Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
Dated as of August 22, 2005,
By and Among
REFAC,
OptiCare Merger Sub, Inc.,
and
OptiCare Health Systems, Inc.
TABLE OF CONTENTS
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Page
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ARTICLE I.
THE MERGER
Section 1.01 The Merger....................................................2
Section 1.02 Closing 2
Section 1.03 Effective Time................................................2
Section 1.04 Effect of the Merger..........................................2
Section 1.05 Certificate of Incorporation and By-laws......................2
Section 1.06 Directors.....................................................3
Section 1.07 Officers......................................................3
ARTICLE II.
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.01 Effect on Capital Stock.......................................3
Section 2.02 Exchange of Certificates......................................5
Section 2.03 Federal Income Tax Treatment..................................7
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01 Organization, Standing and Power..............................8
Section 3.02 The Company Subsidiaries; Equity Interests....................8
Section 3.03 Capital Structure.............................................8
Section 3.04 Authority; Execution and Delivery; Enforceability............10
Section 3.05 No Conflicts; Consents.......................................11
Section 3.06 Company SEC Documents; Undisclosed Liabilities...............12
Section 3.07 Absence of Certain Changes or Events.........................14
Section 3.08 Information Supplied.........................................14
Section 3.09 Litigation...................................................14
Section 3.10 Compliance With Applicable Laws..............................14
Section 3.11 Environmental................................................15
Section 3.12 Intellectual Property........................................16
Section 3.13 Employee Benefit Plans.......................................18
Section 3.14 Labor Matters................................................20
Section 3.15 Material Agreements..........................................20
Section 3.16 Properties...................................................23
Section 3.17 Tax Matters..................................................25
Section 3.18 Products Liability...........................................26
Section 3.19 Brokers 27
Section 3.20 Opinion of Financial Advisor.................................27
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.01 Organization, Standing and Power.............................27
Section 4.02 The Parent Subsidiaries; Equity Interests....................28
Section 4.03 Capital Structure............................................28
Section 4.04 Authority; Execution and Delivery; Enforceability............29
Section 4.05 No Conflicts; Consents.......................................30
Section 4.06 Parent SEC Documents; Undisclosed Liabilities................31
Section 4.07 Absence of Certain Changes or Events.........................32
Section 4.08 Form S-4; Joint Proxy Statement..............................32
Section 4.09 Opinion of Financial Advisor.................................33
Section 4.10 Litigation...................................................33
Section 4.11 Compliance with Applicable Laws..............................33
Section 4.12 Ownership of Company Shares..................................33
ARTICLE V.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01 Covenants Relating to Conduct of Business....................33
Section 5.02 Other Actions................................................38
Section 5.03 Advice of Changes............................................38
ARTICLE VI.
ADDITIONAL AGREEMENTS
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Section 6.01 Preparation of the Form S-4 and Joint Proxy Statement........39
Section 6.02 Access to Information........................................41
Section 6.03 Reasonable Efforts; Notification.............................42
Section 6.04 Public Announcements.........................................42
Section 6.05 Tax Free Reorganization Treatment............................43
Section 6.06 Conversion of Preferred Stock................................43
Section 6.07 Services and Support Agreement...............................43
Section 6.08 Section 16b-3................................................43
Section 6.09 American Stock Exchange......................................43
Section 6.10 Indemnification..............................................43
ARTICLE VII.
CONDITIONS PRECEDENT
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger...45
Section 7.02 Conditions to Obligation of Parent and Merger Sub............46
Section 7.03 Conditions to Obligation of the Company......................47
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination..................................................48
Section 8.02 Effect of Termination........................................49
Section 8.03 Amendment....................................................49
Section 8.04 Extension; Waiver............................................49
ARTICLE IX.
GENERAL PROVISIONS
Section 9.01 Nonsurvival of Representations and Warranties................50
Section 9.02 Fees and Expenses............................................50
Section 9.03 Notices......................................................50
Section 9.04 Definitions..................................................51
Section 9.05 Interpretation; Disclosure Letters...........................53
Section 9.06 Severability.................................................53
Section 9.07 Counterparts; Facsimile......................................53
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Section 9.08 Entire Agreement; No Third-Party Beneficiaries...............53
Section 9.09 Governing Law................................................54
Section 9.10 Assignment...................................................54
Section 9.11 Disputes; Waiver of Jury Trial...............................54
Exhibit A - Form of Affiliate Letter
Exhibit B - Form of Company Tax Opinion
Exhibit C - Form of USV Merger Agreement
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August 22,
2005, by and among REFAC, a Delaware corporation ("Parent"), OptiCare Merger
Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub"), OptiCare Health Systems, Inc. a Delaware corporation (the
"Company"), solely with respect to Sections 6.06 and 6.07, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
whose principal address is ▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇.
▇▇▇▇▇▇▇▇▇"), solely with respect to Section 6.06, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, whose
address is ▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇▇"), and,
solely with respect to Sections 6.01(a),(d), (e) and (g), 6.02(c) ,6.04, 6.06
and 7.03(a)(ii), Palisade Concentrated Equity Partnership, L.P., a Delaware
limited partnership ("Palisade").
WHEREAS, the respective boards of directors of Parent and the Company
have, consistent with the recommendation of the respective special committees
of such boards of directors, (i) determined that the merger of Merger Sub with
and into the Company, upon the terms and subject to the conditions set forth in
this Agreement (the "Merger"), is advisable and fair to and in the best
interests of Parent and the Company, respectively, and the respective
stockholders of Parent and the Company, (ii) approved this Agreement and the
Merger and the other transactions contemplated hereby and (iii) recommended
approval of this Agreement and the Merger by the respective stockholders of
Parent and the Company;
WHEREAS, the respective boards of directors of Parent, Merger Sub and
the Company have approved the Merger on the terms and subject to the conditions
set forth in this Agreement, whereby each issued share of common stock, par
value $0.001 per share, of the Company (the "Company Common Stock") not owned
by the Company shall be converted into the right to receive the Merger
Consideration (as defined below);
WHEREAS, Parent, as the sole stockholder of Merger Sub, is
concurrently with the execution of this Agreement approving this Agreement; and
WHEREAS, for Federal income tax purposes it is intended that the
Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.01 The Merger. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), Merger Sub shall be merged with and into
the Company at the Effective Time (as defined in Section 1.03). At the
Effective Time and as a result of the Merger, the separate corporate existence
of Merger Sub shall cease and the Company shall continue as the surviving
entity after the Merger (the "Surviving Entity").
Section 1.02 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, Four
Times Square, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, as soon as possible after the satisfaction or
waiver of the conditions set forth in Article VIII (other than those conditions
which can only be satisfied at the Closing) or such time and date as agreed by
Parent and the Company. The date on which the Closing occurs is referred to in
this Agreement as the "Closing Date."
Section 1.03 Effective Time. Prior to the Closing Parent shall
prepare, and on the Closing Date the Surviving Entity shall file with the
Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (the "Certificate of Merger") executed in accordance with
the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with such Secretary of State,
or at such later time as Parent and the Company shall agree and specify in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
Section 1.04 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided herein and in the applicable provisions of
the DGCL.
Section 1.05 Certificate of Incorporation and By-laws.
(a) The certificate of incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Entity (except that the
name of the Surviving Entity shall be "OptiCare Health Systems, Inc.")
until thereafter changed or amended as provided therein or by the DGCL
or applicable Law.
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(b) The by-laws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Entity
(except that the name of the Surviving Entity shall be "OptiCare
Health Systems, Inc.") until thereafter changed or amended as provided
therein or by applicable Law.
Section 1.06 Directors. The directors of the Company immediately prior
to the Effective Time shall be the directors of the Surviving Entity until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
Section 1.07 Officers. The officers of the Company immediately prior
to the Effective Time shall continue to be the officers of the Surviving Entity
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II.
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.01 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding
share of capital stock of Merger Sub shall be converted into and
become one duly authorized, validly issued, fully paid and
non-assessable share of common stock, $0.001 par value per share, of
the Surviving Entity.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock that is owned by the Company (or any of its direct or
indirect wholly-owned subsidiaries) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and no Merger Consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion of Common Stock.
(1) Subject to Section 2.01(b), (w) each share of
Company Common Stock issued upon conversion of the Series B
Preferred Stock (as defined in Section 3.03) as a result of
the dividends thereon from and after June 30, 2005 shall no
longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and no Merger Consideration
shall be delivered or deliverable in exchange therefor, (x)
each other share of Company
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Common Stock owned by ▇▇. ▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇ which
was issued by the Company from and after the date hereof upon
conversion of Preferred Stock (as defined in Section 3.03)
pursuant to Section 6.06 shall be converted into the right to
receive 0.0403 shares of common stock, par value $0.001 per
share, of Parent (the "Parent Common Stock"), (y) each share
of Company Common Stock owned by Palisade immediately prior
to the Effective Time shall be converted into the right to
receive 0.04029244 shares of Parent Common Stock, and (z)
each other share of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be
converted into the right to receive 0.0472 shares of Parent
Common Stock ((w), (x), (y) and (z) the "Exchange Ratios").
(2) If, between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock
or Company Common Stock shall have been changed into a
different number of shares or a different class by reason of
any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock
dividend thereon shall be declared with a record date within
said period, the Exchange Ratios shall be correspondingly
adjusted.
(d) Options and Warrants. As of the Effective Time, each
outstanding option, warrant or other right to acquire shares of
Company Common Stock then outstanding (each, a "Company Stock
Option"), whether or not then exercisable, shall be assumed by Parent
and converted into an option, warrant or other right to purchase
shares of Parent Common Stock in accordance with this Section 2.01(d).
Each Company Stock Option so converted shall continue to have, and be
subject to, the same material terms and conditions (including vesting
schedule) as set forth in the applicable agreement pursuant to which
such Company Stock Option was issued immediately prior to the
Effective Time, except that, as of the Effective Time, (i) each
Company Stock Option shall be exercisable for that number of whole
shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable subject to such
Company Stock Option immediately prior to the Effective Time
multiplied by 0.0472, rounded to the nearest whole number of shares of
Parent Common Stock, and (ii) the per share exercise price for each
share of Parent Common Stock subject to each Company Stock Option so
converted shall be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company
Stock Option was exercisable immediately prior to the Effective Time
by 0.0472, rounded to the nearest whole cent. The Company shall use
its reasonable best efforts to obtain all consents necessary to allow
for the conversion of the Company Stock Options as provided in this
Section 2.01(d), which consents are set forth in Section 2.01(d) of
the Company Disclosure Letter.
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To the extent any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company or
under which the Company has any rights, then the shares of Parent Common Stock
issued in exchange for such shares of Company Common Stock will also be
unvested and subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent Common Stock
may accordingly be marked with appropriate legends.
No later than 30 days following the filing of its first
Annual Report on Form 10-K after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor or, including if Form S-8
is not available, other appropriate forms) with respect to the shares of Parent
Common Stock subject to such options assumed by Parent in accordance with this
Section 2.01 (d) and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options awards remain outstanding.
Section 2.02 Exchange of Certificates.
(a) Exchange Agent. As soon as practicable following the date
of this Agreement, Parent shall select a bank or trust company to act
as exchange agent (the "Exchange Agent") for payment of Merger
Consideration upon surrender of certificates representing Company
Common Stock. Promptly following the Effective Time, Parent shall
deposit with the Exchange Agent for exchange in accordance with this
Article II through the Exchange Agent (i) certificates representing
the Merger Consideration and (ii) cash in an amount sufficient for
payment in lieu of fractional shares of Parent Common Stock in
accordance with Section 2.2(d) (such shares of Parent Common Stock and
cash being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder
of record of a certificate or certificates (the "Certificates") that
immediately prior to the Effective Time represented outstanding shares
of Company Common Stock whose shares were converted into the right to
receive the Merger Consideration pursuant to Section 2.01(c) (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for
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cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the number of whole shares of
Parent Common Stock, if any, into which the aggregate number of shares
of Company Common Stock previously represented by such Certificate
shall have been converted pursuant to Section 2.01(c) and cash in lieu
of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(d), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock that is not registered in the
transfer records of the Company, payment may be made to a person other
than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such tax
has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration into which the shares of
Company Common Stock theretofore represented by such Certificate have
been converted pursuant to Section 2.01(c). No interest shall be paid
or accrue on any cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Common Stock. The Merger
Consideration issued in accordance with the terms of this Article II
upon conversion of any shares of Company Common Stock shall be deemed
to have been issued in full satisfaction of all rights pertaining to
such shares of Company Common Stock. After the Effective Time of the
Merger there shall be no further registration of transfers on the
stock transfer books of the Surviving Entity of shares of Company
Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, any Certificates formerly
representing shares of Company Common Stock are presented to the
Surviving Entity or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the
conversion of Company Common Stock, and such fractional share
interests shall not entitle the owner thereof to vote or to
any rights of a holder of Parent Common Stock.
(ii) In lieu of any such fractional shares, each
holder of Company Common Stock who would otherwise be
entitled to such fractional
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shares shall be entitled to an amount in cash, without
interest, rounded to the nearest cent, equal to the product
of (A) the amount of the fractional share interest in a share
of Parent Common Stock to which such holder is entitled and
(B) an amount equal to the average of the closing sale prices
for Parent Common Stock on the American Stock Exchange for
each of the five consecutive trading days ending with (and
including) the trading day which is two days prior to the
date of the Effective Time.
(e) Withholding Rights. Parent shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of
Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of
such payment under the Code, or under any provision of state, local or
foreign Law. To the extent that amounts are so withheld and paid over
to the appropriate taxing authority, the Surviving Entity will be
treated as though it withheld an appropriate amount of the type of
consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock which sold such consideration for an
amount of cash equal to the fair market value of such consideration at
the time of such deemed sale and paid such cash proceeds to the
appropriate taxing authority.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock
for six months after the Effective Time shall be delivered to Parent,
upon demand, and any holder of Company Common Stock who has not
theretofore complied with this Article II shall thereafter look only
to Parent and the Surviving Entity for payment of its claim for Merger
Consideration (including any cash in lieu of fractional shares of
Parent Common Stock to which they are entitled pursuant to Section
2.2(d)), without any interest thereon.
(g) No Liability. None of Parent, Merger Sub, the Company or
the Exchange Agent shall be liable to any person in respect of any
cash or any shares of Parent Common Stock delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificate has not been surrendered prior to five
years after the relevant Effective Time (or immediately prior to such
earlier date on which Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity), any such cash, shares, dividends or
distributions in respect of such Certificate shall, to the extent
permitted by applicable Law, become the property of the Surviving
Entity free and clear of all claims or interest of any person
previously entitled thereto.
Section 2.03 Federal Income Tax Treatment. It is intended by the
parties hereto that the Merger qualify as a "reorganization" within the meaning
of Section 368(a) of the Code. The parties hereto hereby adopt this Agreement
as a "plan of
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reorganization" within the meanings of Sections 1.368-2(g) and 1.368-3(a) of
the U.S. Treasury Regulations promulgated under the Code.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth in the corresponding section of the
disclosure letter delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Letter"), the Company hereby represents
and warrants to Parent as follows:
Section 3.01 Organization, Standing and Power. Each of the Company and
each of its subsidiaries (the "Company Subsidiaries") is duly organized or
formed, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate, partnership or
limited liability company power and authority to conduct its businesses as
presently conducted. The Company and each Company Subsidiary is duly qualified
to do business in each jurisdiction where the nature of its business or the
ownership or leasing of its properties make such qualification necessary or the
failure to so qualify, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect on the Company. The
Company has delivered to Parent true and complete copies of the certificate of
incorporation of the Company, as amended (as so amended, the "Company
Charter"), and the by-laws of the Company, as amended (as so amended, the
"Company By-laws"). The Company is not in violation of any of the provision of
the Company Charter or the Company By-laws.
Section 3.02 The Company Subsidiaries; Equity Interests.
(a) Section 3.02(a) of the Company Disclosure Letter lists
each Company Subsidiary and its jurisdiction of organization or
formation. All the outstanding shares of capital stock of each Company
Subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company, by another Company
Subsidiary or by the Company and another Company Subsidiary, free and
clear of all Liens, except for such Liens set forth on Section 3.02 of
the Company Disclosure Letter;
(b) Except for its interests in the Company Subsidiaries, the
Company does not own, directly or indirectly, any Equity Interest in
any person.
Section 3.03 Capital Structure
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(a) The authorized capital stock of the Company consists of
150,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $0.001 per share, of which 550,000 are
designated as Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), 3,500,000 are designated as Series B 12.5% Voting
Cumulative Convertible Participating Preferred Stock (the "Series B
Preferred Stock"), 406,158 are designated as Series C Preferred Stock
(the "Series C Preferred Stock") and 280,618 are designated as Series
D Preferred Stock (the "Series D Preferred Stock" and, together with
the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, the "Preferred Stock"). As of the date hereof, there
are 30,664,991 shares of Company Common Stock issued and outstanding.
No shares of Company Common Stock are held by the Company in its
treasury. As of the date hereof, (i) 9,019,443 shares of Company
Common Stock are subject to outstanding Company Stock Options, (ii) no
shares of Series A Preferred Stock are issued or outstanding, (iii)
3,204,959.8 shares of Series B Preferred Stock with accumulated
dividends convertible into 48,086,684 shares of Company Common Stock
are issued and outstanding, (iv) 406,158 shares of Series C Preferred
Stock convertible into 20,307,900 shares of Company Common stock are
issued and outstanding and (v) 280,618 shares of Series D Preferred
Stock convertible into 11,224,720 shares of Company Common Stock are
issued and outstanding. Section 3.03(a) of the Company Disclosure
Letter sets forth (1) the names, addresses of all of the holders of
Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock as of the date hereof (the "Preferred Stockholders")
and the number of shares of Preferred Stock held thereby and (2) the
outstanding Company Stock Options, including their holders, number of
underlying shares, vesting schedule, term and exercise price. Except
as set forth above, no shares of capital stock or other voting
securities of the Company are issued, reserved for issuance or
outstanding.
(b) All outstanding shares of Company Common Stock and
Preferred Stock are, and all such shares that may be issued prior to
the Effective Time will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any
provision of the DGCL, the Company Charter, the Certificates of
Designations of Preferred Stock, the Company By-laws or any Contract
to which the Company is a party or otherwise bound.
(c) There are not any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any
matters on which holders
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of Company Common Stock and Preferred Stock may vote ("Voting Company
Debt").
(d) Except as set forth above, as of the date hereof, there
are not any options, warrants, rights, convertible or exchangeable
securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, Contracts (as defined in
Section 3.05 below), arrangements or undertakings of any kind to which
the Company or any Company Subsidiary is a party or by which any of
them is bound (i) obligating the Company or any Company Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other Equity Interests in, or
any security convertible or exercisable for or exchangeable into any
capital stock of or other Equity Interests in, the Company or any
Company Subsidiary or any Voting Company Debt, (ii) obligating the
Company or any Company Subsidiary to issue, grant, extend or enter
into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking or (iii) that give any person the
right to receive any economic benefit or right similar to or derived
from the economic benefits and rights occurring to holders of Company
Common Stock or Preferred Stock.
(e) There are not any outstanding contractual obligations of
the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any
Company Subsidiary.
Section 3.04 Authority; Execution and Delivery; Enforceability
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and, subject to the
Company Stockholder Approval (as defined below), to consummate the
Merger and the other transactions contemplated hereby. The execution
and delivery by the Company of this Agreement and the consummation by
the Company of the Merger and the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of the Company, subject to receipt of the Company Stockholder
Approval. The Company has duly executed and delivered this Agreement,
and, assuming due authorization, execution and delivery of this
Agreement by Parent and Merger Sub, this Agreement constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms, except that enforcement hereof may be
subject to or limited by (i) bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting its creditors' rights
generally and (ii) the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
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(b) Each of the special committee of the board of directors
of the Company (the "Company Board") formed in connection with the
Merger and the other transactions contemplated hereby (the "Company
Special Committee") and the Company Board, at meetings duly called and
separately held, duly and unanimously adopted resolutions (which
resolutions have not been rescinded or modified) (i) approving this
Agreement and approving the Merger and the other transactions
contemplated hereby, (ii) determining that the terms of the Merger and
the other transactions contemplated hereby are advisable and fair to
and in the best interests of the Company and its stockholders and
(iii) recommending that the Company's stockholders adopt this
Agreement. No state takeover statute or similar statute or regulation,
including Section 203 of the DGCL, is applicable to or purports to be
applicable to the Merger or any other transactions contemplated
hereby.
(c) The only vote of holders of any class or series of the
capital stock of the Company necessary to adopt this Agreement and
approve the Merger is the approval of this Agreement, at a
stockholders meeting or by written consent, by a majority of the
outstanding shares of Company Common Stock and Preferred Stock
entitled to vote thereon, voting together as a single class (the
"Company Stockholder Approval").
Section 3.05 No Conflicts; Consents
(a) The execution and delivery by the Company of this
Agreement do not, and the consummation by the Company of the Merger
and the other transactions contemplated hereby and compliance by the
Company with the terms hereof will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of consent, termination,
cancellation or acceleration of any obligation or to loss of a
material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in
the creation of any Lien upon any of the properties or assets of the
Company or any Company Subsidiary under, any provision of (i) the
Company Charter, the Company By-laws or the comparable organizational
documents of any Company Subsidiary, (ii) any contract, management
agreement, development agreement, consulting agreement, lease,
license, indenture, note, bond, agreement, permit, concession,
franchise or other instrument (a "Contract") to which the Company or
any Company Subsidiary is a party or by which any of their respective
properties or assets is bound or (iii) any judgment, order or decree
("Judgment") or statute, law (including common law), ordinance, rule
or regulation ("Law") applicable to the Company or any Company
Subsidiary or their respective properties or assets.
11
(b) No consent, approval, license, order or authorization
("Consent") of, or registration, declaration or filing with, or Permit
(as defined in Section 3.10 below) from, any Federal, state, local or
foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is
required to be obtained or made by the Company or any Company
Subsidiary in connection with the execution, delivery and performance
of this Agreement or the consummation of the Merger and the other
transactions contemplated hereby, other than (i) the filing with the
SEC of the Joint Proxy Statement (as defined in Section 6.01 below)
and such other reports under, or other applicable requirements of, the
Exchange Act as may be required in connection with this Agreement, the
Merger and the other transactions contemplated hereby and (ii) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware.
Section 3.06 Company SEC Documents; Undisclosed Liabilities.
(a) The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company
with the Securities and Exchange Commission (the "SEC") since January
1, 2004 pursuant to Sections 13(a) and 15(d) of the Exchange Act of
1934, as amended (the "Exchange Act") (such documents and any other
documents filed by the Company with the SEC, as have been amended
since the time of their filing, the "Company SEC Documents"). As of
its respective date, or if amended prior to the date hereof, as of the
date of the last such amendment, each Company SEC Document complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as the case
may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Document, and did not
contain any untrue statement of a material fact or omit 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.
(b) The consolidated financial statements of the Company and
the Company Subsidiaries as of December 31, 2004 and for the year then
ended (i) have been prepared from, are in accordance with, and
accurately reflect the books and records of the Company and the
Company Subsidiaries in all material respects, (ii) have been prepared
in accordance with generally accepted accounting principles ("GAAP")
in all material respects applied on a consistent basis during the
periods involved and (iii) fairly present in all material respects in
accordance with GAAP the consolidated financial position of the
Company and the Company Subsidiaries as of the dates thereof and the
consolidated results of
12
their operations and cash flows for the periods shown (subject, in the
case of clauses (ii) and (iii), to normal year-end adjustments, none
of which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company, and the
absence of footnotes in the case of unaudited interim financial
statements). The books and records of the Company and the Company
Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and
accounting requirements.
(c) The Company has designed and maintains adequate
disclosure controls and procedures to ensure that material information
relating to the Company, including the Company Subsidiaries, is made
known to the chief executive officer and the chief financial officer
of the Company by others within those entities. To the Company's
knowledge, there are no (i) significant deficiencies and material
weaknesses in the design or operation of internal controls over
financial reporting which are reasonably likely to adversely affect in
any material respect the Company's ability to record, process,
summarize and report financial information and (ii) fraud, or
allegation of fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls over financial reporting. To the Company's
knowledge, there is no reason to believe that its auditors and its
chief executive officer and chief financial officer would not be able
to timely give the certifications and attestations required pursuant
to the rules and regulations adopted pursuant to Section 404 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 for non-accelerated filers.
(d) Except as and to the extent disclosed or reserved against
on the audited consolidated balance sheet of the Company and the
Company Subsidiaries as of December 31, 2004, neither the Company nor
any Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required
by GAAP to be set forth on a consolidated balance sheet of the Company
and the Company Subsidiaries or in the notes thereto, except for
liabilities that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect on
the Company.
13
(e) None of the Company Subsidiaries is, or has at any time
since January 1, 2003 been, subject to the reporting requirements of
Sections 13(a) and 15(d) of the Securities Exchange Act.
Section 3.07 Absence of Certain Changes or Events. Since December 31,
2004, the Company has conducted its business in all material respects only in
the ordinary course consistent with past practice, and since such date there
has not been any event or development, condition or occurrence that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company.
Section 3.08 Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger
(the "Form S-4") will, at the time the Form S-4 is filed with the SEC, and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Joint Proxy Statement will, at the date it is first mailed to Parent's
stockholders or the Company's stockholders or at the time of the Parent
Stockholders Meeting or the effectiveness of the Company Action by Written
Consent (as such terms are defined in Section 6.01 below), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company makes no
representation or warranty with respect to any information provided by or
required to be provided by Parent or any Parent Subsidiary and/or by the
Parent's auditors, legal counsel, financial advisors or other consultants or
advisors specifically for use in the Form S-4 or Joint Proxy Statement.
Section 3.09 Litigation. There is no suit, claim, action,
investigation or proceeding ("Claim") pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company, nor is there any Judgment
outstanding against the Company or any Company Subsidiary.
Section 3.10 Compliance With Applicable Laws. The Company and the
Company Subsidiaries and their relevant personnel and operations are in
compliance with all applicable Laws, except to the extent that the failure to
be in compliance with any such Law has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. Neither the Company
nor any Company Subsidiary has received any written communication during the
past two years from a Governmental Entity that alleges that the Company or a
Company Subsidiary is not in compliance with any applicable Law. The Company
and the Company Subsidiaries have in effect all permits, findings of
suitability, licenses, variances, certificates of occupancy, exemptions,
authorizations, operating certificates, franchises, entitlements, consents,
orders
14
and approvals of all Governmental Entities (collectively, "Permits"), necessary
or advisable for them to own, lease or operate their properties and assets
(including the Real Property, as defined in Section 3.16(a)(iv) below) and to
carry on their businesses as now conducted or proposed to be conducted. Neither
the Company nor any Company Subsidiary is in conflict with or in default (or
would be in default with the giving of notice, the passage of time or both)
with, or in violation of, any Permit except to the extent that, individually or
in the aggregate, such conflict or default has not had and would not reasonably
be expected to have a Material Adverse Effect on the Company. There is no event
which caused or, to the knowledge of the Company, would reasonably be expected
to result in the revocation, cancellation, non-renewal or adverse modification
of any such Permit.
Section 3.11 Environmental.
(a) For the purpose of this Agreement, the following defined
terms shall have the following meanings:
(i) "Environmental Laws" shall mean all Laws
relating to pollution or protection of the environment or
human health and safety, including, without limitation, Laws
relating to Releases (as defined in Section 3.11(a)(iii)
below) or threatened Releases of Hazardous Substances (as
defined in Section 3.11(a)(ii) below) into the indoor or
outdoor environment (including, without limitation, ambient
air, surface water, groundwater, land, surface and subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or
handling of Hazardous Substances and all Laws with regard to
recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances, and all Laws
relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural
resources.
(ii) "Hazardous Substances" shall mean (1) any
petrochemical or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing polychlorinated
biphenyls and radon gas; (2) any chemicals, materials or
substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely
hazardous substances," "toxic substances," "contaminants" or
"pollutants" or words of similar meaning and regulatory
effect; or (3) any other chemical, material or substance,
exposure to which is prohibited, limited, or regulated by any
applicable Environmental Laws.
15
(iii) "Release" shall mean any release, spill,
emission, discharge, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and
surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Substances through or in
the air, soil, surface water, groundwater or property.
(b) The Company and the Company Subsidiaries have obtained
all material permits, licenses and other authorizations which are
required under the Environmental Laws ("Environmental Permits") for
the operation of their businesses and the ownership, use and operation
of the Real Property, all such permits, licenses and authorizations
are in effect, no appeal nor any other action is pending to revoke any
Environmental Permit and the Company and the Company Subsidiaries are
in material compliance with all terms and conditions of all such
Environmental Permits.
(c) The Company and the Company Subsidiaries have been, and
are, in material compliance with all applicable Environmental Laws.
(d) Neither the Company nor any Company Subsidiary has
received written notice of any existing or pending material civil,
criminal or administrative Claim, hearing, notice of violation or
demand letter (collectively, "Allegations"), or, to the knowledge of
the Company, threatened Allegations, relating to the Company or any
Company Subsidiary, the Real Property or any other property or
facility previously owned, operated or leased by the Company or any
Company Subsidiary, relating in any way to the Environmental Laws.
None of the Company and the Company Subsidiaries are subject to any
material administrative or judicial Judgment or any other enforceable
or voluntary agreement with a Governmental Entity relating in any way
to the Environmental Laws.
(e) The Company and the Company Subsidiaries have not, and,
to the knowledge of the Company, no other person has, Released,
discharged, or otherwise disposed of any Hazardous Substances on,
beneath or adjacent to the Real Property or any property formerly
owned, operated or leased by the Company or any of the Company
Subsidiaries, except for Releases of Hazardous Substances that are not
likely to result in a material Claim against the Company or any of the
Company Subsidiaries.
Section 3.12 Intellectual Property.
(a) For the purpose of this Agreement, the following defined
terms shall have the following meanings:
16
(i) "Company Intellectual Property" means all
Intellectual Property owned, singly or jointly, by the
Company or any of the Company Subsidiaries;
(ii) "Intellectual Property" means all copyrights,
copyright registrations and applications, patents and
industrial designs, including without limitation any
continuations, divisionals, continuations-in-part, renewals,
reissues and applications for any of the foregoing,
trademarks, service marks, trade names, domain names,
designs, logos, emblems, signs or insignia, slogans, other
similar designations of source or origin and general
intangibles of like nature, together with the goodwill of the
business symbolized by any of the foregoing, registrations
and applications relating to any of the foregoing, trade
secrets, financing and marketing information, technology,
know-how, inventions, proprietary processes, formulae,
algorithms, models and methodologies, Software (as defined in
Section 3.12(a)(iii) below), and similar property anywhere in
the world, together with the rights to ▇▇▇ for past
infringement thereof; and
(iii) "Software" means all computer programs
(whether in source code or object code form), databases,
compilations and data, and all documentation related to any
of the foregoing.
(b) Section 3.12(b)(i) of the Company Disclosure Letter sets
forth a complete list of all United States, foreign, international and
state: (i) patents and patent applications; (ii) trademark or trade
name registrations and applications and material unregistered
trademarks; (iii) domain names; and (iv) copyright registrations and
applications and material unregistered copyrights, that are Company
Intellectual Property. Section 3.12(b)(ii) of the Company Disclosure
Letter sets forth a complete list of all material Intellectual
Property agreements (other than standard off-the-shelf licenses for
commercially available Software).
(c) The Intellectual Property set forth on Sections
3.12(b)(i) and 3.12(b)(ii) of the Company Disclosure Letter are
sufficient for the continued conduct of the Company after the
Effective Time in the same manner as the Company was conducted prior
to such time. The Company or a Company Subsidiary owns or has the
valid and enforceable right to use all Intellectual Property, free and
clear of all Liens.
(d) There is no pending or, to the knowledge of the Company,
threatened Claim against the Company or any Company Subsidiary (i)
with respect to any Intellectual Property owned or used by Company or
any Company Subsidiary, (ii) alleging that the Company Intellectual
Property infringes the
17
rights of any person or (iii) challenging the Company's or any Company
Subsidiary's ownership or use of, or the validity, enforceability or
registrability of any Intellectual Property, and, to the knowledge of
the Company, there is no reasonable basis for a Claim regarding any of
the foregoing. Neither Company nor any Company Subsidiary has brought
or threatened a Claim against any person (x) alleging infringement of
Intellectual Property rights owned or used by the Company or any
Company Subsidiary or (y) challenging any person's ownership or use
of, or the validity, enforceability or registrability of, any
Intellectual Property, and, to the knowledge of the Company, there is
no reasonable basis for a Claim regarding any of the foregoing.
Section 3.13 Employee Benefit Plans.
(a) Section 3.13(a) of the Company Disclosure Letter sets
forth a true and correct list of each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan,
fund or program (within the meaning of section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
"pension" plan, fund or program (within the meaning of section 3(2) of
ERISA); each employment , termination or severance agreement; and each
other employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company, any of the Company
Subsidiaries or by any trade or business, whether or not incorporated
(an "ERISA Affiliate"), all of which together with the Company would
be deemed a "single employer" within the meaning of Section 4001(b) of
ERISA, for the benefit of any employee or former employee of the
Company or any Company Subsidiary (the "Plans").
(b) Each Plan that is intended to be qualified under Section
401(a) of the Code, has received a favorable determination letter from
the Internal Revenue Service ("IRS") with respect to such
qualification, and the Company is not aware of any circumstances
likely to result in revocation of any such favorable determination
letter. There is no material pending or, to the knowledge of the
Company, threatened litigation relating to the Plans. Neither the
Company nor any of the Company Subsidiaries has engaged in a
transaction with respect to any Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject the
Company or any Company Subsidiary to a Tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA.
(c) Neither the Company nor any ERISA Affiliate maintains or
has ever maintained a Plan that is subject to Title IV of ERISA.
Neither the Company or any of the Company Subsidiaries nor an ERISA
Affiliate has
18
contributed to a "multiemployer plan," within the meaning of Section
3(37) of ERISA, at any time.
(d) The Company has heretofore made available to Parent with
respect to each of the Plans true and correct copies of each of the
following documents, if applicable: (i) the Plan document and any
amendments thereto; (ii) any related trust or other funding vehicle;
(iii) the most recent IRS determination letter for such Plans as well
as the application materials submitted to the IRS; (iv) the most
recent summary plan description and related summaries of material
modifications for each Plan that is governed by ERISA; (v) for the
three most recent plan years, all annual reports (5500 Series) for
each Plan that have been filed with any governmental agency and (vi)
all other material documents relating to any Plan as may reasonably be
requested by Parent.
(e) Neither the Company nor any of the Company Subsidiaries
has any obligations for retiree health and life benefits under any
Plan. The Company or any Company Subsidiary may amend or terminate any
such Plan at any time without incurring any liability thereunder.
(f) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will (i) entitle
any employees of the Company or any Company Subsidiary to severance
pay or any increase in severance pay upon any termination of
employment prior to or after the date hereof, (ii) accelerate the time
of payment or vesting or trigger any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligation
pursuant to, any of the Plans, (iii) cause the Company or any Company
Subsidiary to record additional compensation expense on its income
statement with respect to any outstanding stock option or other
equity-based award or (iv) result in any payments under, any of the
Plans which would not be deductible under Section 162(m) or Section
280G of the Code.
(g) None of the Company, any of the Company Subsidiaries, any
ERISA Affiliate, any of the Plans, any trust created thereunder, nor
to the Company's knowledge, any trustee or administrator thereof has
engaged in a transaction or has taken or failed to take any action in
connection with which the Company, any of the Company Subsidiaries or
any ERISA Affiliate could be subject to any material liability for
either a civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of the
Code.
19
(h) Each of the Plans has been operated and administered in
all material respects in accordance with the terms of each Plan,
applicable Laws, including but not limited to ERISA and the Code.
(i) No "leased employee," as that term is defined in Section
414(n) of the Code, performs services for the Company or any of the
Company Subsidiaries.
(j) The purchase of shares of Company Common Stock under the
Company's Employee Stock Purchase Plan is suspended, and no such
shares were purchased by any employee of the Company since January 1,
2002.
(k) There are no pending or, to the Company's knowledge,
threatened or anticipated claims by or on behalf of any Plan, by any
employee or beneficiary under any such Plan or otherwise involving any
such Plan (other than routine claims for benefits).
Section 3.14 Labor Matters. Since January 1, 2001, neither the Company
nor any Company Subsidiary has experienced any labor strikes or, to the
knowledge of the Company, union organization attempts, requests for
representation, work slowdowns or stoppages or other disputes due to labor
disagreements, and, to the knowledge of the Company, there is currently no such
action threatened against or affecting the Company or any Company Subsidiary.
The Company and the Company Subsidiaries are each in compliance with all
applicable Laws with respect to labor relations, employment and employment
practices, occupational safety and health standards, terms and conditions of
employment, wages and hours, human rights, pay equity and workers compensation,
except to the extent that the failure to be in compliance with any such Law has
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company. The Company and the Company Subsidiaries are not engaged in any
unfair labor practice, and no unfair labor practice charge or complaint against
the Company or any Company Subsidiary is pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board or any comparable
Federal, state, provincial or foreign agency or authority. No grievance or
arbitration proceeding arising out of a collective bargaining agreement is
pending or, to the knowledge of the Company, threatened against the Company or
any Company Subsidiary that would reasonably be expected to result in material
Liability (as defined in Section 9.04(a) below) to the Company.
Section 3.15 Material Agreements.
20
(a) Neither the Company nor any of the Company Subsidiaries
is a party to or bound by:
(i) any "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K);
(ii) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets,
including any license for Software, that provides for either
(A) annual payments by or to the Company or any Company
Subsidiary of $100,000 or more or (B) aggregate payments by
or to the Company or any Company Subsidiary of $500,000 or
more;
(iii) any limited partnership, joint venture or
other unincorporated business organization or similar
arrangement or agreement in which the Company or any Company
Subsidiary serves as a general partner or otherwise has
unlimited liability or any other material similar agreement
or arrangement;
(iv) any agreement relating to the acquisition or
disposition of any business of the Company, any Company
Subsidiary or any other person (whether by merger, sale of
stock, sale of assets or otherwise);
(v) any agreement relating to indebtedness for
borrowed money or any guarantee or similar agreement or
arrangement relating thereto;
(vi) any lease of real property;
(vii) any license, franchise or similar agreement
material to the Company or any Company Subsidiary, taken as a
whole;
(viii) any material marketing or other similar
agreement and any agreement under which the Company or any
Company Subsidiary has granted any exclusive marketing or
other right to any person;
(ix) any agreement that restricts or prohibits the
Company or any Company Subsidiary from competing with any
person in any line of business or from competing in, engaging
in or entering into any line of business in any area and
which would so restrict or prohibit the Company or any
Company Subsidiary after the Effective Time;
(x) any agreements to which the Company or any
Company Subsidiary is a party or otherwise bound which
contain provisions
21
(a) granting to any person rights in Intellectual Property
used by the Company or any Company Subsidiary; (b) granting
to the Company or any Company Subsidiary any rights in
Intellectual Property owned or controlled by any person; (c)
restricting the Company's or any Company Subsidiary's use of
Intellectual Property that is used by the Company or any
Company Subsidiary; or (d) transferring ownership of
Intellectual Property rights to the Company or any Company
Subsidiary;
(xi) any material agreement containing a "change in
control" or similar provisions relating to a change in
control of the Company or any Company Subsidiary;
(xii) any powers of attorney other than those
entered into in the ordinary course of business;
(xiii) any agreements material to the Company or any
Company Subsidiary taken as a whole pursuant to which the
Company or Company Subsidiary is obligated to indemnify any
other person;
(xiv) any agreement with any Governmental Entity;
(xv) any agreement with any current or former
officer, director, stockholder, employee, consultant, agent
or other representative of the Company or any Company
Subsidiary (or with a person in which any of the foregoing is
a controlling person);
(xvi) any agreement having a duration of six months
or more and not terminable without penalty upon 60 days or
less prior notice by the Company or any Company Subsidiary
that are a party thereto; or
(xvii) any agency, broker, exclusive dealing,
distributor, dealer, manufacturer, representative, reseller,
agency and sales promotion agreements involving payments in
excess of $50,000 or any other agreement that compensates any
person, other than employees or consultants of the Company or
any Company Subsidiary, based on any sales by the Company or
any Company Subsidiary.
Such contracts, agreements and instruments, each as amended
or modified (including all waivers with respect thereto), are referred to
herein as the "Material Agreements."
(b) The Company has heretofore furnished or made available to
Parent complete and correct copies of the Material Agreements.
22
(i) Each of the Material Agreements is in full force and
effect and enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other
similar Laws affecting the enforcement of creditors' rights
generally and general principles of equity (regardless of
whether enforcement is considered in a proceeding at Law or
in equity); (ii) neither the Company nor any Company
Subsidiary has received any written notice of cancellation or
termination of or, to the knowledge of the Company, any
expression or indication of an intention or desire to cancel
or terminate any of the Material Agreements; (iii) no
Material Agreement is the subject of or, to the knowledge of
the Company, has been threatened to be made the subject of,
any arbitration, suit or other legal proceeding; (iv) with
respect to any Material Agreement which by its terms will
terminate as of a certain date unless renewed or unless an
option to extend such Material Agreement is exercised,
neither the Company nor any Company Subsidiary has received
any written notice, or otherwise has any knowledge, that any
such Material Agreement will not be so renewed or that any
such extension option will not be exercised; and (v) there
exists no material event of default or occurrence, condition
or act on the part of the Company or any Company Subsidiary
or, to the knowledge of the Company, on the part of the other
parties to the Material Agreements, which constitutes or
would constitute (with notice or lapse of time or both) a
material breach of or material default under any of the
Material Agreements.
Section 3.16 Properties.
(a) For the purpose of this Agreement, the following defined
terms shall have the following meanings:
(i) "Lease" means the lease, sublease, license or
other agreement relating to the use and/or occupancy of any
of the Leased Premises.
(ii) "Leased Premises" means all the real property
that is leased or operated by the Company and the Company
Subsidiaries and used or held for use by the Company or any
Company Subsidiary in the operation or conduct of their
business.
(iii) "Owned Real Property" means all the real
property that is owned and used or held for use by the
Company and the Company Subsidiaries in the operation or
conduct of their business.
(iv) "Real Property" means, collectively, the Leased
Premises under the Leases and the Owned Real Property.
23
(b) Section 3.16(b) of the Company Disclosure Letter contains
a true, correct and complete list, as of the date hereof, of the
Leased Premises and the Leases, the lessor and lessee (or sublessor
and sublessee, or licensor or licensee, as the case may be) and any
guarantor under each Lease and the current use (or uses) of such
Leased Premises. Prior to the date hereof, Parent has been provided
with a true, correct and complete copy of each Lease and all
amendments thereto. The Company and the Company Subsidiaries have
good, valid and binding license, leasehold or equivalent interest in
all Leased Premises, free and clear of any Liens except for Permitted
Liens. Each Lease is the legal, valid and binding obligation of the
Company or the Company Subsidiaries thereunder and is enforceable and
is in full force and effect. No event has occurred or circumstance
exists which, with the delivery of notice or the passage of time or
both, would constitute such a breach or default by the Company or any
Company Subsidiary, or the lessor or sublessor or licensor or
licensee, or which would permit the termination, modification or
acceleration of performance of the obligations of the Company or any
of the Company Subsidiaries, or the lessor or sublessor or licensor or
licensee, under any Lease.
(c) Section 3.16(c) of the Company Disclosure Letter contains
a true, correct and complete list of the Owned Real Property,
including the entity which owns such Owned Real Property and the
current use (or uses) of such Owned Real Property. Prior to the date
hereof, Parent has been provided with a true, correct and complete
copy of all deeds, mortgages, surveys, title insurance policies
(including any underlying documents relating to Liens), if any, or
equivalent documentation with respect to the Owned Real Property and
other material documents relating to or affecting the title to the
Owned Real Property. The Company or one of the Company Subsidiaries
has good, valid and marketable title in fee simple to each of the
Owned Real Property and to all buildings, structures and other
improvements thereon and all fixtures thereto, in each case, free and
clear of any Liens except for Permitted Liens. Neither the Company nor
any of the Company Subsidiaries has granted to any person any right to
use or occupy any of the applicable Owned Real Property, other than
rights or grants which appear of record.
(d) No options or rights of first offer or rights of first
refusal or similar rights or options have been granted by the Company
or any Company Subsidiary to any person to purchase, lease, license or
otherwise acquire any interest in any of the Real Property. Neither
the Company nor any of its Subsidiaries has mortgaged, hypothecated,
pledged or otherwise encumbered any of the Real Property or their
interest in any Real Property.
24
(e) All the plants, structure and equipment of the Company
and the Company Subsidiaries that are material to the operations of
their business are in good operating condition and repair.
Section 3.17 Tax Matters.
(a) Each of the Company and the Company Subsidiaries has
filed or will file or cause to be filed all material Tax Returns
required by applicable Law to be filed by any of them prior to or as
of the Closing Date. All such Tax Returns and amendments thereto are
or will be true, complete and correct in all material respects.
(b) Each of the Company and the Company Subsidiaries has paid
or accrued adequate reserves for all material Taxes due with respect
to any period ending prior to or as of the Closing Date.
(c) There are no Liens for Taxes upon any property or assets
of the Company or the Company Subsidiaries, except for Liens for Taxes
not yet due or for Taxes being contested in good faith for which
adequate reserves have been made.
(d) No federal, state, local or foreign audits, examinations,
investigations or other administrative proceedings (such audits,
examinations, investigations and other administrative proceedings
referred to collectively as "Audits") or court proceedings are
presently pending or threatened in writing with regard to any Taxes or
Tax Returns filed by or on behalf of the Company or the Company
Subsidiaries. Neither the Company nor any of the Company Subsidiaries
has been informed in writing by any taxing authority that the
jurisdiction or agency believes that the Company or any of the Company
Subsidiaries was required to file any Tax Return that was not filed.
(e) There are no outstanding requests, Contracts, consents or
waivers to extend the statutory period of limitations applicable to
the assessment of any Taxes or deficiencies against the Company or any
of the Company Subsidiaries.
(f) Neither the Company nor any of the Company Subsidiaries
is a party to, bound by, or has any obligation under, any Tax sharing
agreement, Tax indemnification agreement or similar Contract or
arrangement.
(g) Neither the Company nor any of the Company Subsidiaries
has agreed to make any adjustment pursuant to Section 481(a) of the
Code (or any predecessor provision or comparable provision of other
Law) by
25
reason of any change in accounting method. Neither the Company nor any
of its Subsidiaries has an application pending as to any such change
in accounting method and no Tax authority has proposed such a change
in accounting method.
(h) No closing agreement pursuant to Section 7121 of the Code
(or any predecessor provision) or any similar provision of any Laws
has been entered into by or with respect to the Company or the Company
Subsidiaries.
(i) Neither the Company nor any of its Subsidiaries has
engaged in any "listed transaction" within the meaning of Treasury
Regulation 1.6011-4(b)(2).
Section 3.18 Products Liability.
(a) (i) Neither the Company nor any Company Subsidiary has
received any written notice (of violation or otherwise), Claim or
hearing of a civil, criminal or administrative nature by or before any
Governmental Entity against or involving the Company or any Company
Subsidiary (past or present) or concerning any product or service
relating to the businesses of the Company and the Company Subsidiaries
(past or present) which is pending or, to the knowledge of the
Company, threatened, relating to or resulting from: (x) an alleged
defect in design, manufacture, materials or workmanship of any product
manufactured, designed, distributed or sold by, or on behalf of, the
Company or any Company Subsidiary (past or present); (y) any alleged
failure to warn; or (z) from any alleged breach of express or implied
warranties or representations (nor is there any valid basis for any
such notice (of violation or otherwise), Claim or hearing); (ii) there
has not been any Occurrence (as defined below); (iii) there has not
been any product recall, rework, retrofit or post-sale warning
(collectively, "Recalls") by the Company or any Company Subsidiary
(past or present) concerning any products relating to the businesses
of the Company and the Company Subsidiaries (past or present) which
are manufactured, designed, distributed or sold by the businesses of
the Company and the Company Subsidiaries (past or present) (nor is
there, or has there been, any investigation or consideration or
decision made by any person concerning whether to undertake or not to
undertake any Recalls); and (iv) there are no defects in design,
manufacturing, materials or workmanship (including, without
limitation, any failure to warn, or any breach of express or implied
warranties or representations, which involve any product relating to
the businesses of the Company and the Company Subsidiaries that,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on the Company.
26
For purposes of this Section 3.18, the term "Occurrence" shall mean
any accident, happening or event which is caused, or allegedly caused by, any
alleged hazard or alleged defect in manufacture, design, materials or
workmanship (including, without limitation, any alleged failure to warn or any
breach of express or implied warranties or representations with respect to), or
otherwise involves a product (including any parts or components) relating to
the businesses of the Company and the Company Subsidiaries (past or present)
manufactured, designed, distributed or sold by, or on behalf of, the Company
and the Company Subsidiaries (past or present) which results, or is alleged to
have resulted in, injury or death to any person or damage to or destruction of
property or other consequential damages, at any time.
Section 3.19 Brokers. No broker, investment banker, financial advisor
or other person, other than The ▇▇▇▇▇▇▇▇ Group, Ltd., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Merger and the other transactions contemplated hereby based upon arrangements
made by or on behalf of the Company. The Company has furnished to Parent a true
and complete copy of all agreements between the Company and The ▇▇▇▇▇▇▇▇ Group,
Ltd. relating to the Merger and the other transactions contemplated hereby.
Section 3.20 Opinion of Financial Advisor. The Company Board has
received the written opinion of The ▇▇▇▇▇▇▇▇ Group, Ltd., dated as of August
17, 2005, to the effect that, as of such date and subject to the considerations
set forth therein, the consideration to be received in the Merger by the
holders of Company Common Stock other than Palisade, ▇▇. ▇▇▇▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇▇▇▇, is fair to such holders from a financial point of view, a copy of
which will be promptly delivered to Parent upon receipt by the Company.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
Section 4.01 Organization, Standing and Power. Each of Parent and each
of its subsidiaries (the "Parent Subsidiaries") is duly organized or formed,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has full corporate, partnership or limited liability
company power and authority to conduct its businesses as presently conducted.
Parent and each Parent Subsidiary is duly qualified to do business in each
jurisdiction where the nature of its business or the ownership or leasing of
its properties make such qualification necessary or the failure to so qualify,
individually or in the aggregate, has had or would reasonably be expected
27
to have a Material Adverse Effect on Parent. Parent has delivered to the
Company true and complete copies of the certificate of incorporation of Parent,
as amended to the date of this Agreement (as so amended, the "Parent Charter"),
and the by-laws of Parent, as amended to the date of this Agreement (as so
amended, the "Parent By-laws"). Parent is not in violation of any of the
provision of the Parent Charter or the Parent By-laws.
Section 4.02 The Parent Subsidiaries; Equity Interests.
(a) All the outstanding shares of capital stock of each
Parent Subsidiary have been validly issued and are fully paid and
nonassessable and are owned by Parent free and clear of all Liens.
(b) Except for its interests in the Parent Subsidiaries,
Parent does not own, directly or indirectly, any Equity Interest (as
defined in Section 9.04(a) below) in any person.
Section 4.03 Capital Structure
(a) As of the date hereof, the authorized capital stock of
Parent consists of 20,000,000 shares of Parent Common Stock and
1,000,000 shares of preferred stock, par value $0.001 per share. As of
the date hereof, (i) 7,051,393 shares of Parent Common Stock are
issued and outstanding, (ii) 22,656 shares of Parent Common Stock are
held by Parent in its treasury, (iii) 598,500 shares of Parent Common
Stock are subject to outstanding stock options, (iv) 5,000 shares are
reserved for additional stock options that the Parent is authorized to
issue under its 2003 Stock Incentive Plan and (v) no shares of
preferred stock are issued or outstanding. Except as set forth above,
no shares of capital stock or other voting securities of Parent are
issued, reserved for issuance or outstanding.
(b) All outstanding shares of Parent Common Stock are, and
all such shares that may be issued prior to the Effective Time will be
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive
right, subscription right or any similar right under any provision of
the DGCL, the Parent Charter, the Parent By-laws or any Contract to
which Parent is a party or otherwise bound.
(c) There are not any bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any
matters on which holders of Parent Common Stock may vote ("Voting
Parent Debt").
28
(d) Except as set forth in this Section 4.03 and for the
transactions (the "USV Transaction") contemplated by the Agreement and
Plan of Merger (the "USV Merger Agreement") by and among Parent, U.S.
Vision, Inc., a Delaware corporation ("USV"), USV Merger Sub, Inc., a
Delaware corporation, and the stockholders of USV substantially in the
form attached hereto as Exhibit C, as of the date hereof, there are
not any options, warrants, rights, convertible or exchangeable
securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, Contracts, arrangements or
undertakings of any kind to which Parent or any Parent Subsidiary is a
party or by which any of them is bound (i) obligating Parent or any
Parent Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other Equity
Interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other Equity Interests in,
Parent or any Parent Subsidiary or any Voting Parent Debt, (ii)
obligating Parent or any Parent Subsidiary to issue, grant, extend or
enter into any such option, warrant, call, right, security,
commitment, Contract, arrangement or undertaking or (iii) that give
any person the right to receive any economic benefit or right similar
to or derived from the economic benefits and rights occurring to
holders of Parent Common Stock.
(e) There are not any outstanding contractual obligations of
the Parent to repurchase, redeem or otherwise acquire any shares of
capital stock of the Parent, except in connection with the put option
under the Agreement and Plan of Merger, dated August 19, 2002, among
Palisade, Palisade Merger Corp. and Parent, as amended.
(f) As of the date hereof Parent's only business operations
relate to managing its cash, government securities, accounts
receivable, notes receivable, contract rights receivable and
agreements related to its licensing business and leasehold. In
addition, it is positioning itself to manage its investment in the
Company contemplated hereby and its investment in USV, and the
businesses of such companies.
Section 4.04 Authority; Execution and Delivery; Enforceability
(a) Each of Parent and Merger Sub has all requisite corporate
power and authority to execute and deliver this Agreement and, subject
to the Parent Stockholder Approval (as defined below), to consummate
the Merger and the other transactions contemplated hereby. The
execution and delivery by Parent and Merger Sub of this Agreement and
the consummation by Parent and Merger Sub of the Merger have been duly
authorized by all necessary corporate action on the part of Parent and
Merger Sub, subject to the Parent Stockholder
29
Approval (as defined in Section 4.04(c) below). Each of Parent and
Merger Sub has duly executed and delivered this Agreement and,
assuming due authorization, execution and delivery of this Agreement
by the Company, this Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its
terms, except that enforcement hereof may be subject to or limited by
(i) bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting its creditors' rights generally and (ii) the effect
of general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
(b) Each of the special committee of the Parent board of
directors (the "Parent Board") formed in connection with the Merger
and the other transactions contemplated hereby (the "Parent Special
Committee") and the Parent Board, at meetings duly called and
separately held, duly and unanimously adopted resolutions (which
resolutions have not been rescinded or modified) (i) approving this
Agreement and approving the Merger and the other transactions
contemplated hereby, (ii) determining that the terms of the Merger and
the other transactions contemplated hereby are advisable and fair to
and in the best interests of Parent and its stockholders and (iii)
recommending that Parent's stockholders approve the increase in the
authorized share capital of Parent and the issuance of shares of
Parent Common Stock in the Merger pursuant to this Agreement.
(c) The increase in the authorized capital stock of Parent
and the issuance of shares of Parent Common Stock in the Merger
pursuant to this Agreement require the approval of a majority of the
outstanding shares of Parent Common Stock entitled to vote (the
"Parent Stockholder Approval"). Parent, as the sole stockholder of
Merger Sub, has approved the Merger (which approval has not been
rescinded or modified).
Section 4.05 No Conflicts; Consents
(a) The execution and delivery by Parent and Merger Sub of
this Agreement do not, and the consummation by Parent and Merger Sub
of the Merger and the other transactions contemplated hereby and
compliance by Parent and Merger Sub with the terms hereof will not,
conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of consent, termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any Parent Subsidiary under, any
provision of (i) the Parent Charter, the Parent By-laws or the
comparable organizational documents of any Parent Subsidiary, (ii) any
Contract to
30
which Parent or any Parent Subsidiary is a party or by which any of
their respective properties or assets is bound or (iii) any Judgment
or Law applicable to Parent or any Parent Subsidiary or their
respective properties or assets.
(b) No Consent of, or registration, declaration or filing
with, or Permit from, any Governmental Entity is required to be
obtained or made by Parent or any Parent Subsidiary in connection with
the execution, delivery and performance of this Agreement or the
consummation of the Merger and the other transactions contemplated
hereby, other than (i) the filing with the SEC of the Form S-4 and the
Joint Proxy Statement and such other reports under, or other
applicable requirements of, the Securities Act and the Exchange Act as
may be required in connection with this Agreement, the Merger and the
other transactions contemplated hereby and (ii) the filing of the
Certificates of Merger with the Secretary of State of the State of
Delaware.
Section 4.06 Parent SEC Documents; Undisclosed Liabilities
(a) Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by Parent with the
SEC since January 1, 2003 pursuant to Sections 13(a) and 15(d) of the
Exchange Act (such documents and any other documents filed by Parent
with the SEC, as have been amended since the time of their filing, the
"Parent SEC Documents"). As of its respective date, or if amended
prior to the date hereof, as of the date of the last such amendment,
each Parent SEC Document complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case
may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Document, and did not contain
any untrue statement of a material fact or omit 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.
(b) The consolidated financial statements of Parent and the
Parent Subsidiaries as of December 31, 2004 and for the year then
ended (i) have been prepared from, are in accordance with, and
accurately reflect the books and records of Parent and the Parent
Subsidiaries in all material respects, (ii) have been prepared in
accordance with GAAP in all material respects applied on a consistent
basis during the periods involved and (iii) fairly present in all
material respects in accordance with GAAP the consolidated financial
position of Parent and the Parent Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for
the periods shown (subject, in the case of clauses (ii) and (iii), to
normal year-end adjustments, none of which, individually or in the
aggregate, would be material, and the absence of footnotes in the
31
case of unaudited interim financial statements). The books and records
of Parent and the Parent Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and any
other applicable legal and accounting requirements.
(c) To the Parent's knowledge, based upon Parent's assets and
operations as of the date hereof, there is no reason to believe that
its auditors and its chief executive officer and chief financial
officer would not be able to timely give the certifications and
attestations required pursuant to the rules and regulations adopted
pursuant to Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
(d) Except as and to the extent disclosed or reserved against
on the audited consolidated balance sheet of Parent and the Parent
Subsidiaries as of December 31, 2004, neither Parent nor any Parent
Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of Parent and the Parent
Subsidiaries or in the notes thereto, except for liabilities that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect (as defined
in Section 9.04(a) below) on Parent.
Section 4.07 Absence of Certain Changes or Events. Since December 31,
2004, Parent has conducted its business in all material respects only in the
ordinary course consistent with past practice except that it has engaged ▇▇▇▇
Limited, Inc. as a consultant and entered into an employment agreement with J.
▇▇▇▇▇ ▇▇▇▇▇▇▇ as part of its positioning itself to manage its investments in
the Company as contemplated hereby, USV and their respective businesses. Since
December 31, 2004, there has not been any event or development, condition or
occurrence that, individually or in the aggregate, has had or would reasonably
be expected to have a Material Adverse Effect on Parent.
Section 4.08 Form S-4; Joint Proxy Statement. (i) The Form S-4, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act, will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Joint Proxy Statement, at the date it is first
mailed to Parent's stockholders or the Company's stockholders or at the time of
the Parent Stockholders Meeting or effectiveness of the Company Action by
Written Consent (as such terms are defined in Section 6.01 below), will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, and (iii) the Form S-4 and
32
the Joint Proxy Statement will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder,
except, in the case of clauses (i), (ii) and (iii) above, that no
representation is made by Parent with respect to statements made or
incorporated by reference in the Form S-4 or the Joint Proxy Statement based on
information supplied by the Company for inclusion or incorporation by reference
in the Form S-4 or the Joint Proxy Statement.
Section 4.09 Opinion of Financial Advisor. The Parent Board has
received the written opinion of Mufson ▇▇▇▇ ▇▇▇▇▇▇ & Company, LLC dated as of
August 8, 2005, to the effect that, as of such date and subject to the
considerations set forth therein, the Merger Consideration to be paid by Parent
in respect of shares of Company Common Stock is fair, from a financial point of
view, to Parent and its stockholders other than Palisade.
Section 4.10 Litigation. There is no Claim pending or, to the
Knowledge of Parent, threatened against Parent, that individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on Parent.
Section 4.11 Compliance with Applicable Laws. Neither Parent nor any
Parent Subsidiary is in conflict with, or in default or violation of (a) any
Law or Judgment applicable to Parent or any Parent Subsidiary or by which any
of their respective properties is bound, or (b) whether after the giving of
notice or passage of time or both, any Contract to which Parent or any Parent
Subsidiary is a party or by which Parent or any Parent Subsidiary or any of
their respective properties is bound, except for any such conflicts, defaults
or violations which, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect on Parent.
Section 4.12 Ownership of Company Shares. As of the date hereof,
neither Parent nor any Parent Subsidiary owns any shares of Company Common
Stock.
ARTICLE V.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01 Covenants Relating to Conduct of Business.
(a) Conduct of Business by the Company. Except for matters
set forth in Section 5.01(a) of the Company Disclosure Letter or
otherwise expressly permitted by this Agreement, from the date of this
Agreement to the Effective Time, the Company shall, and shall cause
each Company Subsidiary to (x) conduct its business in the usual,
regular and ordinary course in substantially
33
the same manner as previously conducted and use its commercially
reasonable efforts to preserve intact its current business
organization and keep available the services of its current officers
and employees and (y) use all commercially reasonable efforts to keep
its relationships with customers, suppliers, licensors, licensees,
lessors, distributors and others having business dealings with them to
the end that its goodwill and ongoing business shall be unimpaired at
the Effective Time. In addition, and without limiting the generality
of the foregoing, except for matters set forth in Section 5.01(a) of
the Company Disclosure Letter or otherwise expressly permitted by this
Agreement, from the date of this Agreement to the Effective Time the
Company shall not, and shall not permit any of its subsidiaries to, do
any of the following without the prior written consent of Parent,
which consent shall not be unreasonably withheld or delayed:
(i) (A) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by a
wholly owned subsidiary to its security holders, (B) split,
combine or reclassify any of its capital stock or other
Equity Interests, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution
for shares of its capital stock or other Equity Interests or
(C) purchase, redeem or otherwise acquire any of its shares
of capital stock or other Equity Interests, any other
securities thereof or any rights, warrants or options to
acquire any such shares or other securities, other than, in
respect of any of the foregoing clauses (B) or (C), pursuant
to the terms of Company Stock Options outstanding as of the
date hereof or pursuant to the conversion of Preferred Stock
or convertible debt outstanding as of the date hereof;
(ii) except in connection with the conversion of
Preferred Stock as provided in Section 6.06, issue, deliver,
sell or grant (A) any shares of its capital stock or other
Equity Interests, (B) any Voting Debt or other voting
securities, (C) any securities convertible into or
exchangeable for, or any options, warrants or rights to
acquire, any such shares, Voting Debt, voting securities or
convertible or exchangeable securities, (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or
stock-based performance units or (E) any options, warrants,
rights, securities, units, commitments, Contracts,
arrangements or undertakings of any kind that give any person
the right to receive any economic benefits and rights
accruing to holders of its or any of its subsidiaries'
capital stock, other than, in respect of any of the
foregoing, pursuant to the terms of Company Stock Options
outstanding as of the date hereof or pursuant to the
conversion of Preferred Stock or convertible debt outstanding
as of the date hereof;
34
(iii) amend or otherwise change its certificate of
incorporation, by-laws or other comparable charter or
organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any Equity Interest in
or business of any person or (B) any material assets, except
for purchases of inventory in the ordinary course of business
consistent with past practice;
(v) (A) grant to any current or former director,
officer, independent contractor or employee (each a
"Participant") any loan or increase in compensation,
benefits, perquisites or any bonus or award, or pay any bonus
to any such person, except to the extent required under
employment agreements in effect as of the date hereof or in
the ordinary course of business consistent with past
practice, (B) grant to any Participant any increase in
severance, change in control or termination pay or benefits,
except to the extent required under any agreement in effect
as of the date hereof, (C) enter into any employment, loan,
retention, consulting, indemnification, termination or
similar agreement with any Participant, except in the
ordinary course of business consistent with past practice,
(D) enter into any change of control, severance or similar
agreement with any Participant, (E) take any action to fund
or in any other way secure the payment of compensation or
benefits under any benefit plan, except in the ordinary
course of business consistent with past practice, (F)
establish, adopt, enter into, terminate or amend any
collective bargaining agreement or benefit plan, except in
the ordinary course of business consistent with past
practice, (G) amend, waive or otherwise modify any of the
terms of any employee option, warrant or stock option plan or
(H) take any action to accelerate any rights or benefits or
make any material determinations, under any collective
bargaining agreement or benefit plan;
(vi) make any change in accounting methods,
principles or practices materially affecting its reported
consolidated assets, liabilities or results of operations,
other than as may have been required by a change in GAAP or
any Governmental Entity;
(vii) sell, lease, license, transfer, pledge or
otherwise dispose of or subject to any Lien any properties or
assets that have a fair value, individually, in excess of
$100,000 or, in the aggregate, in excess of $1,000,000;
(viii) (A) other than debt incurrence pursuant to
any credit facility or line of credit existing prior to the
date hereof this or any refinancing thereof not to exceed the
amount borrowable thereunder, incur any indebtedness
35
for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants
or other rights to acquire any debt securities, guarantee any
debt securities of another person, or (B) make any loans,
advances or capital contributions to, or investments in, any
other person (other than to or in any direct or indirect
wholly owned subsidiary), individually, in excess of $100,000
or, in the aggregate, in excess of $1,000,000;
(ix) make or agree to make any new capital
expenditure or expenditures other than capital expenditures
for emergency repairs necessary to avoid significant
disruption to its business consistent with past practices;
(x) make any material Tax election or settle or
compromise any material Tax Liability or refund, other than
tax elections required by Law;
(xi) except in the ordinary course of business
consistent with past practice, (A) cancel any indebtedness
owed to it or waive any of its claims or rights of
substantial value or (B) waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill,
non-competition, exclusivity or similar agreement to which it
or any of its subsidiaries is a party;
(xii) enter into any Contract otherwise addressed in
this Section 5.01(a) having a duration of more than one year
and total payment obligations of in excess of $1,000,000
(other than Contracts terminable within one year or the
renewal, on substantially similar terms, of any Contract
existing on the date hereof);
(xiii) except in the ordinary course of business
consistent with past practice, cancel, terminate or adversely
modify or amend any Material Agreement, or waive, release,
assign, settle or compromise any material rights or Claims,
or any material litigation or arbitration; or
(xiv) authorize any of, or commit or agree to take
any of, the foregoing actions.
(b) Conduct of Business by Parent. Except for the USV
Transaction or as otherwise expressly permitted by this Agreement,
from the date of this Agreement to the Effective Time, Parent shall,
and shall cause each Parent Subsidiary to (i) conduct its business in
the usual, regular and ordinary course in substantially the same
manner as previously conducted and use its commercially reasonable
efforts to preserve intact its current business organization and keep
available the services of its current officers and employees and (ii)
use all
36
commercially reasonable efforts to keep its relationships with
customers, suppliers, licensors, licensees, lessors, distributors and
others having business dealings with them to the end that its goodwill
and ongoing business shall be unimpaired at the Effective Time of the
Merger. In addition, and without limiting the generality of the
foregoing, or otherwise expressly permitted by this Agreement, from
the date of this Agreement to the Effective Time, Parent shall not do
any of the following without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed:
(i) (A) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by a
wholly owned subsidiary to its security holders, (B) split,
combine or reclassify any of its capital stock or other
Equity Interests, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution
for shares of its capital stock or other Equity Interests or
(C) purchase, redeem or otherwise acquire any of its shares
of capital stock or other Equity Interests, any other
securities thereof or any rights, warrants or options to
acquire any such shares or other securities, other than, in
respect of any of the foregoing clauses (B) or (C), pursuant
to the terms of Company Stock Options outstanding as of the
date hereof or pursuant to the conversion of convertible debt
outstanding as of the date hereof, and other than, in respect
of the foregoing clause (C), pursuant to the terms of the put
option under the Agreement and Plan of Merger, dated August
19, 2002, among Palisade, Palisade Merger Corp. and Parent,
as amended;
(ii) issue, deliver, sell or grant (A) any shares of
its capital stock or other Equity Interests, (B) any Voting
Parent Debt or other voting securities, (C) any securities
convertible into or exchangeable for, or any options,
warrants or rights to acquire, any such shares, Voting Parent
Debt, voting securities or convertible or exchangeable
securities, (D) any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock-based performance units or
(E) any options, warrants, rights, securities, units,
commitments, Contracts, arrangements or undertakings of any
kind that give any person the right to receive any economic
benefits and rights accruing to holders of capital stock of
Parent, other than (x) pursuant to the terms of Parent stock
options or warrants or the conversion of convertible debt in
accordance with their present terms, in each case,
outstanding as of the date hereof, (y) grants of Parent
equity awards and Parent stock options pursuant to existing
Parent benefits plans or (z) in connection with the USV
Transaction;
(iii) amend or otherwise change its certificate of
incorporation or by-laws, except to increase the authorized
capital stock of Parent;
37
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any Equity Interest in
or business of any person or (B) any material assets, except
for purchases of inventory in the ordinary course of business
consistent with past practice and except for the USV
Transaction;
(v) sell, lease, license, transfer, pledge or
otherwise dispose of or subject to any Lien any properties or
assets that have a fair value, individually, in excess of
$250,000 or, in the aggregate, in excess of $2,500,000;
(vi) other than debt incurrence pursuant to any
credit facility or line of credit existing prior to the date
hereof this or any refinancing thereof not to exceed the
amount borrowable thereunder, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities, guarantee any
debt securities of another person, except for short-term
borrowings incurred in the ordinary course of business
consistent with past practice;
(vii) except in the ordinary course of business
consistent with past practice, (A) cancel any indebtedness
owed to it or waive any of its claims or rights of
substantial value or (B) waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill,
non-competition, exclusivity or similar agreement to which it
or any of its subsidiaries is a party;
(viii) authorize any of, or commit or agree to take
any of, the foregoing actions.
Section 5.02 Other Actions. Each of the Company and Parent shall not,
directly or indirectly, take any action that would, or that would reasonably be
expected to, result in (i) any of the representations and warranties of such
party set forth in this Agreement becoming untrue or (ii) any condition to the
Merger set forth in Article VII not being satisfied.
Section 5.03 Advice of Changes. Each of the Company and Parent shall
promptly advise the other in writing of any state of facts, event, change,
effect, development, condition or occurrence that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on the Company, the Parent, respectively. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
any representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
38
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 Preparation of the Form S-4 and Joint Proxy Statement.
(a) As soon as practicable following the date of this
Agreement, Parent and the Company shall prepare, together with USV,,
and Parent shall file with the SEC, a joint proxy
statement/information statement (the "Joint Proxy Statement") in
preliminary form and the Form S-4, in which the Joint Proxy Statement
will be included as a prospectus, and Parent and the Company shall use
their reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto. Parent and the Company shall
use their reasonable efforts to have the Form S-4 declared effective
by the SEC as promptly as practicable after such filing and to ensure
that it complies in all material respects with the applicable
provisions of the Securities Act and the Exchange Act. Parent and the
Company shall also take any other action required to be taken under
any applicable federal and state securities laws in connection with
the issuance of Parent Common Stock in the Merger and each of the
Parent and the Company shall furnish all information concerning itself
and its stockholders as may be reasonably requested by the other in
connection with the Joint Proxy Statement or any such action. Parent
and the Company shall each be solely responsible for any statement,
information or omission in the Form S-4 or the Joint Proxy Statement
relating to it based upon information provided by it for inclusion
therein. Palisade agrees to cause USV to furnish all information
concerning USV as may be reasonably requested by Parent or Company in
connection with the Joint Proxy Statement or pursuant to this Article
VI.
(b) If, at any time prior to the receipt of the Company
Stockholder Approval or the Parent Stockholder Approval, any event
occurs with respect to the Company or any Company Subsidiary, or any
change occurs with respect to other information supplied by the
Company for inclusion in the Form
39
S-4 or the Joint Proxy Statement, which is required to be described in
an amendment of, or a supplement to, the Form S-4 or the Joint Proxy
Statement, the Company shall promptly notify Parent of such event, and
the Company and Parent shall cooperate in the prompt filing with the
SEC of any necessary amendment or supplement to the Form S-4 or the
Joint Proxy Statement and, as required by Law, in disseminating the
information contained in such amendment or supplement to Parent's or
the Company's stockholders.
(c) If, at any time prior to the receipt of the Company
Stockholder Approval or the Parent Stockholder Approval, any event
occurs with respect to the Parent, any Parent Subsidiary, or any
change occurs with respect to other information supplied by the Parent
for inclusion in the Form S-4 or the Joint Proxy Statement, which is
required to be described in an amendment of, or a supplement to, the
Form S-4 or the Joint Proxy Statement, the Parent shall promptly
notify the Company of such event, and the Parent and Company shall
cooperate in the prompt filing with the SEC of any necessary amendment
or supplement to the Form S-4 or the Joint Proxy Statement and, as
required by Law, in disseminating the information contained in such
amendment or supplement to Parent's or the Company's stockholders.
(d) If, at any time prior to the receipt of the Company
Stockholder approval or the Parent Stockholder Approval, to Palisade's
knowledge, any event occurs with respect to USV, or any change occurs
with respect to other information supplied by USV for inclusion in the
Form S-4 or the Joint Proxy Statement, which is required to be
described in an amendment of, or a supplement to, the Form S-4 or the
Joint Proxy Statement, Palisade shall cause USV to (x) promptly notify
the Company of such event and (y) to cooperate in the prompt filing
with the SEC of any necessary amendment or supplement to the Form S-4
or the Joint Proxy Statement and, as required by Law, in disseminating
the information contained in such amendment or supplement to Parent's
or the Company's stockholders.
(e) Palisade agrees that, concurrently with the execution and
delivery of this Agreement, it shall, deliver to the Company a duly
executed written consent (the "Company Written Consent") with respect
to all shares of the Company owned by it in favor of the Merger and
approval of this Agreement. The Company shall use its reasonable
efforts to cause the Joint Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the date of
this Agreement.
(f) Parent shall, as soon as practicable following the date
of this Agreement, duly call, give notice of, convene and hold an
annual meeting
40
of its stockholders (the "Parent Stockholders Meeting") for the
purpose of, among other things, seeking the Parent Stockholder
Approval. Parent shall use its reasonable efforts to cause the Joint
Proxy Statement to be mailed to Parent's stockholders as promptly as
practicable after the date of this Agreement. Parent shall, through
the Parent Board, recommend to its stockholders that they give the
Parent Stockholder Approval.
(g) Palisade agrees that, by its execution and delivery of
this Agreement, it agrees to (i) vote all shares of the Parent owned
by it in favor of the Merger when called upon by the Parent to do so;
(ii) vote all shares of USV owned by it in favor of the USV
Transaction when called upon by USV to do so; and (iii) vote all
shares of Parent owned by it in favor of the USV Transaction when
called upon by Parent to do so.
Section 6.02 Access to Information(a) . The Company shall, and shall
cause each of its subsidiaries to, afford to Parent and its representatives
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, shall, and shall cause each of its
subsidiaries to, furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably request.
(b) Parent shall afford to the Company and its
representatives reasonable access during normal business hours during
the period prior to the Effective Time to all its properties, books,
contracts, commitments, personnel and records reasonably required by
the Company and its representatives in connection with the
consummation of the Merger and, during such period, shall, and shall
cause each of its subsidiaries to, furnish promptly to Company all
such information concerning its business, properties and personnel as
Company may reasonably request.
(c) Palisade shall cause USV to afford to the Company and its
representatives reasonable access during normal business hours during
the period prior to the Effective Time to all of USV's properties,
books, contracts, commitments, personnel and records reasonably
required by the Company and its representatives in connection with the
consummation of the Merger and, during such period, shall, and shall
cause each of its subsidiaries to, furnish promptly to Company all
information concerning its business, properties and personnel as
Company may reasonably request.
41
Section 6.03 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties shall use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and
make effective, as promptly as practicable, the Merger and the other
transactions contemplated hereby, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations
and filings and the taking of all reasonable steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of
the Merger and other transactions contemplated hereby and (iv) the
execution and delivery of any additional instruments necessary to
consummate the Merger and other transactions contemplated hereby.
(b) Each party shall, subject to applicable Law, (i) promptly
notify the other party of any written communication to that party from
any Governmental Entity with respect to this Agreement and the Merger
and permit the other party to review in advance any proposed written
communication to the foregoing, (ii) consult with the other parties in
advance with respect to, and give the other party the opportunity to
attend and participate at, any substantive meeting or discussion with
any Governmental Entity in respect of any filings, investigation or
inquiry concerning this Agreement or the Merger and (iii) furnish the
other party with copies of all correspondence, filings, and written
communications between them and their respective representatives on
the one hand and any Governmental Entity on the other hand, with
respect to this Agreement and the Merger.
Section 6.04 Public Announcements. Parent, Palisade and the Company
shall consult with each other before issuing, and provide each other reasonable
opportunity to review and comment upon, any press release or other public
statements with respect to the Merger and the other transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
Law, court process or by obligations pursuant to any listing agreement with any
national securities exchange.
42
Section 6.05 Tax Free Reorganization Treatment. Neither the Company
nor Parent shall, nor shall either of them permit any of their respective
subsidiaries to, take or cause to be taken any action that would disqualify the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
Parent and the Company shall use all reasonable efforts, and shall cause their
respective subsidiaries to use their reasonable efforts, to take or cause to be
taken any action that would cause the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Code.
Section 6.06 Conversion of Preferred Stock. On or before the Closing
Date, each Preferred Stockholder shall convert all of its outstanding shares of
Preferred Stock into shares of Company Common Stock in accordance with the
terms of such Preferred Stock.
Section 6.07 Services and Support Agreement. At the Closing, the
Company shall cause its wholly-owned subsidiary, OptiCare Eye Health Centers,
Inc., and ▇▇. ▇▇▇▇▇▇▇▇▇ shall cause Opticare P.C., a Connecticut professional
corporation of which he is the sole shareholder, to execute the Amended and
Restated Professional Services and Support Agreement substantially in the form
agreed to by Refac.
Section 6.08 Section 16b-3. Parent, Merger Sub and the Company shall
take all such steps as may be required to cause the transactions contemplated
by Section 2.01 and any other disposition of equity securities of the Company
(including derivative securities) or acquisitions of equity securities of
Parent by each individual who (a) is a director or officer of the Company, or
(b) at the Effective Time will become a director or officer of Parent, to be
exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 6.09 American Stock Exchange. Parent shall use its reasonable
best efforts to cause the shares of Parent Common Stock issuable to the
stockholders of the Company in the Merger (including the shares of Parent
Common Stock reserved for issuance with respect to Company Stock Options and
warrants) to be eligible for listing on the American Stock Exchange (or other
national market or exchange on which Parent Common Stock is then traded or
quoted) prior to the Effective Time.
Section 6.10 Indemnification.
(a) Parent shall, to the fullest extent permitted by Law,
cause the Surviving Entity to honor all the Company's obligations to
indemnify (including any obligations to advance funds or expenses) the
current or former directors or officers of the Company for acts or
omissions by such directors and officers occurring prior to the
Effective Time to the extent that such obligations of the Company
exist on the date of this Agreement, whether pursuant to the Company's
43
certificate of incorporation and by-laws, individual indemnity
agreements or otherwise, and such obligations shall survive the
Merger. The certificate of incorporation of the Surviving Entity shall
contain, and Parent shall cause the certificate of incorporation of
the Surviving Entity to contain, provisions no less favorable with
respect to indemnification and exculpation of present and former
directors and officers of the Company than are set forth as of the
date hereof in the Company's certificate of incorporation and by-laws.
(b) For a period of three years after the Effective Time,
Parent shall cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by the Company
as of the date hereof (provided that Parent may substitute therefor
policies with reputable and financially sound carriers of at least the
same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from or related to
facts or events which occurred at or before the Effective Time;
provided however, that Parent shall not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed
150% of the annual premiums paid as of the date hereof by the Company
for such insurance (such 150% amount, the "Maximum Premium");
provided, further, if such insurance coverage cannot be obtained at
all, or can only be obtained at an annual premium in excess of the
Maximum Premium, Parent shall maintain the most advantageous policies
of directors' and officers' insurance obtainable for an annual premium
equal to the Maximum Premium, provided, further, if the Company in its
sole discretion elects, by giving written notice to Parent at least 60
days prior to the Effective Time with respect to wrongful acts and/or
omissions committed or allegedly committed at or prior to the
Effective Time (such coverage shall have an aggregate coverage limit
over the term of such policy in an amount not to exceed the annual
aggregate coverage limit under the Company's existing directors and
officers liability policy, and in all other respects shall be
comparable to such existing coverage), provided that the premium for
such "tail" or "runoff" coverage shall not exceed an amount equal to
the Maximum Premium. The Company represents to Parent that the Maximum
Premium is as set forth in Section 6.10 of the Company Disclosure
Letter.
(c) In the event that Parent or the Surviving Entity or any
of their respective successors or assigns (i) consolidates with or
merges into any other person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all its properties and
assets to any person, then, and in each such case, Parent shall cause
proper provisions to be made so that the successor and assigns of
Parent or the Surviving Entity, as the case may be, assume the
obligations set forth in this Section 6.10. The obligations of Parent
and the Surviving Entity under this Section
44
6.10 shall not be terminated or modified in such a manner as to
adversely affect any indemnitee to whom this Section 6.10 applies
without the express written consent of such affected indemnitee (it
being expressly agreed that the indemnitees to whom this Section 6.10
applies shall be third party beneficiaries of this Section 6.10).
ARTICLE VII.
CONDITIONS PRECEDENT
Section 7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. The Company shall have obtained
the Company Stockholder Approval and Parent shall have obtained the
Parent Stockholder Approval.
(b) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and Parent shall have received all
state securities or "blue sky" authorizations necessary to issue
Parent Common Stock pursuant to the Merger.
(c) Consents, Approvals and Authorizations. All material
consents, approvals, orders or authorizations from, and all material
declarations, filings and registrations with, any Governmental Entity
required to consummate the Merger and the other transactions
contemplated hereby shall have been obtained or made.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in
effect.
(e) No Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Entity in any court of
competent jurisdiction seeking to restrain or prohibit the
consummation of the Merger or any other transaction contemplated
hereby or that would otherwise cause a Material Adverse Effect on
Parent (after giving effect to the Merger).
(f) The closing of the USV Transaction shall have taken place
prior to or shall take place simultaneously with the Merger.
45
Section 7.02 Conditions to Obligation of Parent and Merger Sub.The
obligation of Parent and Merger Sub to effect the Merger is further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true
and correct (without giving effect to any limitation as to
"materiality or "Material Adverse Effect" set forth therein) at and as
of the Effective Time of the Merger as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which
case as of such earlier date), except where the failure of such
representations and warranties to be true and correct (without giving
effect to any limitation as to "materiality" or "Material Adverse
Effect" set forth therein) would not, individually or in the
aggregate, result in a Material Adverse Effect on the Company and
Parent shall have received a certificate signed on behalf of Parent by
an executive officer of the Company to such effect.
(b) Performance of Obligations. The Company shall have
performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing
Date, and Parent shall have received a certificate signed on behalf of
the Company by an executive officer of the Company to such effect.
(c) Absence of Material Adverse Effect. Since the date of
this Agreement, there shall not have been any state of facts, event,
change, effect, development, condition or occurrence that,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on the Company.
(d) Affiliate Letters. The Company shall have delivered to
Parent duly executed letters, in substantially the form of Exhibit A
hereto, from each person who was, as of the date of the approval of
this Agreement and the Merger by the Company's stockholders, an
"affiliate" for purpose of Rule 145 under the Securities Act.
(e) Certificate of Good Standing. The Company shall have
delivered to Parent a certificate from the Secretary of State of
Delaware, dated as of the Closing Date or such date as soon as
practicable before the Closing Date, as to the corporate good standing
of the Company.
(f) Preferred Stock. All outstanding shares of Preferred
Stock shall have been converted by the Preferred Stockholders into
shares of
46
Company Common Stock in accordance with the terms of their respective
Certificates of Designations and no shares of Preferred Stock shall be
outstanding.
(g) Professional Services and Support Agreement. OptiCare Eye
Health Centers, Inc., a Connecticut corporation and wholly-owned
subsidiary of the Company, and Opticare P.C., a Connecticut
professional corporation of which ▇▇. ▇▇▇▇▇▇▇▇▇ is the sole
shareholder, shall have executed the Amended and Restated Professional
Services and Support Agreement substantially in the form agreed to by
Refac.
Section 7.03 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties.
(i) The representations and warranties of Parent
contained in this Agreement shall be true and correct
(without giving effect to any limitation as to "materiality
or "Material Adverse Effect" set forth therein) at and as of
the Effective Time of the Merger as if made at and as of such
time (except to the extent expressly made as of an earlier
date, in which case as of such earlier date), except where
the failure of such representations and warranties to be true
and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein)
would not, individually or in the aggregate, result in a
Material Adverse Effect on Parent. The Company shall have
received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(ii) The representations and warranties of USV
contained in the USV Merger Agreement shall be true and
correct (without giving effect to any limitation as to
"materiality or "Material Adverse Effect" set forth therein)
at and as of the effective time of the merger contemplated
thereby as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as
of such earlier date), except where the failure of such
representations and warranties to be true and correct
(without giving effect to any limitation as to "materiality"
or "Material Adverse Effect" set forth therein) would not,
individually or in the aggregate, result in a Material
Adverse Effect on USV. The Company shall have received, and
Palisade shall cause USV to deliver to the Company, a
certificate signed on behalf of USV by an executive officer
of USV to such effect.
(b) Performance of Obligations. Parent and Merger Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date
and USV
47
shall have performed in all material respects all obligations required
to be performed by USV under the USV Merger Agreement at or prior to
the earlier of (i) the Closing Date and (ii) the closing date of the
USV Transaction, and the Company shall have received certificates
signed on behalf of Parent and USV by their executive officers to such
effect.
(c) Federal Income Tax Opinion. The Company shall have
received an opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., counsel to the Company, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit B.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by written notice of either Parent or the Company in the
event that either:
(i) the Merger is not consummated on or before
December 31, 2005; provided that the right to terminate this
Agreement under this Section 8.01(b) shall not be available
to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or results in, the
failure of the Merger to occur on or before such date; or
(ii) any Governmental Entity issues an order, decree
or ruling or takes any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final
and nonappealable;
(c) by written notice of Parent, if the Company breaches or
fails to perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which breach or
failure to perform (i) would give rise to the failure of a condition
set forth in Section 7.02(a) or 7.02(b), and (ii) cannot be or has not
been cured within 10 days after the giving of written notice to the
Company of such breach;
48
(d) by written notice of the Company, if Parent breaches or
fails to perform in any material respect of any of its
representations, warranties or covenants contained in this Agreement,
which breach or failure to perform (i) would give rise to the failure
of a condition set forth in Section 7.03(a) or 7.03(b), and (ii)
cannot be or has not been cured within 10 days after the giving of
written notice to Parent of such breach;
Section 8.02 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
Liability or obligation on the part of Parent, Merger Sub or the Company, other
than this Section 8.02 and Article X, which provisions shall survive such
termination, and except to the extent that such termination results from a
material breach by a party of any of its representations, warranties or
covenants set forth in this Agreement.
Section 8.03 Amendment. This Agreement (including the Exhibits and
disclosure letters hereto) may be amended prior to the Effective Time by Parent
and the Company, by action taken by the Board of Directors of Parent and the
Board of Directors of the Company (provided, that no amendment shall be
approved by the Board of Directors of the Company unless such amendment shall
have been recommended by the Special Committee), at any time before or after
approval of the Merger by the stockholders of the Company but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
Section 8.04 Extension; Waiver. At any time prior to the Effective
Time (whether before or after approval of the stockholders of the Company),
Parent and the Company may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement and (c) waive
compliance by the other parties with any of the agreements or conditions
contained in this Agreement. Any extension or waiver on behalf of the Company
shall be taken only upon the recommendation of the Special Committee. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
49
ARTICLE IX.
GENERAL PROVISIONS
Section 9.01 Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time of the
Merger. This Section 9.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
Section 9.02 Fees and Expenses. All fees and expenses incurred in
connection with the Merger shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
Section 9.03 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given (i) upon personal delivery, (ii) one business day after being sent via a
nationally recognized overnight courier service if overnight courier service is
requested or (iii) upon receipt of electronic or other confirmation of
transmission if sent via facsimile, in each case at the addresses or fax
numbers (or at such other address or fax number for a party as shall be
specified by like notice) set forth below:
(a) if to Parent or Merger Sub, to
REFAC
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
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Attn: ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
50
(b) if to the Company, to
OptiCare Health Systems, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.04 Definitions.
(a) For purposes of this Agreement:
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person.
"Equity Interest" means any share, capital stock,
partnership, member or similar interest in any entity, and any option,
warrant, right or security (including debt securities) convertible,
exchangeable or exercisable therefor.
"knowledge" of any person means what such person (and, if
such person is not an individual, such person's executive officers and
any other officer having primary responsibility for the specific
matter) knew or should have known after reasonable inquiry.
"Liabilities" mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency,
guaranty or endorsement of or by any person of any type, whether
accrued, absolute, contingent, matured, unmatured, liquidated,
unliquidated, known or unknown.
51
"Liens" means any mortgage, deed of trust, deed to secure
debt, title retention agreement, pledge, lien, encumbrance, security
interest, conditional or installment sale agreement, charge or other
Claims of third parties of any kind.
"Material Adverse Effect" on a person means a material
adverse effect on (i) the business, assets, financial condition or
results of operations of such person and its subsidiaries, taken as a
whole, (ii) the ability of such person to perform its obligations
under this Agreement or (iii) the ability of such person to consummate
the Merger and the other transactions to be performed or consummated
by such person hereunder, in each case other than any state of facts,
event, change, effect, development, condition or occurrence relating
to (A) the economy in general in the U.S. which do not
disproportionately affect such person relative to the other
participants in the industry in which it operates or (B) any change in
such person's stock price or trading volume, in and of itself.
"Merger Consideration" with respect to any stockholder of the
Company shall mean the consideration to be received by such
stockholder in the Merger pursuant to Section 2.01 hereof.
"Permitted Lien" means (x) any Lien for Taxes not yet due or
for Taxes being contested in good faith for which adequate reserves
have been made, (y) any mechanics', materialmen's, warehousemen's,
contractors', workmen's, repairmens', carriers' or similar Lien
attaching by operation of Law, incurred in the ordinary course of
business and securing payments not yet due or delinquent or which are
being contested in good faith or (z) any minor imperfection of title
which does not have a material impact on the continued use and
operation of the property to which such Lien applies.
A "person" means any individual, firm, corporation,
partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
A "subsidiary" of any person means another person in which it
owns, directly or indirectly, an amount of the voting securities,
other voting ownership or voting partnership interests which is
sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50%
or more of the equity interests of such entity).
"Taxes" means any and all taxes, charges, fees, levies,
tariffs, duties, liabilities, impositions or other assessments of any
kind (together with any and all interest, penalties, additions to tax
and additional amounts imposed with respect thereto) imposed by any
Tax authority or other Governmental Authority, and shall include any
Liability for the Taxes of any other person under Treasury Regulation
Section 1.1502-6 (or any
52
similar provision of state, local, or foreign Law), or as a transferee
or successor, by contract, or otherwise.
"Tax Return" means any return, report, declaration,
information return or other document (including any related or
supporting information) required to be filed with respect to Taxes,
including any amendments thereof.
Section 9.05 Interpretation; Disclosure Letters. When a reference is
made in this Agreement to a Section or Subsection, such reference shall be to a
Section or Subsection of this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 9.06 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
Section 9.07 Counterparts; Facsimile. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. Facsimile
transmission of any signed original document and/or retransmission of any
signed facsimile transmission will be deemed the same as delivery of an
original. At the request of any party, the parties will confirm facsimile
transmission by signing a duplicate original document.
Section 9.08 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments relating to the Merger
referred to herein), taken together with the Company Disclosure Letter, (a)
constitutes the entire agreement and supersede all prior agreements and
understandings, whether written or oral, among the parties with respect to the
Merger and (b) is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
53
Section 9.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
Section 9.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 9.11 Disputes; Waiver of Jury Trial.
(a) Each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of the state court located in the State
of Delaware, and that the Court of Chancery shall be the exclusive
jurisdiction in the event any dispute arises out of this Agreement or
the Merger, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating
to this Agreement or the Merger in any court other than the Court of
Chancery of Delaware in the State of Delaware. Each of the parties
agrees that a final non-appealable judgment in any action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner permitted
by Law.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
[Signature Page Follows]
54
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have duly
executed this Agreement, all as of the date first written above.
REFAC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
OPTICARE MERGER SUB, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
OPTICARE HEALTH SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief
Executive Officer
Solely with respect to Sections 6.06 and 6.07:
/s/ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Solely with respect to Section 6.06:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Solely with respect to Sections 6.01(a), (d), (e) and (g), 6.02(c) 6.04, 6.06
and 7.03(a)(ii):
PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.
By: Palisade Concentrated Holdings, L.L.C., General Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Member