.4.
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9.5. Certificates. The Semlers, the Shareholders and the Company shall
have furnished to Purchaser such certificates to evidence compliance with the
conditions set forth in this Agreement as may be reasonably requested by
Purchaser, including certificates of appropriate officers of the Company stating
that the conditions set forth in Sections 9.1 and 9.2 have been satisfied and
including appropriate certification of articles of incorporation, bylaws,
corporate resolutions and incumbency in the form of Exhibit J.
9.6. Resignation. The Company shall have delivered to Purchaser, in
form and substance reasonably satisfactory to Purchaser and its counsel,
resignations of all members of the Board of Directors of the Company and
terminations with respect to all powers of attorney and agency relationships
specified by Purchaser prior to the Closing, in each case effective as of the
Closing Date and conditioned on the Closing.
9.7. Signature Authority. The Company shall have taken all action
satisfactory to Purchaser to cause the termination of the power of such persons
as shall be requested by Purchaser in writing, to borrow, discount debt
obligations, cash or draw checks or otherwise act on behalf of the Company with
respect to the bank accounts listed on Schedule 4.1(e).
9.8. Waiver of Rights. At the Closing, the Semlers, each Shareholder
and each of the members of the Board of Directors of the Company shall have, on
behalf of itself and its Affiliates, executed and delivered to Purchaser a
release in the form of Exhibit K. At the Closing, BT Alex. Xxxxx and Xxxxx
XxxXxxxxx Incorporated shall have provided Purchaser with a confirmation
reasonably satisfactory to Purchaser stating that all of their fees and
commissions for which Purchaser or Company may be responsible in connection with
the transactions contemplated hereby have been paid in full.
9.9. Non-Competition Agreement. The Company shall have delivered to
Purchaser a Non-Competition Agreement in the form of Exhibit L-1 executed by the
Semlers and the Xxxxxx Trusts and a Non-Competition Agreement in the form of
Exhibit L-2 executed by Xxxxxxx X. Xxxxxx.
9.10. Certification of Minimum Shareholders' Equity and Net Current
Assets. The Company shall have delivered to Purchaser a certificate in the form
of Exhibit M (the "Closing Certificate"), which shall be signed by Xxxxxxx X.
Xxxxxx in his capacity as Chief Executive Officer of the Company and Xxxxxxx X.
Xxxxxx in her capacity as Executive Vice President of the Company. The amount of
Shareholders' Equity of the Company and Net Current Assets of the Company set
forth in the Closing Certificate shall each be at least $2,000,000 and
$2,750,000, respectively, measured in a manner consistent with Section 2.2(a);
provided, however, that for purposes of this Section 9.10, the amount of Excess
Transactional Expenses shall be deemed to be zero.
9.11. Company Debt Payoff; Releases.
(a) Purchaser shall have received a payoff
letter from the United States National Bank of Oregon indicating all amounts
required to be paid in order to satisfy the Company Debt in full on the Closing
Date. The pledges of Stock to secure Company Debt granted pursuant to the Stock
Pledge Agreement dated June 20, 1996 by and among Xxxxxxx X. Xxxxxx,
individually
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and as trustee under trust agreement dated May 25, 1993, for the benefit of
Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, individually and as trustee under trust
agreement dated May 25, 1993, for the benefit of Xxxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxx and the United States National Bank of Oregon referred to in Schedule 3.1
and other liens to secure repayment of the Company Debt shall have been
released.
(b) The Company shall have been released from its guaranty in favor of
Kansas City Life Insurance Company and from its indebtedness, obligations and
guarantees to the United States National Bank of Oregon, each release in form
and substance reasonably satisfactory to Purchaser.
9.12. Option Cancellation Agreements. If the Scheduled Closing Date is
prior to the expiration of the Option Notice Period, the Company shall have
delivered to Purchaser either: (i) executed Option Cancellation Agreements from
each holder of outstanding Options (or waiver of the Option Notice Period) or
(ii) an opinion of Stoel Rives LLP reasonably satisfactory to Purchaser that the
only right against the Company which would be available to a holder of an Option
who neither executes and delivers to the Company an Option Cancellation
Agreement nor waives any claim he may have against the Company as a result of
consummation of the Merger prior to the expiration of the Option Notice Period
would be to receive either the Per Share Merger Consideration for each share of
Stock subject to the Option or the Option Value.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to
consummate the Merger and the transactions contemplated by this Agreement shall
be subject to the satisfaction, at or before the Closing, of each of the
following conditions:
10.1. Representations and Warranties. The representations and
warranties made by Parent and Purchaser in this Agreement, and in the Documents
executed and delivered by Parent and Purchaser shall be true and correct on the
date hereof and on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, except that any such representation
or warranty made with reference to a specified date shall have been true on and
with reference to such date and except for any breaches of any such
representations or warranties that do not have, individually or in the
aggregate, a Material Adverse Effect with respect to Parent or Purchaser.
10.2. Performance. With respect to agreements, covenants, obligations
and conditions set forth herein and required to be performed or complied with by
Parent and/or Purchaser on or prior to the Closing Date, Parent and/or Purchaser
shall have performed in all material respects (except that any thereof which, by
the terms thereof, are qualified so as to require material performance or
compliance must be performed and complied with as written), each such agreement,
covenant, obligation and condition.
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10.3. Opinion of Purchaser's Counsel. The Company and the Shareholders
shall have been furnished with an opinion or opinions of counsel, dated the
Closing Date in the form of Exhibit N.
10.4. Certificates. Parent and Purchaser shall have furnished to the
Company and the Shareholders such certificates to evidence compliance with the
conditions set forth in this Agreement as may be reasonably requested by the
Company, including certificates of appropriate officers of Parent and Purchaser
stating that the conditions set forth in Sections 10.1 and 10.2 have been
satisfied and including appropriate certification of articles of incorporation,
bylaws, corporate resolutions and incumbency. Parent also shall have furnished
to the Company and the Shareholders a certificate stating that, to its
knowledge, no event has occurred which would cause Parent to believe that it
will not be able to obtain sufficient funds to pay the amounts owing under the
promissory notes issued pursuant to Section 2.3(a) hereunder on the Final
Payment Date.
10.5. Payment of Company Debt; Release of Guarantee. The Company Debt
shall have been paid and the Semlers shall have been released from the guarantee
of the Company's obligations under that certain loan agreement dated June 20,
1996, by and among the Company, the Semlers, individually and in their
respective capacities as trustees of the Xxxxxx Trusts, and the United States
National Bank of Oregon.
10.6. Merger Sub. Merger Sub shall have executed a countersignature
page to this agreement jointly taking on the obligations of the Purchaser
hereunder in the form of Exhibit O.
ARTICLE XI
TERMINATION
Unless Purchaser, the Company and the Shareholder
Representative otherwise agree in writing, this Agreement shall be terminated if
the Closing does not occur on the Scheduled Closing Date. In the event of such
termination, each party to this Agreement shall remain fully liable in damages
for his failure to fulfill or perform those obligations he was required to
fulfill or perform, as the case may be, on or prior to the date of such
termination.
ARTICLE XII
NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
12.1. Survival of Representations, Warranties, etc. All
representations and warranties of the parties set forth in this Agreement, and
the rights of the parties to seek indemnification with respect thereto, shall
survive the Closing. Such representations and warranties, and the rights of the
parties to seek indemnification with respect thereto, shall expire, except with
respect to claims asserted prior to and pending at the time of expiration,
fifteen (15) months following the Closing; provided that the representations and
warranties contained in Sections 3.1, 3.2, 4.2(a)(i),
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4.2(b), 4.2 (c), 4.3 and 5.1 shall survive indefinitely (or if indefinite
survival is not permitted by law, then for the maximum period permitted by
applicable law) and provided further that the representations and warranties
contained in Section 4.13 shall survive for seven (7) years following the
Closing. All such representations and warranties shall be deemed to have been
given and made on the date hereof and as of the Closing Date. Except as set
forth herein, all of the covenants, agreements and obligations of the parties
hereto, hereunder and under any of the Documents, shall survive the Closing
indefinitely (or if indefinite survival is not permitted by law, then for the
maximum period permitted by applicable law). The liability of any party for any
breach of any representation or warranty set forth herein shall not be limited
by the knowledge of any Indemnified Party or any Affiliate thereof and the
existence of any such knowledge shall not constitute a defense to any such
indemnification obligation, unless such Indemnified Party has expressly
acknowledged (by a certificate executed by an executive officer of such
Indemnified Party and delivered to the Indemnifying Party prior to the Closing
which recites the facts which give rise to the breach) that the Indemnified
Party is aware of such facts.
12.2. Semlers' and Shareholders' Agreement to Indemnify.
(a) The Semlers and the Xxxxxx Trusts (and, prior to the Closing, the
Company), jointly and severally, and each of the Other Shareholders, severally
(with respect to each of the Other Shareholders only, to the extent of its
Shareholder Percentage), shall defend, indemnify and hold harmless Parent,
Purchaser and Merger Sub (and, effective from and after the Closing, the
Company) (each, a "Purchaser Indemnitee"), their respective Affiliates and their
respective officers, directors, shareholders, employees and agents, against and
in respect of any and all liabilities, losses, damages, deficiencies, Taxes or
expenses (including the reasonable expenses of investigation and reasonable fees
and expenses of counsel) ("Losses") resulting from, arising out of, or in
connection with: (i) any breach of any representation or warranty of the
Company, the Semlers or any Shareholder contained in this Agreement (or any
representation or warranty deemed to have been made by the Semlers or any
Shareholder pursuant to Section 13.1); (ii) any breach by the Company, the
Semlers or any Shareholder of any covenant or agreement contained in this
Agreement (or deemed to have been made by the Semlers or any Shareholder
pursuant to Section 13.1); (iii) any CompressAR Business Liabilities (provided,
that the Other Shareholders shall have no indemnification obligation with
respect to the CompressAR Business Liabilities); (iv) any Excess Transactional
Expenses (except to the extent that such Excess Transactional Expenses were
either subtracted from the amounts paid under the promissory notes referred to
in Section 2.3 or reflected in the Closing Balance Sheet); (v) any claim by a
holder of an Option that in connection with the Merger the Company failed to
comply with the twenty day notice provision contained in section 12 of the Stock
Option Plan and (vi) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses incident to any of the foregoing.
(b) Notwithstanding the provisions of Section 12.2(a), and subject to
the provisions of Section 12.2(d), no claim for indemnification hereunder shall
be made against the Semlers or any of the Shareholders for Losses arising out
of: (x) any matter described in Section 12.2(a)(i); (y) any matter described in
Section 12.2(a)(ii) (other than with respect to matters covered by Sections 6.1
and 7.8) or (z) any matter described in Section 12.2(a)(vi) (with respect only
to the matters referred to in clauses (x) and (y) of this Section 12.2(b)),
unless and until the aggregate amount of Losses with respect to the matters
covered thereby exceed $1,000,000, in which event
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the Semlers and the Xxxxxx Trusts, jointly and severally, and each of the Other
Shareholders, severally (with respect to each of the Other Shareholders only, to
the extent of its Shareholder Percentage), shall be required to indemnify the
Purchaser Indemnitees for any and all Losses in excess of $500,000.
(c) (i) Notwithstanding the provisions of Section 12.2(a), and subject
to the provisions of Section 12.2(d), the Semlers, the Xxxxxx Trusts and the
Other Shareholders collectively shall not be required to indemnify any Purchaser
Indemnitee for Losses arising out of: (x) any matter described in Section
12.2(a)(i); (y) any matter described in Section 12.2(a)(ii) (other than with
respect to matters covered by Sections 6.1 and 7.8) or (z) any matter described
in Section 12.2(a)(vi) (with respect only to the matters referred to in clauses
(i)(x) and (y) of this Section 12.2(c)), in an aggregate amount in excess of
$10,000,000.
(ii) Notwithstanding anything in this Agreement to the contrary but
subject to the other provisions of this Section 12.2, if any Purchaser
Indemnitee is
entitled to indemnification under this Section 12.2 on account of any Loss, the
obligation of each Other Shareholder in respect thereof shall be limited to the
amount of such Loss multiplied by its Shareholder Percentage, provided, however,
that such limitation shall not apply to the breach by any Other Shareholder of
any of his representations or warranties contained in Article III.
(iii) Notwithstanding anything in this Agreement to the contrary but
subject to the other provisions of this Section 12.2, no claim for
indemnification hereunder shall be made against CCI more than fifteen (15)
months after the Closing, except with respect to claims asserted prior to and
pending at such time and claims under Article III.
(d) The limitations contained in Sections 12.2(b) and (c)(i) shall not
apply in respect of any breach of any representation or warranty contained in
any of Sections 3.1, 3.2, 4.1(c)(iii)(z), 4.2, 4.3 or 7.12 (regarding the book
value and tax basis of the CompressAR Net Assets).
(e) Notwithstanding anything in this Agreement to the contrary,
Purchaser Indemnitees shall not be entitled to receive indemnification on
account of any Losses (other than losses described in Section 12.2(a)(iii) and
any Losses arising out of or resulting from a breach of the representation or
warranty contained in Section 7.12 (regarding the book value and tax basis of
the CompressAR Net Assets), other than with respect to the Other Shareholders)
in excess of an aggregate amount equal to the sum of: (i) the Purchase Price and
(ii) the amount of any Transactional Expenses (other than Excess Transactional
Expenses).
(f) For purposes of Section 12.2(a)(i), whether there has occurred a
breach of any representation or warranty which is qualified as to knowledge,
materiality or both shall be determined as if such representation or warranty
were made without any such qualification, except with respect to the knowledge
qualification contained in Section 4.10(c).
12.3. Parent and Purchaser's Agreement to Indemnify.
(a) Parent, Purchaser and the Surviving Corporation, jointly and
severally, shall defend, indemnify and hold harmless each Shareholder (and prior
to the Closing, the Company),
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against and in respect of any Losses resulting from: (i) any breach of any
representation or warranty of Parent or Purchaser contained in this Agreement;
(ii) any breach by Parent, Purchaser or the Surviving Corporation of any
covenant or agreement made in this Agreement or in any Document executed and
delivered by Parent, Purchaser or the Surviving Corporation and (iii) any and
all actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses incident to any of the foregoing.
(b) For purposes of Section 12.3(a)(i), whether there has occurred a
breach of any representation or warranty which is qualified as to knowledge,
materiality or both shall be determined as if such representation or warranty
were made without any such qualification.
12.4. Third Party Claims.
(a) Promptly after the receipt by any party hereto of notice of any
claim, action, suit or proceeding of any third party which is subject to
indemnification hereunder, such party ("Indemnified Party") shall give written
notice of such claim to the party obligated to provide indemnification hereunder
("Indemnifying Party"), stating the nature and basis of such claim and the
amount thereof, to the extent known. Failure of the Indemnified Party to give
such notice shall not relieve the Indemnifying Party from any liability which it
may have on account of its indemnification obligation or otherwise, except to
the extent that the Indemnifying Party is materially prejudiced thereby.
(b) So long as the Indemnifying Party provides assurances, reasonably
acceptable to the Indemnified Party, that the Indemnifying Party is capable of
satisfying all Losses that may arise in respect of any matter, the Indemnifying
Party shall be entitled to elect to participate in the defense of and, if it so
chooses, to assume the defense of such claim, action, suit or proceeding with
counsel selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party. Upon any such election by the Indemnifying Party to assume
the defense of such claim, action, suit or proceeding, the Indemnifying Party
shall not be liable for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, provided, that the
Indemnified Party may, at its option and at its own expense, participate in such
defense and employ counsel separate from the counsel employed by the
Indemnifying Party. The Indemnifying Party shall be liable for the reasonable
fees and expenses of counsel employed by the Indemnified Party for any period in
which the Indemnifying Party has not assumed the defense thereof (other than
during any period in which the Indemnified Party failed to give the notice
provided above). The parties shall use commercially reasonable efforts to
minimize Losses from claims by third parties and shall act in good faith in
responding to, defending against, settling or otherwise dealing with such
claims, notwithstanding any dispute as to liability as between the parties under
this Article XII. The parties shall also cooperate in any such defense, give
each other full access to all information relevant thereto and make employees
and other representatives available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Whether or not the Indemnifying Party shall have assumed the defense, the
Indemnifying Party shall not be obligated to indemnify the Indemnified Party
hereunder for any settlement entered into without the Indemnifying Party's prior
written consent, which consent shall not be unreasonably withheld or delayed.
The Indemnifying Party shall not settle any claim without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed. The provisions of this Section
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12.4(b) shall not apply to any claims, actions, suits or proceedings
which are subject to indemnification hereunder as a result of any matter
referred to on Schedule 4.10 or any breach of the representations and warranties
contained in Section 4.10 (including the Company's failure to disclose any
matter on Schedule 4.10 which should have been disclosed).
(c) If any party to this Agreement shall receive from a third party
any claim or assertion relating to any matter referred to on Schedule 4.10 or
any matter which should have been disclosed on Schedule 4.10 (an "Intellectual
Property Claim"), then the party becoming so informed shall promptly, but in all
events within twenty (20) days, notify the other parties to this Agreement of
the claim or assertion and shall provide with such notice reasonable detail
relating thereto. Parent and Purchaser shall have the right to defend any
Intellectual Property Claim with litigation counsel of its choice and shall
instruct said counsel to diligently and energetically defend any such
Intellectual Property Claim. Purchaser shall keep the Shareholder Representative
apprised of the developments in the action. The Semlers and the Shareholders
shall cooperate in the defense of the claim, including making available
documents and/or witnesses as may be within the control of the Semlers or the
Shareholders, cooperating in assisting Parent and Purchaser to determine all
particulars of operation of the accused product or method, and in identifying
and proving counterclaims against the third party. Parent and Purchaser shall
retain control of the litigation and shall have the right to make the final
decision with respect to defenses, counterclaims, settlement and strategy
(provided that, prior to the making any such final decision, Purchaser shall
consult with the Shareholder Representative and afford him an opportunity to
present his views). The Semlers and the Shareholders shall strictly observe all
conduct and communication rules that litigation counsel shall impose with
respect to the claim or litigation, including issuance of press releases, public
statements, and statements to individuals within the employ of the Semlers or
the Shareholders who either do not have a strict need know, or to whom
communication would be restricted by reason of any protective order in effect.
The Shareholders shall not be obligated to indemnify Parent and Purchaser
hereunder for any settlement entered into without the prior written consent of
the Shareholder Representative (and the Shareholder Representative agrees not to
unreasonably withhold such consent), provided, that the Shareholder
Representative shall have complied in all material respects with its obligations
under this Section 12.4(c). Notwithstanding the forgoing, Parent and Purchaser
shall defend the Intellectual Property Claims in a commercially reasonable
manner and consistent with the defense of such matter as if Parent and Purchaser
were not entitled to indemnification hereunder, including in the context of
considering offers of settlement. Purchaser agrees to work with the Shareholder
Representative in an attempt to arrive at commercially reasonable settlements,
to the extent practicable. Parent and Purchaser shall use commercially
reasonable efforts to minimize Losses from claims by third parties and shall act
in good faith in responding to, defending against, settling or otherwise dealing
with such claims, notwithstanding any dispute as to liability as between the
parties under this Article XII.
12.5. Effect of Taxes and Insurance. The amount of any Losses for
which indemnification is provided under this Article XII shall be reduced to
take account of any net Tax benefit realized and shall be increased to take
account of any net Tax detriment realized arising from the incurrence or payment
of any such Losses or from the receipt of any such indemnification payment and
shall be reduced by the insurance proceeds received and any other amount, if
any, recovered from third parties by the Indemnified Party (or its Affiliates)
with respect to any Losses. If any Indemnified Party (or its Affiliates) shall
have received any indemnification payment pursuant to this Article XII with
respect to any Loss, such Indemnified Party shall, upon written request by the
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Indemnifying Party, assign to such Indemnifying Party (to the extent of the
indemnification payment) any claim which such Indemnified Party may have under
any applicable insurance policy which provides coverage for such Loss. Such
Indemnified Party shall reasonably cooperate (at the expense of the Indemnifying
Party) to collect under such insurance policy. If any Indemnified Party (or its
Affiliates) shall have received any payment pursuant to this Article XII with
respect to any Loss and had or shall subsequently have received insurance
proceeds or other amounts with respect to such Loss, then such Indemnified Party
(or its Affiliates) shall promptly pay over to the Indemnifying Party the amount
so recovered (after deducting the amount of the expenses incurred by it in
procuring such recovery), but not in excess of the amount previously so paid by
the Indemnifying Party.
12.6. Purchase Price Adjustment. Any amount paid by the Semlers or the
Shareholders on the one hand, or Parent or Purchaser on the other hand, to the
other pursuant to this Article XII will be treated for Tax purposes as an
adjustment to the aggregate Merger Consideration.
12.7. Due Date; Interest. All payments required to be made under this
Article XII shall be due upon the later of (a) incurrence of the Loss to which
such required indemnification payment relates or (b) the date the promissory
notes delivered pursuant to Section 2.3 are paid in full and shall include
interest at the rate of ten percent (10%) per annum compounded annually from
such due date through the date of payment.
12.8. Remedies Exclusive. After the Closing, the remedies of the
parties set forth in this Article XII shall be deemed to be the exclusive remedy
for breaches of any representation, warranty or covenant (other than fraud)
contained in this Agreement that would otherwise be available to the parties.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1. Representations/Covenants of the Shareholders and the Company.
If the Closing occurs, all representations and warranties (to the extent the
same survive the Closing as contemplated in Section 12.1) and all covenants and
agreements of the Company or any or all Shareholders and the Company made
pursuant to this Agreement and the Documents executed and delivered by any such
persons (but for the Company, only such Documents as are entered into by the
Company prior to the Closing) shall be deemed to be representations and
warranties, covenants and agreements solely of the Semlers and each Shareholder
(and not of the Company) for all purposes hereunder (other than with respect to
the Closing Certificate), including Article XII and the Semlers and the
Shareholders (and each of them) will be liable and responsible, in accordance
with the terms of this Agreement, for any breach thereof.
13.2. Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of all of the parties hereto.
13.3. Waiver. Any breach of any obligation, covenant,
agreement or condition contained herein shall be deemed waived by the
non-breaching party, only by a writing, setting forth
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with particularity the breach being waived and the scope of the waiver, but such
waiver shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other breach. No waiver shall be implied from any conduct or
action of the non-breaching party. No failure by any party in exercising any
right, power or privilege hereunder or under the Documents and no course of
dealing by any party shall operate as a waiver and any right, power or privilege
hereunder or under any Document nor shall any single or partial exercise thereof
or the exercise of any other right, power or privilege.
13.4. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered:
If to Parent, Purchaser, Merger Sub or (after the Merger) the Company, to:
ALARIS Medical, Inc.
00000 Xxxxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Chief Executive Officer
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
with a copy to:
Xxxxxx Xxxxxx Butowsky
Xxxxxxx Shalov & Xxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx Xxxxx, Esq.
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
If (prior to the Merger) to the Company to:
Instromedix, Inc.
One Technology Center
0000 X.X. Xxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxx 00000-0000
Attention: Xxxxx Xxx
(000) 000-0000 x000 (telephone)
(000) 000-0000 (telecopy)
If to the Semlers, the Shareholders or the Shareholder
Representative to:
Xxxxxxx X. Xxxxxx
0000 Xxxxx Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
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with a copy to:
Capital Consultants, Inc.
Capital Center
0000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
with a copy to:
Xxxxxxx, Xxxxxxxxxx & Xxxxx
0000 X.X. 5th Avenue
Suites 1600-1800
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
or to such other address or telecopy number and with such other copies as such
party may hereafter specify for the purpose of notice to the other party. Each
such notice, request, demand or other communication shall be effective (a) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and evidence of receipt is received or (b) if given by
any other means, upon delivery or refusal of delivery at the address specified
in this Section.
13.5. Binding Nature; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, heirs and personal
representatives but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without
prior written consent of the other parties; provided, however, that the rights
of Parent and/or Purchaser hereunder may be assigned by Parent and/or Purchaser
to: (a) any lender or financing institution as security for a loan or loans
(with respect to enforcement of Parent and/or Purchaser's rights hereunder after
the Closing) or (b) any Person that acquires all or substantially all of the
assets or business of Parent and/or Purchaser by purchase, merger, consolidation
or otherwise (in which case Parent and/or Purchaser shall maintain its
obligation jointly with such transferee). The foregoing notwithstanding, prior
to the Closing Date, Parent and/or Purchaser may assign their rights and
delegate their
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obligations hereunder, including rights and obligations relating to Merger Sub,
to any direct or indirect wholly-owned Subsidiary of Parent and/or Purchaser
("Assignee") (in which case Parent and/or Purchaser, as applicable, shall
maintain its/their obligations jointly with such Assignee). Such assignment
shall be made pursuant to documentation in form and substance reasonably
acceptable to the Company and the Shareholders.
13.6. Governing Law; Submission to Jurisdiction. This Agreement and the
legal relations among the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed therein without regard to conflicts of law principles, except that
the consummation and effectiveness of the Merger shall be governed by, and
construed in accordance with the OBCA. Each party hereto hereby irrevocably: (a)
in any legal proceeding brought in connection with this Agreement or any of the
Documents or the transactions contemplated hereby or thereby, submits to the
nonexclusive in personam jurisdiction of (i) the United States District Court
for the Northern District of California or any California state court or (ii) in
the event that Parent, Purchaser, Merger Sub or the Company is a defendant in
any legal proceeding in which it seeks to join the Semlers or any Shareholder as
a third party defendant, then, any state or United States court in which such
proceeding has properly been brought, and consents to suit therein; (b) waives
any objection that it may now or hereafter have to the venue of such proceeding
in any such court or that such proceeding was brought in an inconvenient court;
(c) designates Stoel Rives LLP (in the case of the Company, the Semlers and the
Shareholders) or Xxxxxx Xxxxxx Butowsky Xxxxxxx Shalov & Xxxx (in the case of
Purchaser) as agent to receive service of any and all process and documents on
their behalf in any legal proceeding in the State of California and (d) agrees
that nothing herein shall affect any party's right to effect service of process
in any manner permitted by law, and that Parent, Purchaser, the Company, the
Semlers and the Shareholders shall have the right to bring any Legal Proceedings
(including a proceeding for enforcement of a judgment entered by any of the
aforementioned courts) against any party in any other court or jurisdiction in
accordance with applicable law.
13.7. Transactional Expenses. The Company shall deliver to Purchaser at
least three (3) business days prior to the Closing, a good faith written
estimate of the Company's Transactional Expenses which shall be used in the
computation of the Purchase Price and the Per Share Merger Consideration, as
provided herein. The Transactional Expenses estimate shall be itemized and shall
contain such supporting documentation as may be reasonably requested by
Purchaser. If the Closing occurs, Purchaser agrees to pay, on behalf of the
Surviving Corporation, the Company's Transactional Expenses at the Closing to
the extent not theretofore paid, provided that Purchaser shall be entitled to
recoup the full amount of any Excess Transactional Expenses by means of any one
or more of (without duplication): (a) a reduction in the Purchase Price (as
contemplated in clause (c) of the definition of Purchase Price), (b) the
inclusion of such Excess Transactional Expenses as a liability on the Closing
Balance Sheet or (c) by indemnification pursuant to Section 12.2(a).
13.8. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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13.9. Headings; References. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Articles", "Sections" or "Exhibits" shall be deemed to be
references to Articles or Sections hereof and to Exhibits hereto unless
otherwise indicated.
13.10. Entire Agreement. This Agreement, together with the Schedules,
Exhibits, Documents and the Confidentiality Agreement, constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, schedules, understandings,
documents (including information provided or made available by any party to any
other party), negotiations and discussions, whether oral or written, of the
parties hereto.
13.11. Drafting Conventions. Any use herein of the phrase "and/or"
shall be deemed to mean both "and" and "or". Any use herein of the phrase
"including" shall be deemed to mean "including, without limitation". The
masculine gender used herein shall be deemed to include the feminine and neuter
genders, and vice-versa, and the singular or plural shall be deemed to include
the plural or singular, as the case may be, when required by context.
13.12. Arbitration.
(a) Disputes that arise under or with respect to this Agreement will
be resolved as follows:
(i) except as set forth in Section 13.12(c), no party shall bring a
civil action arising under or with respect to this Agreement;
(ii) at any time any party may demand arbitration of any dispute
arising
under or with respect to this Agreement by delivering written notice thereof to:
(i) the other parties and (ii) an office of JAMS/Endispute located in San
Francisco, California (or, if none then the office of JAMS/Endispute located
closest to San Francisco, California); and
(iii) any such arbitration shall be conducted at an office of
JAMS/Endispute located in San Francisco, California (or, if none, then the
office of JAMS/Endispute located closest to San Francisco, California) according
to JAMS/Endispute's Arbitration Rules then in effect applicable to disputes of
the
type submitted to arbitration and the results of such arbitration shall be final
and binding on the parties.
(b) In the event that JAMS/Endispute is not available to provide such
arbitration services with respect to any such dispute, then that dispute shall
be resolved by final, binding arbitration in San Francisco, California by three
arbitrators pursuant to the rules then prevailing of the American Arbitration
Association applicable to disputes of the type submitted to arbitration.
Judgment on the award rendered by any of the above referenced arbitrators may be
confirmed and entered in and by any court having jurisdiction.
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(c) Notwithstanding the foregoing, each party specifically reserves
the right: (i) to seek equitable remedies in a court of competent jurisdiction
following arbitration of the underlying matter, if practicable and (ii) to bring
a third party action against any other party in any proceeding to which such
person (the "Initiating Person") is a party under circumstances in which the
basis of the claim by the Initiating Person against the other party is that such
other party is liable (under the Agreement or otherwise), in whole or in part,
for or in respect of any claim or counterclaim being asserted against the
Initiating Person in such proceeding.
(d) Other than disputes resolved pursuant to Section 2.2(b), the costs
and expenses incurred by the parties in connection with any claim that has been
finally determined by arbitration pursuant thereto shall promptly be paid by (i)
the claimant in proportion to the amount of its claim determined to by
JAMS/Endispute to be invalid and (ii) the defendants in proportion to the amount
of the claim determined by JAMS/Endispute to be valid (including, for purposes
of both (i) and (ii) of this Section 13.12(d), reasonable fees and disbursements
of counsel provided that the Purchaser and Merger Sub shall have no obligation
to provide such reimbursement for more than one counsel for all of the Semlers
and the Shareholders). Notwithstanding the foregoing, the costs and expenses
incurred by the prevailing parties (as determined by JAMS/Endispute) in
connection with any non-monetary claim that has been finally determined by
arbitration pursuant thereto shall promptly be paid by the other parties. Any
amounts required to be paid pursuant to this paragraph (d) and Section 2.2(c)
shall be disregarded for purpose of the limitations contained in Sections
12.2(b), 12.2(c) and 12.3(b).
13.13. Appointment of Shareholder Representative.
(a) Xxxxxxx X. Xxxxxx hereby is appointed, authorized and empowered to
act as a shareholder representative (the "Shareholder Representative"), for the
benefit of the Shareholders, in connection with and to facilitate the
consummation of the transactions contemplated by the Merger Agreement and the
Documents. The Shareholder Representative shall be the Shareholders' exclusive
agent and attorney-in-fact to act for and on behalf of each of them with respect
to any and all actions which maybe necessary or appropriate under the Agreement
or the Documents, which shall include the power and authority: (i) to execute
and deliver such waivers and consents in connection with this Agreement and the
Documents and the consummation of the transactions contemplated hereby and
thereby as the Shareholder Representative, in his sole discretion, may deem
necessary or desirable; (ii) to enforce or refrain from enforcing any rights of
the Shareholders or any of them and/or the Shareholder Representative arising
out of or under or in any manner relating to this Agreement or the Documents;
(iii) to do any and all things and to take any and all action that the
Shareholder Representative, in his sole and absolute discretion, may consider
necessary or proper or convenient in connection with or to carry out the
transactions contemplated by this Agreement and the Documents.
(b) All of the powers granted to the Shareholder Representative under
this Agreement shall survive the Closing and/or any termination of the Merger
Agreement.
(c) Notwithstanding anything herein to the contrary, each Shareholder
hereby acknowledges that neither Parent, Purchaser nor the Company shall have
any responsibility or obligation whatsoever to any Shareholder or to any other
party with respect to or arising out of any
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actions taken or any inaction by the Shareholder Representative and nothing
contained herein shall limit or affect in any manner whatsoever the
responsibilities or obligations of the Shareholder Representative to, howsoever
arising, or release the Shareholder Representative from any liabilities with
respect to, Parent, Purchaser or the Company.
(d) Parent and Purchaser shall have the right to rely upon all actions
taken or omitted to be taken by the Shareholder Representative pursuant to this
Agreement and the Documents, all of which actions or omissions shall be legally
binding upon the Shareholders.
(e) The grant of authority provided for herein (i) is coupled with an
interest and shall be irrevocable and survive the death, incompetency,
bankruptcy or liquidation of any Shareholder; and (ii) shall survive the
delivery of any assignment by a Shareholder of the whole or any fraction of his
interest hereunder, including his Shareholder Percentage.
ARTICLE XIV
GLOSSARY
14.1. Definitions. The following terms as used in this Agreement shall
have the meaning indicated below.
"Acquisition Proposal" means any proposal for a merger or other
business combination to which the Company or any of its Affiliates is or would
be a party, or involving the acquisition of any substantial interest in, or a
substantial portion of the assets of, the Company or any of its Affiliates,
other than the transaction with Purchaser contemplated by this Agreement.
"Affiliate" means, with respect to any Person, any other person
controlling, controlled by or under common control with, such Person.
"Aggregate Option Exercise Proceeds" means the amount of proceeds the
Company would have been entitled to receive upon the exercise in full of all
Options (to the extent vested) which remain unexercised immediately prior to the
Effective Time had such Options been so exercised prior to the Effective Time
(for this purpose, all Options which are subject to Option Cancellation
Agreements shall be considered as unexercised Options.).
"Appraised Value" means the greater of: (i) $450,000 and (ii) the book
value of the CompressAR Net Assets as of the date immediately prior to the
Closing. The parties acknowledge that $450,000 reflects (i) the book value of
the tangible assets of the CompressAR business as set forth in the appraisal
dated May 31, 1998 prepared by Xxxxx X. Xxxxx, CFA, ASA, of Corporate
Valuations, Inc. and (ii) the parties' agreed upon value for the intangible
assets of the Compress AR business.
"Approvals" means, collectively, permits, approvals, authorizations,
registrations (including foreign product registrations), consents, clearances,
licenses, franchises, concessions,
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orders, exemptions or other permits, in each case of all governmental or
regulatory agencies, whether federal, state, local or foreign.
"Associate" has the meaning set forth in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Certificates" means all certificates which immediately prior to the
Effective Time represented outstanding shares of Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Instromedix, Inc., an Oregon corporation.
"Company Debt" means all Indebtedness (including all accrued and unpaid
interest, fees and penalties, if any) of the Company to United States Bank of
Oregon under the Loan Agreement dated June 20, 1996, the $3,000,000 Promissory
Note and Letter Agreement each dated October 3, 1997 and the $297,231.88
Promissory Note dated March 31, 1995.
"CompressAR Business Liabilities" means any and all liabilities or
Losses (whether or not disclosed on Schedule 7.12) whether contingent or fixed,
actual or potential, known or unknown, substantially relating to the CompressAR
business or any of the activities or business, plans or policies thereof,
including, any such liability or Loss substantially resulting from, relating to
or arising in respect of the transfer of the CompressAR business to Newco and
any such liability or Loss substantially relating to or arising in respect of or
any breach of any representation, warranty, covenant or agreement set forth in
Section 7.12 or substantially relating to or resulting from any transaction or
event contemplated or engaged in pursuant to Section 7.12 (except to the extent
taken into account in determining the Purchase Price) or any actions taken or
not taken by the Company with respect to the CompressAR business, its operations
or business including all obligations to employees or former employees
(including those whose activities for the Company were required by or were
dedicated substantially to, the activities relating to the conduct of the
business or activities of the CompressAR business) in respect of any
compensation, severance, COBRA obligation or Benefit Plans or otherwise.
"Documents" means and includes and is deemed to refer to all
instruments, certificates, documents and agreements to be executed and/or
delivered herewith or in connection with the transactions contemplated hereby.
"Encumbrances" means all mortgages, deeds of trust, claims, security
interests, liens, pledges, leases, subleases, charges, escrows, options,
proxies, rights of occupancy, rights of first refusal, preemptive rights,
covenants, conditional limitations, hypothecations, prior assignments,
easements, title retention agreements, indentures, security agreements or any
other encumbrances of any kind.
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"Environmental Costs and Liabilities" means any and all liabilities,
obligations, damages, deficiencies, losses, fines, penalties, judgments,
assessments, costs and expenses (including. without limitation, reasonable fees,
costs and disbursements of legal counsel, experts, engineers and consultants)
arising from (a) any violation by the Company of Environmental Laws or
Environmental Permits, including any costs incurred to remedy any such
violation; (b) any Remedial Action with respect to any property currently or
formerly owned by the Company; (c) damages to property or natural resources
resulting from the Release by the Company of Hazardous Materials at any property
currently or formerly owned by the Company; (d) human exposure to Hazardous
Materials in connection with the Company's operations or (e) the Release of
Hazardous Materials at any property at which any Hazardous Material generated by
the Company was disposed of.
"Environmental Law" means any and all foreign, federal, state and
local statutes, ordinances, regulations, rules and judicial or administrative
decisions and orders relating to environmental quality, pollution control,
natural resources, health, safety, the handling and disposal of Hazardous
Materials, contamination and clean-up, including, without limitation, the Clean
Air Act, 42 U.S.C. Section 7401 et seq.; the Clean Water Act, 33 U.S.C. Section
1251 et seq., and the Water Quality Act of 1987; the Federal Insecticide,
Fungicide, and Rodenticide Act 7 U.S.C. Section 136 et seq.; the Marine
Protection, Research and Sanctuaries Act, 33 U.S.C. Section 1401 et seq.; the
National Environmental Policy Act, 42 U.S.C. Section 4321 et seq.; the Noise
Control Act, 42 U.S.C. Section 4901 et seq.; the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq.; the Resource Conservation and Recovery Act
42 U.S.C. Section 6901 et seq., as amended by the Hazardous and Solid Waste
Amendments of 1984; the Safe Drinking Water Act; 42 U.S.C. Section 300f et seq.;
CERCLA; the Toxic Substances Control Act 15 U.S.C. Section 2601 et seq.; the
Atomic Energy Act, 42 U.S.C. Section 2011 et seq., and the Nuclear Waste Policy
Act of 1982, 42 U.S.C. Section 10101 et seq.; and state and local environmental
statutes and ordinances with implementing regulations and rules.
"Environmental Permits" means any permit, Approval, authorization,
license, variance, registration or permission required under any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the applicable regulations promulgated thereunder.
"Excess Transactional Expenses" means the excess, if any, of:
(a) the entire amount of all Transactional Expenses over (b) $1,000,000.
"FDA" means the United States Food and Drug Administration.
"Federal Tax" means any tax imposed under the Code.
"Final Payment Date" means the later to occur of: (a) the Effective
Time or (b) the earlier to occur of (i) the first business day after the
expiration of the thirty-five (35) day period commencing on the date hereof or
(ii) the receipt by Parent of proceeds of not less than $45,000,000 of
subordinated debt financing.
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"Governmental Authority" means any foreign, United States, Federal,
State, municipal or other governmental department, commission, administration,
board, bureau, agency or instrumentality.
"GAAP" means generally accepted accounting principles.
"Hazardous Material" means any of the following, including mixtures
thereof: any substance, pollutant, contaminant, waste, by-product or constituent
regulated under or subject to the requirements of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq.; oil and petroleum products and natural gas, natural gas liquids,
liquefied natural gas and synthetic gas usable for fuel; pesticides regulated
under the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section
136 et seq.; asbestos and asbestos-containing materials, PCB's, urea
formaldehyde foam insulation and other substances regulated under the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; source material, special
nuclear material, by-product material and any other radioactive materials or
radioactive wastes, however produced, regulated under the Atomic Energy Act or
the Nuclear Waste Policy Act of 1982; chemicals subject to the OSHA Hazard
Communication Standard, 29 C.F.R. ss. 1910.1200 et seq.; industrial process and
pollution control wastes, whether or not hazardous within the meaning of the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq; medical
waste and special waste; and any other substance defined in or regulated under
Environmental Laws.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indebtedness" means, with respect to any Person, any indebtedness,
secured or unsecured, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), and evidenced by bonds, notes, debentures or similar
instruments or letters of credit, to the extent of the face value thereof (or,
in the case of evidence of indebtedness issued at a discount, the current
accreted value thereof) or (b) representing the balance deferred and unpaid of
the purchase price of property or services (other than accounts payable
(including trade payables) in the ordinary course of business) and shall also
include, to the extent not otherwise included, (i) any capitalized lease
obligations and (ii) the face value of guaranties of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor).
"Initial Percentage" means the percentage obtained by multiplying 100%
by a fraction, the numerator of which shall be the difference between
$25,000,000 and the aggregate Option Value of all Options subject to Option
Cancellation Agreements (rounded to the nearest $0.00001) and the denominator of
which shall be the Merger Consideration.
"Intellectual Property" means, together, all Listed
Intellectual Property and all Other Intellectual Property.
"IRS" means the United States Internal Revenue Service.
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"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, investigations, proceedings (public or private) or governmental
proceedings.
"Material Adverse Effect" means with respect to any Person, any change
or effect that has or that is reasonably likely to have a material adverse
effect on the condition (financial or otherwise), results of operations,
business, prospects or assets of such Person and its Subsidiaries taken as a
whole (other than as a result of changes in general economic or political
conditions generally or in general economic or political conditions applicable
to the health care industry generally).
"Merger" has the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" means the aggregate amount in dollars into which
the total number of shares of Stock are to be converted at the Effective Time
pursuant to Section 2.1(b).
"Millennium Compliant" means the ability to provide the following
functions: consistently handle date information before, during and after January
1, 2000, including, but not limited to, accepting date input, providing the date
output, and performing calculations on dates or portions of dates; function
accurately and without interruption before, during and after January 1, 2000,
without any change in operations associated with the advent of the new century;
respond to two-digit date input in a way that resolves any ambiguity as to
century in a disclosed, defined and predetermined manner; and store and provide
output of date information in ways that are unambiguous as to century.
"Newco" means Xxxxxx Technologies, Inc., an Oregon
corporation wholly-owned by the Semlers.
"OBCA" means the Oregon Business Corporation Act.
"Option Value" means with respect to the portion of any Option which is
vested as of immediately prior to the Effective Time, an amount equal to the
difference between: (a) the Per Share Merger Consideration for each share of
Stock subject to the vested portion of such Option and (b) the aggregate
exercise price for all shares of Stock subject to the vested portion of such
Option.
"Other Intellectual Property" means all trade secrets, proprietary
software or hardware, proprietary technology, technical information,
discoveries, designs and other proprietary rights, whether or not patentable and
confidential information (including, without limitation, know-how, processes and
technology) used in the conduct of the Company's business or in which it has an
interest (but not including the Listed Intellectual Property).
"Other Shareholder" means any Shareholder other than either of
the Xxxxxx Trusts.
"Per Share Merger Consideration" means an amount in dollars (rounded to
the nearest $0.00001) determined by dividing (a) an amount equal to the sum of
(i) the Purchase Price and (ii) the Aggregate Option Exercise Proceeds, by (b)
an amount equal to the sum of (i) the number of shares of Stock outstanding
immediately prior to the Effective Time and (ii) the aggregate number
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of shares of Stock subject to Options (to the extent vested) which remain
unexercised immediately prior to the Effective Time (for this purpose, the
Xxxxxx Option and all other Options which are subject to Option Cancellation
Agreements shall be considered as unexercised Options).
"Permitted Lien" means (i) any encumbrances disclosed on any Financial
Statement; (ii) Tax Liens which are not yet due and payable or which are being
contested in good faith and, with respect to which have adequately been provided
for on applicable financial statements (whether or not required to be disclosed
under GAAP); (iii) liens incurred in the ordinary course of business in
connection with workers compensation, unemployment insurance and other types of
social security benefits; (iv) mechanics', carriers', workmen's, repairmen's or
other like liens arising out of or incurred in the ordinary course of business;
(v) liens arising under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business; (vi) liens created by or existing from any litigation or legal
proceeding that is being contested and (vii) with respect to real property and
interests therein, easements (including, without limitation, reciprocal easement
agreements and utility agreements), zoning requirements, rights of way,
covenants, consents, agreements, reservations, encroachments, variances and
other similar restrictions, charges or encumbrances (whether or not recorded)
that do not, individually or in the aggregate, impair the continued use and
operation of the assets to which they relate the applicable business.
"Person" and "person" means any natural person and any corporation,
trust, partnership, limited liability partnership, limited liability company,
limited liability corporation, venture or business entity.
"Purchase Price" means: (a) $51,000,000 plus (b) if the CompressAR Net
Assets are purchased by Newco pursuant to Section 7.12, the sum of: (i) sixty
percent (60%) of the excess, if any, of the Appraised Value over the book value
of the CompressAR Net Assets (as set forth in the Closing Certificate) and (ii)
the book value of the CompressAR Net Assets (as set forth in the Closing
Certificate) minus (c) the excess, if any, of (i) the amount of Transactional
Expenses as reflected in the Closing Certificate over (ii)$1,000,000 minus (d)
the greater of any Net Current Assets Shortfall or the Shareholders' Equity
Shortfall as reflected in the Closing Certificate.
"Related Party Agreements" means the following collectively: (A) LOAN
AND STOCK OPTION AGREEMENT dated June 12, 1991, by and among the Company,
Xxxxxxx X. Xxxxxx, individually and as Trustee U/T/A dtd 05/25/93 FBO Xxxxxxx X.
Xxxxxx, and Xxxxxxx X. Xxxxxx, individually and as Trustee U/T/A dtd 05/25/93
FBO Xxxxxxx X. Xxxxxx, and CCI; (b) LOAN MODIFICATION AGREEMENT dated as of June
20, 1996 by and among the Company, Xxxxxxx X. Xxxxxx, individually and as
Trustee U/T/A dtd 05/25/93 FBO Xxxxxxx X. Xxxxxx, and Xxxxxxx X. Xxxxxx,
individually and as Trustee U/T/A dtd 05/25/93 FBO Xxxxxxx X. Xxxxxx, and CCI
and Side Letter Agreement (interest calculation) in connection with the Loan
Modification Agreement dated as of June 20, 1996; (C) AMENDMENT, EXERCISE AND
TERMINATION OF STOCK OPTION AGREEMENT dated as of June 20, 1996, as amended, by
and among the Company, Xxxxxxx X. Xxxxxx, individually and as Trustee U/T/A dtd
05/25/93 FBO Xxxxxxx X. Xxxxxx, and Xxxxxxx X. Xxxxxx, individually and as
Trustee U/T/A dtd 05/25/93 FBO Xxxxxxx X. Xxxxxx, and CCI; (D) REGISTRATION
RIGHTS AGREEMENT dated as of June 20, 1996 by and among the Company, Xxxxxxx X.
Xxxxxx, individually and as Trustee U/T/A dtd 05/25/93 FBO Xxxxxxx X. Xxxxxx,
and Xxxxxxx X. Xxxxxx, individually and as Trustee U/T/A dtd 05/25/93 FBO
Xxxxxxx X. Xxxxxx and
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CCI; (e) INSTROMEDIX, INC. BUY-SELL AGREEMENT dated as of June 10,1996 by and
among the Company, Xxxxxxx X. and Xxxxxxx X. Xxxxxx, Trustees, and Xxxxxxx X.
Xxxxxx; (F) VOTING AGREEMENT dated as of June 10, 1996 by and among the Company
Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx and Amendment No. 1
to the Voting Agreement dated July 1, 1996; (g) STOCK PURCHASE AND PLEDGE
AGREEMENT dated June 10, 1996 by and between Xxxxxxx X. Xxxxxx, Trustee U/T/A
dtd 05/25/93 FBO Xxxxxxx X. Xxxxxx, and Xxxxxxx X. Xxxxxx, Trustee U/T/A dtd
05/25/93 FBO Xxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx; and (h) STOCK PLEDGE AND
ASSIGNMENT FOR SECURITY dated June 17, 1991 by and among Xxxxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx, individually and as trustees of the Xxxxxxx X. Xxxxxx
Family Trust and the Xxxxxxx X. Xxxxxx Family Trust, and CCI.
"Release" means any discharge, emission, spill, leakage,
deposit, injection, migration on or into the indoor or outdoor environment or
into or out of any property, including, but not limited to, a "Release" as
defined in CERCLA at 42 U.S.C. ss. 9601(22).
"Remaining Percentage" means 100% minus the Initial
Percentage.
"Remedial Action" means all actions, including any capital
expenditures, required by any Governmental Authority or under any Environmental
Laws or which a reasonable Person would undertake voluntarily to (i) clean up,
remove, treat, or in any other way address any Hazardous Materials or other
substance; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Materials; (iii) perform pre-remedial studies
and investigations or post- remedial monitoring, operations, maintenance and
care; or (iv) bring facilities and operations at or on any property owned,
operated or leased by the Company and its Affiliates into compliance with all
Environmental Laws and Environmental Permits.
"Rights" means any right (including, without limitation,
conversion or exchange right); option; warrant; call; put or similar commitment
of any character, authorized, granted or issued; right to acquire, or to require
purchase of, any security; right to acquire an equity interest, or any interest
measured by income, profits or any results of operations or by the value of any
stock, or any similar or related right or interest.
"Xxxxxx Option" means the options to purchase 500,000 shares
of Voting Common Stock granted under the Stock Option Agreement dated January 5,
1996 between the Company and Xxxxxxx X. Xxxxxx, as amended by the Separation
Agreement between the Company and Xxxxxxx X. Xxxxxx dated as of November 8,
1996.
"Xxxxxx Trusts" means collectively, the Xxxxxxx X. Xxxxxx
Family Trust established under Trust Agreement dated May 25, 1993 for the
benefit of Xxxxxxx X. Xxxxxx and the Xxxxxxx X. Xxxxxx Family Trust established
under Trust Agreement dated May 25, 1993 for the benefit of Xxxxxxx X. Xxxxxx.
"Senior Credit Agreement" means the Credit Agreement dated as
of November 26, 1996 among Advanced Medical, Inc., IMED Corporation, various
lending institutions, Bankers Trust Company, Banque Paribas and Xxxxxxxxx Lufkin
& Xxxxxxxx Securities Corporation.
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"Shareholder Consent" has the meaning set forth in the
recitals to this Agreement.
"Shareholder Indebtedness" means the aggregate amount of the
Shareholder Notes together with accrued and unpaid interest thereon through the
Final Payment Date; provided that, from the Closing Date through the Final
Payment Date, interest on the Shareholder Notes shall accrue at the interest
rate in effect on the Closing Date under the Company's term loan with United
States National Bank of Oregon and each Shareholder Note shall be deemed to be
amended accordingly.
"Shareholder Notes" means the outstanding indebtedness of the
Semlers to the Company pursuant to the promissory notes listed on Schedule
4.1(c).
"Shareholder Percentage" means with respect to any Shareholder, 100%
multiplied by a fraction, the numerator of which shall be the number of shares
of Stock owned by such Shareholder immediately prior to the Effective Time and
the denominator of which shall be the total number of shares of Stock
outstanding immediately prior to the Effective Time.
"Stock" means the Voting Common Stock and the Non-Voting
Common Stock of the Company, collectively.
"Stock Option Plan" means the stock option plan adopted by the
Board of Directors of the Company in 1992, as amended.
"Subsidiary" means with respect to any Person, (a) each corporation,
partnership, joint venture or other legal entity of which such Person owns,
either directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or similar governing body of such corporation,
partnership, joint venture or other legal entity, (b) each partnership in which
such Person or another Subsidiary of such Person is the general or managing
partner and (c) each limited liability company in which such Person or another
Subsidiary of such Person is the managing member or otherwise controls (by
contract, through ownership of membership interests or otherwise).
"Surviving Corporation" has the meaning set forth in the
recitals to this Agreement.
"Tax" or "Taxes" means all taxes, charges, fees, imposts, duties,
levies or other assessments by any Taxing Authority, including (without
limitation), all net income, alternative or add-on minimum, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property,
estimated, together with any interest and any penalties, fines, additions to tax
or additional amounts (whether disputed or not) imposed by any Taxing Authority
(domestic or foreign) and shall include any transferee liability in respect of
Taxes.
"Taxing Authority" means any Governmental Authority.
"Tax Lien" or "Tax Liens" means any Encumbrance relating to Taxes,
other than a lien of the type described in clause (ii) of the definition of
Permitted Liens.
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"Tax Return" or "Tax Returns" means any United States Federal, state,
local and/or foreign return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including all schedules and
attachments thereto, and including any amendment thereof.
"Transactional Expenses" means all costs and expenses of any nature
whatsoever incurred by the Company at any time (including prior to the date of
this Agreement) or for which the Company has become or may become liable in the
future (including such amounts which Purchaser pays pursuant to Section 13.7) in
connection with the negotiation, preparation and execution of this Agreement or
the consummation of the transactions contemplated hereby, including fees and
expenses of BT Alex.Xxxxx; Xxxxxx & Xxxxxxx; Xxxxx Xxxxx LLP; Xxxxxxx Hartwell,
Dickinson, XxXxxxxxx & Xxxxxx; and Price Waterhouse LLP.
14.2. Terms Defined Elsewhere in the Agreement. For purposes of this
Agreement, the following terms shall have the meanings set forth in the section
indicated:
Term Section
Articles of Merger 1.2
Assignee 13.5
Balance Sheet 4.6
Balance Sheet Date 4.6
Benefit Plans 4.14
BT Alex. Xxxxx 4.19
CCI 3.1
Certificates 2.4
Closing 1.3
Closing Balance Sheet 2.2
Closing Certificate 9.10
Closing Date 1.3
Company Representatives 7.9
CompressAR Net Assets 7.12
Confidentiality Agreement 6.2
Defined Benefit Plan 4.14
Disputed Amount 2.2
Due Date 2.2
Effective Time 1.2
Employee Benefit Plan 4.14
Employee Pension Benefit Plans 4.14
Employee Welfare Benefit Plans 4.14
Employees 4.14
Final Closing Balance Sheet 2.2
Final Determination 12.6
Financial Statements 4.6
First Business Day 2.1
501(k) 4.23
Forms 483s 4.23
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IDE 4.23
Indemnified Party 12.4
Indemnifying Party 12.4
Initiating Person 13.12
Intellectual Property Claim 12.4
Leased Real Property 4.9
Listed Intellectual Property 4.1
Losses 12.2
Minimum Amount 12.2
Multiemployer Plan 4.14
Multiple Employer Plan 4.14
Net Current Assets Shortfall 2.2
1997 Special Purpose Balance Sheet 4.6
1997 Special Purpose Statement of Operations4.6
Non-Voting Common Stock 4.3
Option and Options 2.1
Option Cancellation Agreement 2.1
Option Notice Period 7.14
PaceArt Matter 6.1
PMA 4.23
Purchaser Indemnitee 12.2
Ralin License Agreement 4.10
Scheduled Closing Date 1.3
Shareholder Representative 13.7
Shareholders' Equity Shortfall 2.2
Total Option Cancellation Amount 2.1
Voting Common Stock 4.3
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Merger to be duly executed the day and year first above
written.
ALARIS MEDICAL, INC.
By: -------------------------------------
Name:
Title:
INSTROMEDIX, INC.
By:--------------------------------------
Name:
Title:
----------------------------
Xxxxxxx X. Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx
SHAREHOLDERS
----------------------------
Xxxxxx Xxx Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx
----------------------------
Xxxx Xxx Xxxxxx Xxxxxxxxxx
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----------------------------
H. Xxxx Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx Family Trust
By:----------------------------
Xxxxxxx X. Xxxxxx, Trustee
----------------------------
Xxxxxxx X. Xxxxxx Family Trust
By:----------------------------
Xxxxxxx X. Xxxxxx, Trustee
Capital Consultants, Inc.
By:----------------------------
Name:
Title:
[continuation of signature page to Agreement and Plan of Merger]
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ALARIS MEDICAL SYSTEMS, INC.
By:----------------------------
Name:
Title:
[continuation of signature page to Agreement and Plan of Merger]
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