EXHIBIT 1
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STOCK AND MEMBERSHIP INTEREST EXCHANGE AGREEMENT
This Stock and Membership Interest Exchange Agreement (the
"Agreement") is made as of the 4th day of December, 1998, by and among ▇▇▇▇
National Corporation, a California corporation ("▇▇▇▇"), InPath, LLC, a
Delaware limited liability company ("InPath"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as an
individual and as Trustee of the InPath, LLC Voting Trust ("Gombrich");
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee of each of The EAG Trust, The CMC Trust, The
MDG Trust and The MSD Trust; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; AccuMed International,
Inc., a Delaware corporation; Northlea Partners Ltd., a Colorado limited
partnership; and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇ Trust;
▇▇▇▇▇▇ ▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust; and Monroe
Investments, Inc., an Illinois corporation (collectively, the "InPath
Members").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇ wishes to acquire the business of InPath;
WHEREAS, InPath is in the business of developing and marketing
certain medical diagnostic technology;
WHEREAS, the InPath Members own all of the units of membership
interest (the "Units") of InPath;
WHEREAS, based upon the representations, agreements and warranties
herein made by the parties and subject to the terms and conditions
contained in this Agreement, the InPath Members wish to exchange the Units
of InPath owned by them for shares of no par common stock of ▇▇▇▇ (the
"Stock") and warrants to purchase Stock in the form of Exhibit A attached
hereto (the "Warrants"); and
WHEREAS, it is the intent of the parties that after the consummation
of the transactions contemplated herein, the InPath Members will own 50% of
the Stock of ▇▇▇▇ computed on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties, intending to be legally bound, agree as follows:
Article I. Exchange.
1.1 Exchange of Units for Stock and Warrants. Subject to the terms
and conditions set forth herein, as of the Closing Date (as defined in
Article II) the InPath Members shall sell, assign and deliver to ▇▇▇▇, free
and clear of any and all claims, liens, pledges, mortgages, security
interests, charges, options, defaults, equities, rights of first refusal
and other restrictions and other adverse claims ("Liens") all of their
Units in InPath in exchange for the shares of Stock and Warrants set forth
next to their names on Schedule 3.4, and ▇▇▇▇ shall issue and deliver such
Stock and Warrants free and clear of any and all Liens in exchange for
Units. The number of shares of Stock issuable pursuant to the Warrants
shall be subject to adjustment as provided in Sections 1.2 and 1.4.
1.2 Anti-Dilution Provisions. It is understood and agreed that
after consummation of the transactions contemplated hereby, the InPath
Members will own 50% of the issued and outstanding common stock of ▇▇▇▇
computed on a fully diluted basis, subject to adjustment as set forth in
Section 1.4 and as provided herein. In the event ▇▇▇▇ changes (or
establishes a record date for changing) the number of shares of its Stock
issued and outstanding prior to the Closing Date as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect
to its outstanding Stock and the record date therefor shall be prior to the
Closing Date, the number of shares of Stock and Warrants each InPath Member
is entitled to receive under this Agreement shall be adjusted
proportionately.
1.3 Directors and Officers. At and as of the Closing Date, ▇▇▇▇
shall take such actions as may be necessary and appropriate so that the
directors and officers of ▇▇▇▇ shall be as follows:
(a) The directors of ▇▇▇▇ shall be:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
(b) The officers of ▇▇▇▇ shall be:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ - Chairman, Chief Executive
Officer and Secretary
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - President and Chief Financial
Officer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - Vice President and Chief
Technology Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ - Vice President and Treasurer
1.4 Adjustments. On or before the date one hundred and twenty
(120) days after the date hereof, ▇▇▇▇ will identify all liabilities and
obligations ("Liabilities") that would be required to be reflected on a
balance sheet dated as of the Closing Date prepared in accordance with
generally accepted accounting principles (the "Closing Balance Sheet").
Notwithstanding the foregoing, the Closing Balance Sheet shall specifically
exclude the following Liabilities: (a) all legal and accounting expenses
that relate to the transactions contemplated hereby, (b) all accounting
expenses that relate to the audit of the 1998 calendar year, and (c) all
expenses relating to any underfunding of the ▇▇▇▇▇ Fabrics, Inc. pension
plan or the 401(k) plan. If such liabilities identified on such Closing
Balance Sheet exceed the sum of twenty five thousand dollars ($25,000) in
the aggregate, the number of shares of Stock issuable pursuant to the
Warrants will be increased by an amount equal to the quotient of (i) the
amount of such Liabilities in excess of the sum of twenty five thousand
dollars ($25,000), divided by (ii) nine hundred twenty-five thousand
dollars ($925,000), multiplied by (iii) 7,464,640. The shares of Stock
subject to each Warrant will be increased pro rata, based upon the Stock
issuable to every Warrant holder. If the representation and warranty in
Section 5.12 is not true and correct as of the Closing Date, the amount of
any shortfall in cash and cash equivalents of ▇▇▇▇ shall be added to clause
(i) in the formula above.
Article II. The Closing.
The closing of the issuance of the Stock and Warrants contemplated
herein (the "Closing") will take place on December 4, 1998 at 10:00 a.m.
local time, or such other time as the parties may mutually agree (the
"Closing Date"). The issuance of additional Stock by ▇▇▇▇ pursuant to the
Warrants will take place on a date and at a time mutually selected by
▇▇▇▇▇▇ and Gombrich, but in no event later than March 30, 1999 or such
later date as is approved by Gombrich.
Article III. Representations and Warranties of InPath
As a material inducement to ▇▇▇▇ to enter into and perform this
Agreement, InPath represents and warrants that:
3.1 InPath's Organization and Corporate Authority. InPath is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full power and
authority to carry on its business as now conducted and to consummate the
transactions contemplated by this Agreement. InPath maintains its
principal place of business in Illinois. InPath has not failed to qualify
as a foreign corporation to do business in any jurisdiction where failure
to so qualify would have a material adverse effect on Inpath or its
business.
3.2 Certificate of Formation and Operating Agreement. The copies
of the Certificate of Formation of InPath and the Limited Liability Company
Agreement of InPath, which have previously been furnished to ▇▇▇▇, are
true, correct and complete copies.
3.3 No Violation. Neither the execution and delivery by InPath of
this Agreement or other agreements and instruments required by the
provisions of this Agreement, nor consummation of the transactions herein
or therein contemplated, nor compliance with the terms, conditions and
provisions hereof or thereof will conflict with or violate any provision of
law applicable to InPath or its Certificate of Formation or Limited
Liability Company Agreement, or result in a violation or default in any
provision of any regulation, order, writ, injunction or decree of any court
or governmental agency or authority or except for a lease of office space,
of any agreement or instrument to which InPath is party or by which InPath
or any of its property is bound or to which InPath or any of its property
is subject, or constitute a default thereunder or result in the imposition
of any Lien whatsoever upon any of InPath's property pursuant to the terms
of any such agreement or instrument.
3.4 Capitalization. InPath has authorized 200,000 Units, of which
100,000 Units are presently issued and outstanding. There are no other
classes of InPath equity securities, or rights to convert or to exercise
into InPath equity securities, currently outstanding. There are no
outstanding rights to purchase or pre-emptive rights of any kind affecting
any Units, whether or not outstanding. Schedule 3.4, attached hereto, is a
true and complete list of all holders of InPath Units.
3.5 Financial Statements. InPath has heretofore delivered to ▇▇▇▇
copies of InPath's unaudited balance sheet as of November 30, 1998 (the
"InPath Financials"). The InPath Financials were prepared in accordance
with generally accepted accounting principles applied on a consistent
basis, and fairly present in all material respects the financial position
of InPath as at the date thereof, subject to normal year-end adjustments
and any other adjustments described therein except that the InPath
Financials do not contain footnote disclosure. As of the date of the
InPath Financials, there were no material liabilities of InPath of any
kind, contingent or otherwise, other than liabilities disclosed or provided
for in the InPath Financials. The InPath Financials reflect or provide for
all claims against and all debts and liabilities of InPath as of the date
hereof, whether absolute, accrued, contingent or otherwise in accordance
with generally accepted accounting principles. InPath has no knowledge of
any circumstance, condition, event or arrangement that may hereafter give
rise to any other liability of InPath, other than in the ordinary course of
business.
3.6 No Adverse Change. Since October 31, 1998, (a) there has been
no material adverse change in the financial condition, results of
operation, assets, liabilities or business of InPath, and InPath is not
aware of any fact or condition particularly related to InPath which it
reasonably believes is likely to cause any such change at any time in the
future; (b) there have been no distributions with respect to Units paid or
declared by InPath; (c) the physical properties owned or leased by InPath
have not suffered any destruction or damage, regardless of whether or not
the loss suffered was insured, that would materially and adversely affect
InPath's business; and (d) there has been no incurrence of any material
liability other than in the ordinary course of business consistent with
past practice.
3.7 Subsidiaries. InPath has no subsidiaries. InPath does not
own, directly or indirectly, any of the capital stock of any corporation,
association, trust or similar entity, any interest in the equity of any
partnership, limited liability company or similar entity, any share in any
joint venture, or any other equity or proprietary interest in any entity or
enterprise, however organized and however such interest may be denominated
or evidenced.
3.8 Taxes. InPath has filed all federal, state, local and other
tax returns which are required to be filed by it and which were due prior
to the date of this Agreement and has paid all taxes shown thereon,
including without limitation all taxes on properties, income, licenses,
sales and payrolls. All federal, state, local and other taxes accruable
since the end of the respective periods covered by such returns and up to
the date hereof and the Closing Date have or will have been paid or accrued
on the books of InPath. Any tax returns of InPath delivered to ▇▇▇▇ are
true, accurate and complete, and fairly present the information purported
to be shown therein, and reflect all the tax liabilities of InPath for the
periods covered thereby. The amount reflected in the InPath Financials as
a provision for taxes as of the date thereof is sufficient for the payment
of all accrued and unpaid federal, state and local taxes of InPath, whether
or not disputed, for such period stated and for all periods prior thereto
or arising out of transactions entered into or any state of facts existing
on or prior to such date.
No federal income tax returns of InPath have been audited by the
Internal Revenue Service. No federal or state tax liabilities have been
assessed or proposed which remain unpaid. There is no basis upon which any
assessment for any amount of additional taxes could be made.
The present taxes which InPath is required by law to withhold or
collect have been withheld or collected and have been paid over to the
proper governmental authorities or are properly held by InPath for such
payment, and all withholdings, collections or other payments due in
connection therewith as of the date of the InPath Financials, are fully
reflected in the InPath Financials as at such date and for the period then
ended. All such taxes are and will be so withheld, collected, paid over or
held for payment as of the date of this Agreement and the Closing. No
waivers of statutes of limitations with respect to any tax returns of
InPath nor extensions of time for the assessment of any tax have been given
which are now in effect.
Neither InPath nor any InPath Member has taken or will take any
action other than in the ordinary course of business and other than the
transactions to occur pursuant to this Agreement which would create a tax
liability of InPath that would become such on or after the Closing Date.
3.9 Interests of Officers. Except as previously disclosed to ▇▇▇▇,
and except for normal advances for business expenses incurred in the
ordinary course of business, no officer, director, or InPath Member nor any
affiliate of any of the foregoing parties has any loan or other obligation
outstanding to or from InPath or for which InPath is or may be liable under
guaranty or otherwise, or has any material interest in any firm, person or
entity with which InPath has entered into any contract or lease, or with
which InPath does business.
3.10 Property. InPath has good and marketable title to its
interests in all real and personal property owned by it and reflected on
the InPath Financials, and property leased or licensed by InPath, free and
clear of all Liens.
All leases and licenses to which InPath is a party are in good
standing and are valid and effective in accordance with their respective
terms, and except for the need to obtain certain insurance under a lease
for office space, there is not under any such lease or license any existing
default or event which with notice or lapse of time or both would become a
default. All personal property of InPath has been properly maintained and
is in good order and repair and is operable and fit to be used for its
intended purposes.
3.11 Intellectual Property. InPath owns or has a valid license to
use all of its intellectual property rights disclosed in Schedule 3.11 and
is not infringing on intellectual property rights of others. Without
limiting the generality of the foregoing: InPath's point-of-care
diagnostic products currently being developed or contemplated are within
"LICENSEE'S PROTECTED BUSINESS," and excluded from "ACCUMED'S PROTECTED
BUSINESS," within the meaning of InPath's Patent and Technology License
Agreement with AccuMed International, Inc.
3.12 Material Contracts; Defaults. Inpath has previously delivered
to ▇▇▇▇ a list of all of InPath's Material Contracts. Each such Material
Contract is in full force and effect and constitutes a valid and binding
obligation of InPath and to InPath's knowledge, each other party thereto.
InPath has delivered a true and complete copy of each Material Contract to
▇▇▇▇. InPath has not breached any of its Material Contracts, and InPath
has no knowledge of any default by any other party to any such Material
Contract or any condition which, with the giving of notice or passage of
time, or both, could reasonably be expected to constitute a default by any
party thereto. For purposes hereof, "Material Contract" shall mean any
agreement, contract, arrangement, commitment or understanding (wither
written or oral) (i) that is a "material contract" within the meaning of
Item 601(b)(10) of SEC Regulation S-K, or (ii) that materially restricts
the conduct of business by InPath, or (iii) any other contract, agreement,
commitment, lease or other instrument that cannot be terminated within one
year or that involves an amount in excess of $10,000.
3.13 Litigation. There are no actions, suits or proceedings,
pending, or, to the knowledge of InPath, after due inquiry, threatened
before any court, arbitrator, commission, agency or other administrative
authority against, or affecting, InPath or its businesses or properties, or
which would interfere with the marketing of InPath's services or products
or the transactions contemplated by this Agreement, and InPath is not the
subject of any order or decree.
3.14 Employee Benefit Plans. InPath maintains, sponsors and/or
contributes to no Employee Benefit Plans, as defined in Section 3(3) of
ERISA, nor has it ever done so.
3.15 Finder's Fee. Neither InPath nor any InPath Member has
incurred any obligation of any kind whatsoever to any party for a finder's
or broker's fee in connection with the transactions contemplated by this
Agreement.
3.16 No Practices in Violation of Law. Neither InPath nor any
InPath Member by, on behalf of or for the benefit of InPath, has engaged in
or is now engaging in any act, conspiracy or course of conduct in violation
of any applicable federal or state law which is likely to result in a
materially adverse change in the financial condition, results of operation,
assets, liabilities or business of InPath, and has not received any notice,
claim or protest that it is now or has heretofore been so engaged.
3.17 Authority. InPath has full right, power and authority to
execute, deliver and perform this Agreement, all other proper corporate
actions of InPath's Board of Directors, Managers and Members authorizing
the execution, delivery and performance hereof and thereof having been
taken. This Agreement has been duly executed and delivered by InPath and
constitutes a valid and legally binding obligation of InPath, enforceable
against InPath in accordance with its terms, subject, as to enforcement, to
bankruptcy, reorganization and other laws affecting the enforcement of
creditors' rights generally from time to time in effect and to judicial
discretion in accordance with general equitable principles. There are
pending no proceedings or actions to dissolve or liquidate InPath.
3.18 Consents and Approvals. No consents or approvals of, or
filings or registrations with, any governmental authority or with any third
party are required to be made or obtained by InPath in connection with the
execution, delivery or performance by InPath of this Agreement or to enter
into this Agreement or consummate any of the transactions contemplated
herein.
3.19 Environmental Matters.
(a) InPath has complied at all times with applicable
Environmental Laws; (i) no real property (including buildings or other
structures) currently or formerly owned, leased or operated by it has been
contaminated with, or has had any release of, any Hazardous Substance;
(ii) InPath is not subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (iii) InPath has not
received any notice, demand letter, claim or request for information
alleging any violation of, or liability under, any Environmental Law;
(iv) InPath is not subject to any order, decree, injunction or other
agreement with any governmental authority or any third party relating to
any Environmental Law; (v) to the best of InPath's knowledge, there are no
circumstances or conditions (including the presence of asbestos,
underground storage tanks, lead products, polychlorinated biphenyls, prior
manufacturing operations, dry-cleaning, or automotive services) involving
InPath, or any currently or formerly owned or operated property, that could
reasonably be expected to result in any claims, liability or investigations
against InPath or result in any restrictions on the ownership, use, or
transfer of any property pursuant to any Environmental Law; and (vi) InPath
has delivered to ▇▇▇▇ copies of all environmental reports, studies,
sampling data, correspondence, filings and other environmental information
in its possession or reasonably available to it relating to itself and any
currently or formerly owned, leased or operated property.
(b) As used herein, the term "Environmental Law" means any
federal, state or local law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to:
(i) the protection or restoration of the environment, health, safety, or
natural resources, (ii) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (iii) noise, odor,
wetlands, indoor air, pollution, contamination or any injury or threat of
injury to persons or property in connection with any Hazardous Substance
and the term "Hazardous Substance" means any substance in any concentration
that is: (i) listed, classified or regulated pursuant to any Environmental
Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is or
may be the subject of regulatory action by any governmental authority in
connection with any Environmental Law.
Article IV. Representations of the InPath Members.
As a material inducement to ▇▇▇▇ to enter into and perform this
Agreement, the InPath Members represent and warrant that:
4.1 Title to Units. Each InPath Member owns the number of Units
listed opposite his name in Schedule 3.4, free and clear of any and all
Liens. Such Units in the aggregate constitute all of the issued and
outstanding Membership Interests in InPath.
4.2 Authority. The InPath Members have full legal capacity, right,
power and authority to execute, deliver and perform this Agreement and to
cause InPath to approve the execution of this Agreement. This Agreement
has been duly executed and delivered by the InPath Members and constitutes
the valid and legally binding obligation of each of them, enforceable
against each of them in accordance with its terms, subject, as to
enforcement, to bankruptcy, reorganization and other laws affecting the
enforcement of creditors' rights generally from time to time in effect and
to judicial discretion in accordance with general equitable principles.
4.3 No Violation. Neither the execution and delivery by the InPath
Members of this Agreement or other agreements and instruments required by
the provisions of this Agreement, nor consummation of the transactions
herein or therein contemplated, nor compliance with the terms, conditions
and provisions hereof or thereof will conflict with or violate any
provision of law applicable to any of the InPath Members or if applicable,
their organizational documents, or result in a violation or default in any
provision of any regulation, order, writ, injunction or decree of any court
or governmental agency or authority or of any agreement or instrument to
which any of the InPath Members is party or by which any of the InPath
Members or any of their property is bound or to which any of the InPath
Members or any of their property is subject, or constitute a default
thereunder or result in the imposition of any Lien upon any of the InPath
Members' property pursuant to the terms of any such agreement or
instrument.
4.4 Investment Representations. (i) The Stock and Warrants to be
issued to the InPath Members hereunder (the "InPath Members Securities")
are being acquired for the InPath Members' own account for investment
purposes only and without any present intention to sell, transfer or
otherwise dispose of the same (except in compliance with clause (v)
hereof); (ii) the InPath Members have such knowledge and experience in
financial matters that they are capable of evaluating the merits and risks
of their investment in the InPath Members Securities; (iii) the InPath
Members understand that the InPath Members Securities have not been
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act") or any securities laws of any state of the United States
("Blue Sky Laws"); (iv) the InPath Members are fully informed as to the
applicable limitations upon any distribution or resale of the InPath
Members Securities under such Securities Act and Blue Sky Laws and that the
InPath Members Securities may not be distributed or resold if such
distribution or resale would constitute a violation of the Securities Act
or Blue Sky Laws; and (v) the InPath Members will not sell, transfer,
assign, pledge or otherwise distribute any of the InPath Members Securities
unless (a) there is an effective registration statement under the
Securities Act and Blue Sky Laws covering such InPath Members Securities,
(b) such sale, transfer, assignment, pledge or other distribution is exempt
from the registration or qualification requirements of the Securities Act
and Blue Sky Laws or (c) the Securities Act and Blue Sky Laws are
inapplicable to such transaction. In connection with the foregoing, the
InPath Members agree and consent to the inclusion on the certificate(s)
representing the InPath Members Securities of the following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN TAKEN BY THE ISSUEE
FOR INVESTMENT PURPOSES. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED
(a) UNLESS THEY HAVE BEEN REGISTERED UNDER SAID ACT, OR (b) UNLESS SUCH
REGISTRATION IS EXPRESSLY WAIVED BY THE COMPANY, OR THE TRANSFER AGENT (OR
THE COMPANY, IF THEN ACTING AS ITS TRANSFER AGENT) IS PRESENTED WITH A
WRITTEN OPINION SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER."
The foregoing may be relied upon by ▇▇▇▇ and also by: (i) ▇▇▇▇'▇
counsel on the date hereof, Berlack, Israels and ▇▇▇▇▇▇▇▇ LLP, New York,
New York, in connection with any opinion or other letter that they may
deliver in respect of the issuance and delivery of any of the InPath
Members Securities, and (ii) the Company's transfer agent, Continental
Stock Transfer & Trust Company, in connection with their effectuation of
such issuance and delivery.
Article V. Representations and Warranties of ▇▇▇▇.
As a material inducement to InPath and the InPath Members to enter
into and perform this Agreement, ▇▇▇▇ represents and warrants that:
5.1 ▇▇▇▇'▇ Organization and Corporate Authority. ▇▇▇▇ is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, with full power and authority to carry on
its business as now conducted and to consummate the transactions
contemplated by this Agreement. ▇▇▇▇ maintains its principal place of
business in Florida. ▇▇▇▇ has not failed to qualify as a foreign
corporation to do business in any jurisdiction where failure to so qualify
would have a material adverse effect on the business of ▇▇▇▇.
5.2 Charter and Bylaws. ▇▇▇▇ has heretofore delivered to InPath,
true, correct and complete copies of the Articles of Incorporation of ▇▇▇▇
and the Bylaws of ▇▇▇▇.
5.3 No Violation. Neither the execution and delivery by ▇▇▇▇ of
this Agreement or other agreements and instruments required by the
provisions of this Agreement, nor consummation of the transactions herein
or therein contemplated, nor compliance with the terms, conditions and
provisions hereof or thereof will conflict with or violate any provision of
law or the Articles of Incorporation or Bylaws of ▇▇▇▇, or result in a
violation or default in any provision of any regulation, order, writ,
injunction or decree of any court or governmental agency or authority or of
any agreement or instrument to which ▇▇▇▇ is party or by which ▇▇▇▇ or any
of its property is bound or to which ▇▇▇▇ or any of its property is
subject, or constitute a default thereunder or result in the imposition of
any lien, charge, encumbrance or security interest of any nature whatsoever
upon any of ▇▇▇▇'▇ property pursuant to the terms of any such agreement or
instrument.
5.4 Capitalization. ▇▇▇▇ has authorized capital stock consisting
of 12,000,000 shares of common stock, no par value, of which 7,711,210
shares are issued and outstanding (except for 17,858 shares due to Rafalco)
and all such outstanding shares of capital stock are duly authorized, fully
paid and nonassessable. Except for 450,000 Stock Appreciation Rights with
an exercise price of $.30 per right issued in 1989 (the "1989 SARs"), there
are no other classes of ▇▇▇▇ equity securities, or rights to convert or to
exercise into ▇▇▇▇ equity securities, currently outstanding, and there are
no outstanding rights to purchase, warrants, stock appreciation rights,
options or pre-emptive rights of any kind affecting any shares of the
capital stock of ▇▇▇▇. Schedule 5.4 attached hereto is a true and complete
list of all holders holding 5% or more of the issued and outstanding Stock,
excluding the InPath Members, as of the Closing Date.
The 696,570 shares of Stock designated by the Debtors Plan of
Reorganization dated December 30, 1986 filed in the US Bankruptcy Court for
the Northern District of California in Case No. 3-85-01696-LK as the "4-B
Shares" have no voting, dividend, liquidation, preference or other rights
of any nature whatsoever. After the consummation of the issuance of Stock
and Warrants, as contemplated herein, the InPath Members will collectively
own 4,228,790 shares of Stock, as listed on Schedule 3.4, free and clear of
all Liens (excluding any arising through or under any Inpath Member). Upon
exercise of the Warrants and the issuance by ▇▇▇▇ of the shares of Stock to
satisfy the Warrants, the InPath Members will collectively own 7,464,640
shares of Stock, free and clear of all Liens, (excluding any arising
through or under any InPath Member) constituting 50% of the issued and
outstanding capital stock of ▇▇▇▇, computed on a fully diluted basis,
without giving effect to the "4-B Shares" or any transactions approved by
the Board of Directors of ▇▇▇▇, which shall include the affirmative Vote of
Gombrich, after the date hereof. All of the Stock to be issued to the
InPath Members pursuant hereto has been and will be duly authorized, and
upon issuance will be fully paid and nonassessable.
5.5 Financial Statements. Included in ▇▇▇▇'▇ Annual Report on Form
10-K for the year ended December 31, 1997 (the "10-K") and Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and September
30, 1998 (collectively, with the 10-K, the "SEC Filings") are copies of
▇▇▇▇'▇ audited consolidated financial statements for the fiscal year ended
1997, and unaudited interim financial statements as of September 30, 1998
(together, the "▇▇▇▇ Financials"). The ▇▇▇▇ Financials were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, except as may be indicated therein or on the notes
thereto, and fairly present in all material respects the financial position
of ▇▇▇▇ as at the dates thereof and the results of its operations and cash
flows for the periods then ended, subject to normal year-end adjustments
and any other adjustments described therein. As of the date of the ▇▇▇▇
Financials, there were no material liabilities of ▇▇▇▇ of any kind,
contingent or otherwise, other than liabilities disclosed or provided for
in the ▇▇▇▇ Financials or set forth elsewhere in the SEC Filings. The ▇▇▇▇
Financials reflect or provide for all claims against and all debts and
liabilities of ▇▇▇▇ as of the dates thereof whether absolute, accrued,
contingent or otherwise in accordance with generally accepted accounting
principles, consistently applied. ▇▇▇▇ has no knowledge of any
circumstance, condition, event or arrangement that may hereafter give rise
to any other liability of ▇▇▇▇, other than in the ordinary course of
business.
5.6 No Adverse Change. Since September 30, 1998, (a) there has
been no material adverse change in the financial condition, results of
operation, assets, liabilities or business of ▇▇▇▇, and ▇▇▇▇ is aware of no
fact or condition particularly related to the business of ▇▇▇▇ which it
reasonably believes is likely to cause any such change at any time in the
future; (b) there have been no distributions with respect to Stock paid or
declared by ▇▇▇▇; (c) except pursuant to this Agreement or the Claims
Settlement Agreement (the "Claims Settlement Agreement") dated as of the
date hereof, among ▇▇▇▇ and certain claimholders, pursuant to which ▇▇▇▇
will issue 1,776,666 shares of common stock, ▇▇▇▇ has not issued or sold
any Stock or any rights to purchase, warrants, stock appreciation rights,
options or pre-emptive rights of any kind affecting any shares of the
capital stock of ▇▇▇▇, whether or not outstanding; (d) the physical
properties owned or leased by ▇▇▇▇ have not suffered any destruction or
damage, regardless of whether or not the loss suffered was insured, that
would materially and adversely affect ▇▇▇▇'▇ business; and (e) there has
been no incurrence of any material liability other than in the ordinary
course of business consistent with past practice.
5.7 Reports. ▇▇▇▇ has filed all required forms, reports and
documents (including all prospectuses and all registration statements) with
the Securities and Exchange Commission required to be filed by it pursuant
to the federal securities laws and the Securities and Exchange Commission
rules and regulations promulgated thereunder, all of which have complied in
all material respects with all applicable requirements including those of
the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder. None of the SEC Filings,
including the financial statements included therein, at the time filed,
contained any untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.8 Subsidiaries. ▇▇▇▇ has no subsidiaries not disclosed in the
SEC Filings. ▇▇▇▇ does not own, directly or indirectly, other than for
investment purposes, any of the capital stock of any corporation,
association, trust or similar entity, any interest in the equity of any
partnership, limited liability company or similar entity, any share in any
joint venture, or any other equity or proprietary interest in any entity or
enterprise, however organized and however such interest may be denominated
or evidenced not disclosed in the SEC Filings.
5.9 Taxes. ▇▇▇▇ has filed all federal, state, local and other tax
returns which are required to be filed by it and which were due prior to
the date of this Agreement and has paid all taxes shown thereon, including
without limitation all taxes on properties, income, licenses, sales and
payrolls. All federal, state, local and other taxes accruable since the
end of the respective periods covered by such returns and up to the date
hereof and the Closing Date have or will have been paid or accrued on the
books of ▇▇▇▇. Any tax returns of ▇▇▇▇ delivered to the InPath Members are
true, accurate and complete, and fairly present the information purported
to be shown therein, and reflect all the tax liabilities of ▇▇▇▇ for the
periods covered thereby. The amount reflected in the ▇▇▇▇ Financials as a
provision for taxes as of the dates thereof are sufficient for the payment
of all accrued and unpaid federal, state and local taxes of ▇▇▇▇, whether
or not disputed, for the year stated and for all fiscal periods prior
thereto or arising out of transactions entered into or any state of facts
existing on or prior to such dates.
No federal income tax returns of ▇▇▇▇ have been audited by the
Internal Revenue Service. No federal or state tax liabilities have been
assessed or proposed which remain unpaid. There is no basis upon which any
assessment for a material amount of additional taxes could be made.
The present taxes which ▇▇▇▇ is required by law to withhold or
collect have been withheld or collected and have been paid over to the
proper governmental authorities or are properly held by ▇▇▇▇ for such
payment, and all withholdings, collections or other payments due in
connection therewith as of the dates of the ▇▇▇▇ Financials, are fully
reflected in the balance sheets included as a part of the ▇▇▇▇ Financials
as at such dates and for the periods then ended. All such taxes are and
will be so withheld, collected, paid over or held for payment as of the
date of this Agreement and the Closing. No waivers of statutes of
limitations with respect to any tax returns of ▇▇▇▇ nor extensions of time
for the assessment of any tax have been given which are now in effect.
▇▇▇▇ has not taken and will not take any action other than in the
ordinary course of business and other than the transactions to occur
pursuant to this Agreement or the Claims Settlement Agreement which would
create a tax liability of ▇▇▇▇ that would become such on or after the
Closing Date.
5.10 Interests of Officers. Except for the Claims (as defined in
the Claims Settlement Agreement), and except for normal advances for
business expenses incurred in the ordinary course of business, no officer,
director, or stockholder nor any affiliate of any of the foregoing parties
has any loan or other obligation outstanding to or from ▇▇▇▇ or for which
▇▇▇▇ is or may be liable under guaranty or otherwise, or has any material
interest in any firm, person or entity with which ▇▇▇▇ has entered into any
contract or lease, or with which ▇▇▇▇ does business. All of the agreements
and arrangements which are the subject of the Claims Settlement Agreement
are terminated as of the date hereof.
5.11 Property. ▇▇▇▇ has good and marketable title to its interests
in all real and personal property owned by it and reflected on the ▇▇▇▇
Financials, and property leased or licensed by ▇▇▇▇, free and clear of any
and all Liens.
All leases and licenses to which ▇▇▇▇ is a party are in good standing
and are valid and effective in accordance with their respective terms, and
there is not under any such lease any existing default or event which with
notice or lapse of time or both would become a default. All personal
property of ▇▇▇▇ has been properly maintained and is in good order and
repair and is operable and fit to be used for its intended purposes.
5.12 Cash on Deposit. ▇▇▇▇ has cash or cash equivalents of not less
than $1,000,000 on deposit at the financial institutions listed on Schedule
5.12 hereto, after applying $150,000 towards the discharge of a liability
for the underfunding of the ▇▇▇▇▇ Fabrics pension plan.
5.13 Intellectual Property. ▇▇▇▇ owns or has a valid license to use
all intellectual property rights disclosed in Schedule 5.13 and is not
infringing on intellectual property rights of others.
5.14 Material Contracts; Defaults. Set forth on Schedule 5.14 is a
list of all of ▇▇▇▇'▇ Material Contracts. Each such Material Contract is
in full force and effect and constitutes a valid and binding obligation of
▇▇▇▇ and to ▇▇▇▇'▇ knowledge, each other party thereto. ▇▇▇▇ has delivered
a true and complete copy of each Material Contract to InPath. ▇▇▇▇ has not
breached any Material Contract, and ▇▇▇▇ has no knowledge of any default by
any other party to any such Material Contract or any condition which, with
the giving of notice or passage of time, or both, could reasonably be
expected to constitute a default by any party thereto.
5.15 Litigation. There are no actions, suits or proceedings,
pending, or, to the knowledge of ▇▇▇▇, after due inquiry, threatened before
any court, arbitrator, commission, agency or other administrative authority
against, or affecting, ▇▇▇▇ or its business or properties, or which would
interfere with the marketing of ▇▇▇▇'▇ services or products or the
transactions contemplated by this Agreement, and ▇▇▇▇ is not the subject of
any order or decree.
5.16 Employee Benefit Plans. Schedule 5.16 lists all "Employee
Benefit Plans" as defined in Section 3(3) of ERISA existing on the date
hereof or within three (3) years prior to the Closing Date that are
maintained, sponsored or contributed to by ▇▇▇▇. Schedule 5.16 also lists
all "Employee Benefit Plans" of any of ▇▇▇▇'▇ current or former
subsidiaries or affiliates (including for this purpose and for the purpose
of all of the representations in this Section 5.16 all entities (whether or
not incorporated) which by reason of common control are treated together
with ▇▇▇▇ as a single employer under Section 414 of the Code) to the extent
that ▇▇▇▇ has any liability with respect to such plans.
True and correct copies of each Employee Benefit Plan listed on
Schedule 5.16 have been delivered to the InPath Members prior to the
Closing Date along with, where applicable, the most recent summary plan
description, actuarial report, standard or distress termination filing with
the Pension Benefit Guaranty Corporation and all subsequent correspondence
relating thereto, Tax Form 5310 filing with the IRS and all subsequent
correspondence relating thereto, the most recent determination letter
issued by the IRS with respect to each Employee Benefit Plan which purports
to be a "qualified plan" as defined under Code Section 401(a), and the most
recent Tax Form 5500 Series Annual Return (including, but not limited to
all schedules thereto and financial statements with attached opinions of
independent accountants). Except as set forth on Schedule 5.16, all
Employee Benefit Plans listed on Schedule 5.16 (i) are currently in
compliance and have in the past complied in all material respects with all
applicable requirements of law and regulations and (ii) have been
maintained and funded in all material respects in accordance with its terms
and with all applicable provisions of ERISA and of the Code applicable
thereto. Except as set forth on Schedule 5.16, there are no accumulated
funding deficiencies within the meaning of Section 412 of the Code under
any such Employee Benefit Plan which is a defined benefit plan within the
meaning of Code Section 414(j). Other than with respect to the ▇▇▇▇▇
Fabrics, Inc. Pension Plan, ▇▇▇▇ has no liability with respect to unfunded
benefits to employees and/or the Pension Benefit Guaranty Corporation which
respect to any defined benefit plan within the meaning of Section 414(j) of
the Code. The ▇▇▇▇▇ Fabrics, Inc. Pension Plan is in the process of being
terminated, and the liability with respect to such plan to ▇▇▇▇ or any of
its subsidiaries or affiliates with respect to unfunded benefits is not
materially greater than $200,000.
All Form 5500 series returns filed within the last three years
relating to such Employee Benefit Plans and any actuarial reports relating
to such Employee Benefit Plans are true and correct in all material
respects. No excise tax or payment to the Pension Benefit Guaranty
Corporation is due or owing from ▇▇▇▇ relating to any such Employee Benefit
Plan, other than regular PBGC premium payments on account of the current
plan year. Neither ▇▇▇▇ nor any of its subsidiaries or affiliates is aware
of the occurrence of a prohibited transaction (under Section 4975(c)(1) of
the Code) with respect to any Employee Benefit Plan. No reportable event
as described in ERISA Section 4043, for which the 30 day or advance
reporting requirement has not been waived, has occurred with respect to any
such Employee Benefit Plan.
Except as set forth herein or on Schedule 5.16, ▇▇▇▇ has no liability
to any Employee Benefit Plan. None of the plans or arrangements listed in
Schedule 5.16 are the subject of any lawsuit or other proceeding concerning
any benefit claims (other than routine claims for benefits). With respect
to any severance pay arrangement, the consummation of the transactions
contemplated by this Agreement will not accelerate the time of payment,
vesting or increase the amount of compensation due to an individual covered
by a severance pay agreement. ▇▇▇▇ has no obligation to provide any
"retiree medical benefits" to any employee or former employee and has no
unfunded liability with respect to any such "retiree medical benefits."
5.17 Finder's Fee. Neither ▇▇▇▇ nor any stockholder of ▇▇▇▇ has
incurred any obligation of any kind whatsoever to any party for a finder's
or broker's fee in connection with the transactions contemplated by this
Agreement.
5.18 No Practices in Violation of Law. Neither ▇▇▇▇ nor any
stockholder thereof, by, on behalf of or for the benefit of ▇▇▇▇, has
engaged in or is now engaging in any act, conspiracy or course of conduct
in violation of any applicable federal or state law which is likely to
result in a materially adverse change in the financial condition, results
of operation, assets, liabilities or business of ▇▇▇▇, and has not received
any notice, claim or protest that it is now or has heretofore been so
engaged.
5.19 Authority. ▇▇▇▇ has full right, power and authority to
execute, deliver and perform this Agreement, all other proper corporate
actions of ▇▇▇▇'▇ Board of Directors authorizing the execution, delivery
and performance hereof and thereof having been taken. This Agreement has
been duly executed and delivered by ▇▇▇▇ and constitutes a valid and
legally binding obligation of ▇▇▇▇ enforceable against ▇▇▇▇ in accordance
with its terms, subject, as to enforcement, to bankruptcy, reorganization
and other laws affecting the enforcement of creditors' rights generally
from time to time in effect and to judicial discretion in accordance with
general equitable principles. There are pending no proceedings or actions
to dissolve or liquidate ▇▇▇▇.
5.20 Consents and Approvals. No consents or approvals of, or
filings or registrations with, any governmental authority or with any third
party are required to be made or obtained by ▇▇▇▇ in connection with the
execution, delivery or performance by ▇▇▇▇ of this Agreement or to enter
into this Agreement or consummate any of the transactions contemplated
herein.
5.21 Environmental Matters. ▇▇▇▇ has complied at all times with
applicable Environmental Laws; (i) no real property (including buildings or
other structures) currently or formerly owned, leased or operated by it has
been contaminated with, or has had any release of, any Hazardous Substance;
(ii) ▇▇▇▇ is not subject to liability for any Hazardous Substance disposal
or contamination on any third party property; (iii) ▇▇▇▇ has not received
any notice, demand letter, claim or request for information alleging any
violation of, or liability under, any Environmental Law; (iv) ▇▇▇▇ is not
subject to any order, decree, injunction or other agreement with any
governmental authority or any third party relating to any Environmental
Law; (v) to the best of ▇▇▇▇'▇ knowledge, there are no circumstances or
conditions (including the presence of asbestos, underground storage tanks,
lead products, polychlorinated biphenyls, prior manufacturing operations,
dry-cleaning, or automotive services) involving ▇▇▇▇, any currently or
formerly owned or operated property, that could reasonably be expected to
result in any claims, liability or investigations against ▇▇▇▇ or result in
any restrictions on the ownership, use, or transfer of any property
pursuant to any Environmental Law; and (vi) ▇▇▇▇ has delivered to InPath
copies of all environmental reports, studies, sampling data,
correspondence, filings and other environmental information in its
possession or reasonably available to it relating to itself and any
currently or formerly owned, leased or operated property.
Article VI. Covenants of InPath.
6.1 Gombrich Loans. Inpath agrees that it will not utilize any of
the funds of ▇▇▇▇ on deposit as of the date hereof to repay indebtedness of
Inpath to Gombrich or his affiliates without the unanimous written consent
of the Board of Directors of ▇▇▇▇.
Article VII. Covenants of ▇▇▇▇.
7.1 Transfer of Working Capital. At the Closing, ▇▇▇▇ shall
transfer to InPath's bank account or otherwise make available to InPath all
cash and cash equivalents of ▇▇▇▇ for InPath's use as working capital.
7.2 Delivery of Stock. At the Closing, ▇▇▇▇ shall deliver to each
InPath Member stock certificates representing the number of shares of Stock
as set forth on Schedule 3.4.
7.3 Delivery of Warrants. At the Closing, ▇▇▇▇ shall deliver to
each InPath Member a Warrant in the form of Exhibit A attached hereto, to
be redeemed by ▇▇▇▇ on the date of the Stockholders' Meeting to be held
pursuant to Section 7.4(b), in the amounts of Stock opposite each InPath
Member's name on Schedule 3.4.
7.4 Post-Closing Actions.
(a) Promptly after the Closing, but in no event later than
March 30, 1999, or such later date as is approved by Gombrich, ▇▇▇▇ shall
take all actions necessary to incorporate a wholly-owned subsidiary, to be
named (if available) Ampersand Medical Corporation ("Ampersand"), under the
laws of the State of Delaware.
(b) Promptly after the Closing, ▇▇▇▇ shall call a stockholder
meeting to be held no later than March 30, 1999 or such later date as is
agreed upon by Gombrich, for the purpose of (i) approving the merger of
▇▇▇▇ with and into Ampersand, with Ampersand as the surviving corporation;
(ii) authorizing additional shares of Stock in an amount at least
sufficient to permit the issuance of Stock issuable upon exercise of the
Warrants; (iii) authorizing shares of so-called "blank check" preferred
stock; (iv) electing a slate of directors of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and an additional director to be
selected by Gombrich and ▇▇▇▇▇▇; (v) ratifying the transactions
contemplated by this Agreement and the Claims Settlement Agreement; and
(vi) considering such other proposals as may come before the meeting.
(c) The existing members of ▇▇▇▇'▇ Board of Directors shall
recommend that the stockholders vote in favor of proposals (i), (ii),
(iii), (iv) and (v) listed in Subsection (b) above.
(d) Promptly after the Closing Date, ▇▇▇▇ shall prepare and file
all documents and forms and amendments to forms which are or will be
required to be filed or delivered under applicable federal and state laws
and regulations, including without limitation the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as a result of the consummation
of the transactions contemplated by this Agreement and the Claims
Settlement Agreement.
(e) Promptly after the date hereof, the directors of ▇▇▇▇ shall
appoint the directors listed in Subsection 1.3(a) above to the Board of
Directors of the ▇▇▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall serve as Chairman of the
Board.
(f) Effective as of the date hereof, the Board of Directors shall
appoint the officers listed in Subsection 1.3(b) above as the officers of
▇▇▇▇.
(g) From and after the date hereof, until the Warrants have been
redeemed for the Stock issuable in respect thereof, ▇▇▇▇ will not issue any
capital stock, securities convertible into capital stock, warrants, rights
to purchase, stock appreciation rights, options or exemptive rights of any
kind unless such issuance has been approved by Gombrich, or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
if Gombrich is not able to act.
Article VIII. Covenants of the InPath Members.
8.1 Assignment of Units. At the Closing, each of the InPath
Members shall assign his or its Units to ▇▇▇▇, free and clear of any and
all Liens, causing InPath to become a wholly-owned subsidiary of ▇▇▇▇.
8.2 Approval. At the Closing, the InPath Members shall cause the
Board of Directors of InPath to grant its consent to the transfer of Units
described above.
8.3 Voting of Stock. The InPath Members agree that they will vote
their Stock and take all actions necessary or desirable to effect and
consummate each of the transactions contemplated by this Agreement.
Article IX. Conditions Precedent to InPath's and the InPath Members'
Obligations.
All obligations of InPath and the InPath Members under this Agreement
are subject to the fulfillment and satisfaction, prior to or at the
Closing, of each of the following conditions, any one or more of which may
be waived by it or them in regard to its or their obligations,
respectively:
9.1 ▇▇▇▇'▇ Certificate. ▇▇▇▇ shall have delivered a certificate,
duly executed by its President, dated as of the date of the Closing
certifying that (i) since the delivery of ▇▇▇▇'▇ Articles of Incorporation
and Bylaws pursuant to Section 5.2, there have been no amendments or other
modifications thereof; (ii) true, complete and accurate copies of the
minutes of meetings of the Board of Directors (or consents in lieu thereof)
approving this Agreement and the transaction contemplated herein have been
delivered to InPath; and (iii) the officers of ▇▇▇▇ are those persons named
in the certificate.
9.2 Other Documents. The appropriate parties shall have executed
and delivered:
(a) A Stockholders Agreement in the form of Exhibit 9.2; and
(b) All other documents required by this Agreement or otherwise
necessary to effectuate the transaction contemplated by this Agreement.
9.3 Cancellation. ▇▇▇▇ shall have cancelled or there shall have
expired all rights to purchase, warrants, stock appreciation rights,
options or pre-emptive rights of any kind affecting any shares of the
capital stock of ▇▇▇▇ (other than the 1989 SARs), outstanding prior to the
date hereof and delivered evidence thereof to InPath in form and substance
reasonably satisfactory to InPath.
9.4 Approvals. Any consent, approval, authorization or order of
any court, governmental agency, administrative body or other person or
entity required for the consummation of the transactions contemplated by
this Agreement shall have been obtained and shall be in effect on the
Closing Date.
9.5 ▇▇▇▇'▇ Performance. The representations and warranties made by
▇▇▇▇ in this Agreement shall be true and correct in all material respects
as of the Closing Date, and its obligations to be performed on or before
the Closing Date pursuant to the terms of this Agreement shall have been
duly performed on or before the Closing Date and ▇▇▇▇ shall have delivered
to InPath a certificate dated the Closing Date, certifying as to the
foregoing.
9.6 Approval of Documentation. The form and substance of all
certificates, and other documents shall be reasonably satisfactory in all
respects to InPath, the InPath Members and its or their counsel.
9.7 Examination of Books and Records. For purposes of compliance
with and performance of this Agreement, InPath and the InPath Members,
acting through itself or themselves or through counsel, accountants, or
other representatives designated by it or them, shall have been afforded
full and complete opportunity to examine and investigate all aspects of
▇▇▇▇'▇ business and affairs and assets and liabilities, including without
limitation, its minute books and stock transfer records, financial books
and records, the workpapers of ▇▇▇▇'▇ independent public accountants,
titles and leases to properties, loan and other agreements, the condition
of its facilities and equipment, and the collectability of accounts
receivable.
Article X. Conditions Precedent to ▇▇▇▇'▇ Obligations.
All obligations of ▇▇▇▇ under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by it in
regard to its obligations:
10.1 InPath's Certificate. InPath shall have delivered a
certificate, duly executed by its President, dated as of the date of the
Closing certifying that (i) since the delivery of InPath's Certificate of
Formation and Limited Liability Company Agreement pursuant to Section 3.2,
there have been no amendments or other modifications thereof; (ii) true,
complete and accurate copies of the minutes of meetings of the Board of
Directors and Members (or consents in lieu thereof) approving this
Agreement and the transaction contemplated herein have been delivered to
▇▇▇▇; and (iii) that the officers of InPath are those persons named in the
certificate.
10.2 Other Documents. The appropriate parties shall have executed
and delivered:
(a) A Stockholders Agreement in the form of Exhibit 9.2;
(b) A revised Employment Agreement between InPath and Gombrich in
the form of Exhibit 10.2;
(c) The Claims Settlement Agreement; and
(d) All other documents required by this Agreement or otherwise
necessary to effectuate the transaction contemplated by this Agreement.
10.3 Approvals. Any consent, approval, authorization or order of
any court, governmental agency, administrative body or other person or
entity required for the consummation of the transactions contemplated by
this Agreement shall have been obtained and shall be in effect on the
Closing Date.
10.4 InPath's and the InPath Members' Performance. The
representations and warranties made by InPath and the InPath Members in
this Agreement shall be true and correct in all material respects as of the
Closing Date, and their respective obligations to be performed on or before
the Closing Date pursuant to the terms of this Agreement shall have been
duly performed on or before the Closing Date and InPath and Gombrich shall
have delivered a certificate, dated as of the Closing Date, certifying as
to the foregoing.
10.5 Approval of Documentation. The form and substance of all
opinions, certificates, and other documents shall be reasonably
satisfactory in all respects to ▇▇▇▇ and its counsel.
10.6 Examination of Books and Records. For purposes of compliance
with and performance of this Agreement, ▇▇▇▇, acting through itself,
counsel, accountants, or other representatives designated by it, shall have
been afforded full and complete opportunity to examine and investigate all
aspects of InPath's business and affairs and assets and liabilities,
including without limitation, its minute books and stock transfer records,
financial books and records, the workpapers of InPath's independent public
accountants, titles and leases to properties, loan and other agreements,
the condition of its facilities and equipment, and the collectability of
accounts receivable.
Article XI. Post-Closing Covenants.
11.1 Further Assurances. From time to time after the Closing at the
request of any party, and without further consideration, the other parties
shall execute and deliver any further instruments and take such other
action as may reasonably be required to consummate the transactions
contemplated herein. To the extent that the transactions contemplated
herein requires the consent of any person in order to avoid a breach of the
terms of any lease, contract or commitment to which any party hereto is a
party or by which any party hereto is bound, and such consent is not
obtained satisfactorily prior to the Closing, the party with respect to
which the failure to obtain consent applies shall use their best efforts to
assure the other parties hereto of the benefits of such leases, contracts,
commitments and rights. Nothing in this section shall be deemed a waiver
by any party hereto of its or his rights under this Agreement.
Article XII. Indemnification.
12.1 Indemnification by the InPath Members. Subject to all of the
limitations and provisions of this Article XII, the InPath Members agree to
indemnify ▇▇▇▇, on a pro-rata basis proportionate with their membership
interests in InPath, from and against any and all demands, claims, actions,
causes of action, assessments, damages, liabilities, losses, expenses,
fees, judgments and deficiencies of any nature whatsoever (including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit, action or proceeding) incurred or sustained by ▇▇▇▇
which shall arise out of or result from: (i) any breach of any
representation or warranty by Inpath or any Inpath Member hereunder or (ii)
any non-fulfillment of any covenant or obligation of InPath or any Inpath
Member under this Agreement.
12.2 Indemnification by ▇▇▇▇. Subject to all of the limitations and
provisions of this Article 12, ▇▇▇▇ agrees to indemnify each InPath Member
from and against any and all demands, claims, actions, causes of action,
assessments, damages, liabilities, losses, expenses, fees, judgments and
deficiencies of any nature whatsoever (including, without limitation,
reasonable attorneys' fees and other costs and expenses incident to any
suit, action or proceeding) incurred or sustained by any InPath Member
which shall arise out of or result from: (i) any breach of any
representation or warranty by ▇▇▇▇ hereunder or (ii) any non-fulfillment of
any covenant or obligation of ▇▇▇▇ under this Agreement.
12.3 Limitations on Indemnity; Payment. Anything herein to the
contrary notwithstanding, none of the parties hereto shall be obligated to
provide indemnification hereunder unless and until the indemnified party's
indemnifiable damages exceed $25,000, and the maximum amount of
indemnification any party shall be responsible for shall be $925,000. If
▇▇▇▇ is the indemnifying party it shall issue additional Stock to the
Inpath Members in satisfaction of its obligation and if the Inpath Members
are the indemnifying party they shall have the option of paying cash or
Stock to ▇▇▇▇ in satisfaction of their obligations. For purposes hereof,
the Stock shall be valued at $.30 per share. There shall be no
indemnification hereunder for (i) any breach of the representation in
Section 5.16 (absent fraud) with respect to liabilities arising from any
underfunding of the ▇▇▇▇▇ Fabrics Pension Plan, or (ii) any Liability for
which additional Stock is issued under Section 1.4 (so as not to compensate
the Inpath Members twice for such Liability). This Article 12 shall be
parties' sole remedy for any dispute arising under this Agreement.
Article XIII. General.
13.1 Entire Agreement. All exhibits and schedules shall be deemed
to be incorporated into and made part of this Agreement. This Agreement,
together with its exhibits and schedules, contains the entire agreement
among the parties and there are no agreements, representations, or
warranties by any of the parties which are not set forth herein. This
Agreement may not be amended or revised except by a writing signed by all
parties.
13.2 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns;
provided, however, this Agreement and all rights hereunder may not be
assigned by any party except by prior written consent of all parties.
13.3 Survival of Representations and Warranties. The
representations and warranties of the parties set forth in this Agreement
and referred to in Articles III, IV, V and VI above shall survive the
Closing for a period of one (1) year.
13.4 Separate Counterparts. This Agreement may be executed in
several identical counterparts, all of which when taken together shall
constitute but one instrument, and it shall not be necessary in any court
of law to introduce more than one executed counterpart in proving this
Agreement.
13.5 Consistent Accounting. The parties to this Agreement shall
consult with each other for the purpose of arriving at consistent
accounting, tax and reporting treatment, whether public or private, of the
transaction contemplated hereby.
13.6 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if
personally delivered, delivered by reputable overnight courier, or
telecopied with confirmation, or mailed by registered or certified mail,
return receipt requested, to the party to be notified at the party's
address shown below. Notices which are hand delivered shall be effective
on delivery. Notices which are mailed shall be effective on the third day
after mailing.
(i) If to InPath or the InPath Members:
InPath, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Coff
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to ▇▇▇▇:
▇▇▇▇ National Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopier:
with a copy to:
Berlack, Israels & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
unless and until notice of another or different address shall be given as
provided herein.
13.7 Severability. The provisions of this Agreement are severable
and the invalidity of any provision shall not affect the validity of any
other provision.
13.8 Captions. The captions have been inserted solely for
convenience of reference and in no way define, limit or describe the scope
or substance of any provision of this Agreement.
13.9 Gender. All pronouns used herein shall include the masculine,
feminine and neuter gender, as the context requires.
13.10 Governing Law. The execution, interpretation, and performance
of this Agreement shall be governed by the laws of the State of Illinois.
[Signature pages follow.]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as a document under seal as of the date first above written.
▇▇▇▇ NATIONAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its:
Attest:
INPATH, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its:
Attest:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as an individual and
as Trustee of the InPath, LLC Voting Trust
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee of each
of The EAG Trust, The CMC Trust, The MDG Trust and The MSD Trust
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ACCUMED INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: CEO
Attest: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
NORTHLEA PARTNERS LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Its: General Partner
Attest: __________________________
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇'▇ Trust
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇
▇▇▇▇▇▇ Trust
MONROE INVESTMENTS, INC.
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its:
Attest: __________________________
SCHEDULE 3.4
Number Amount Amount of
of of ▇▇▇▇ Warrants % of
Units Stock to to ▇▇▇▇
InPath Member Owned Receive Receive Owned
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 52,616 2,256,590 1,671,005 26.31%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
as Trustee of
the Inpath, LLC
Voting Trust 3,240 138,957 102,897 1.62%
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
as Trustee of
The EAG Trust 6,428 275,683 204,144 3.21%
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
as Trustee of The CMC Trust 6,428 275,683 204,144 3.21%
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
as Trustee of
The MDG Trust 6,428 275,683 204,144 3.21%
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
as Trustee of The MSD Trust 5,500 235,883 174,672 2.75%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 360 15,440 11,433 0.18%
AccuMed Interna-
tional, Inc. 2,000 85,776 63,517 1.00%
Northlea Partners Ltd. 2,500 107,220 79,396 1.25%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
as Trustee of
▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇
Trust 2,500 107,220 79,396 1.25%
▇▇▇▇▇▇ ▇▇▇▇▇▇,
as Trustee of
the ▇▇▇▇▇▇ ▇▇▇▇▇▇
Trust 8,000 343,103 254,068 4.00%
Monroe Investments,
Inc. 4,000 171,552 127,034 2.00%
TOTAL: 100,000 4,288,790 3,175,850 50.00%
EXHIBIT 9.2
Stockholders Agreement
[See Exhibit 2 to this Schedule 13D]
EXHIBIT 10.2(b)
Amendment No. 1 to Employment Agreement
This is Amendment No. 1, dated as of December 4, 1998, to that certain
Employment
Agreement (the "Original Agreement") dated as of May 1, 1998 between
InPath, LLC, a Delaware limited liability company ("InPath"), and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ ("Employee").
Recitals:
Inpath and the members of Inpath are contemporaneously herewith entering into a
Stock and Membership Interest Exchange Agreement with ▇▇▇▇ National
Corporation and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Exchange Agreement"), and it is a
condition to the closing of the transactions contemplated by such agreement
that the Original Agreement be amended to modify the term of the Employee's
employment, clarify certain circumstances under which the Employee may be
terminated and clarify that the transactions contemplated thereby shall not
constitute a "Change of Control" for purposes of the Original Agreement.
In consideration of the mutual covenants and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
Covenants
1.Amendments to Original Agreement. The Original Agreement is hereby
amended as follows:
(a)Paragraph 1 of the Original Agreement is hereby amended by deleting
the first two sentences thereof and inserting in their place:
InPath shall
employ Employee for a three (3) year period, commencing May 1, 1998 (the
"Effective Date") and ending April 30, 2001, unless terminated as provided
in Sections 5 or 6. This Agreement shall automatically renew for
additional two (2) year terms unless either party delivers to the other
written notice of non-renewal at least sixty (60) days prior to the end of
the term.
(b) Section 3(b) of the Original Agreement is hereby amended by deleting
the comma after the word "Directors", by adding the words "of ▇▇▇▇ National
Corporation" after "Directors, and deleting the words "but with a minimum
annual bonus of not less than 25% of the Employee's base annual salary
applicable in that year".
(c)Section 5(b) of the Original Agreement is hereby amended
by deleting the word "or"
at the end of clause (iii), by deleting the period at the end of clause
(iv) and inserting a semicolon and by inserting the following after clause
(iv):
(v) InPath
materially deviates from its business and financial plan as from time to
time approved by the Board of Directors of ▇▇▇▇ National Corporation, and
such deviation directly results in a material and adverse change in or to
the business of InPath.
2.Change in Control. Employee agrees that the
transactions contemplated by the
Exchange Agreement will not constitute a "Change of Control," as defined in
Section 7(d) of the Original Agreement.
3.Reaffirmation of Original Agreement.
Except as otherwise specifically set forth
herein, the Original Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 to the
Original Agreement as of the date first set forth above.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
InPath, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: CEO
EXHIBIT 10.2(c)
Claims Settlement Agreement
[See Exhibit 4 to this Schedule 13D]
SCHEDULE 3.11
Intellectual Property - InPath
1.Patent and Technology License Agreement dated September 4, 1998,
between AccuMed
International, Inc. and InPath, granting InPath an exclusive license (a) to
make, have made, use, offer to sell, and sell Licensed Products covered by
the Claims of the Patents; (b) to make, have made, use, offer to sell, and
sell Licensed Products covered by the subject matter of the Technology; and
(c) to use and copy the Copyrighted Works.
SCHEDULE 5.4
Capitalization - ▇▇▇▇
5% Stockholders
(Excluding (i.e., not naming) the InPath Members
but/and after giving effect to the consummation of the
Agreement and Claims Settlement Agreement transactions)
Name No. of Shares
Santa Fe Mortgage Development Company 648,485
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 616,4861
▇▇▇▇▇▇ Management Incorporated 503,0002
Cadmus Corporation
1,206,7863
1 Excludes: (i) 148,655 shares held by
Winchester National, Inc., (ii) the shares listed herein as being held by
▇▇▇▇▇▇ Management Incorporated, and (iii) the shares listed herein as being
held by Cadmus Corporation. ▇▇. ▇▇▇▇▇▇ is an officer, director and
stockholder of each of these entities and, accordingly, may be deemed to be
the beneficial owner of securities held by them.
2 Excludes the shares listed herein as held by
Cadmus Corporation. ▇▇▇▇▇▇ Management Incorporated is a controlling
stockholder of Cadmus Corporation and, accordingly, may be deemed to be the
beneficial owner of securities held by it.
3 Excluded shares issuable upon exercise 450,000
stock appreciate rights in the process of being purchased. Includes
606,786 shares issued pursuant to exercises of stock appreciation rights in
1997 recently purchased or in the process of being purchased.
SCHEDULE 5.12
Cash On Deposit - ▇▇▇▇
Financial Institutions at which
Cash and Cash Equivalents are Deposited
▇. ▇▇▇▇ Accounts
Checking: Bank of America Illinois
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
B. PFI National Corporation Accounts
Checking: Bank of America Illinois
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Checking: NationsBank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Money Market: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Funds
Sears Tower, 60th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Money Market: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Discover
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Securities: ▇.▇. ▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
SCHEDULE 5.13
Intellectual Property - ▇▇▇▇
None
SCHEDULE 5.14
Material Contracts - ▇▇▇▇
None
SCHEDULE 5.16
Employee Benefit Plans - ▇▇▇▇
[Schedule 5-16 not completed at time of filing]
