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>
TABLE OF CONTENTS
-----------------
Page
----
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...........................................................13
Section 3.08 Information Supplied...........................................................................14
Section 3.09 Litigation.....................................................................................14
Section 3.10 Compliance With Applicable Laws................................................................14
Section 3.11 Environmental..................................................................................15
</TABLE>
<TABLE>
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....................................................................................24
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
</TABLE>
iii
<TABLE>
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..............................................................42
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
</TABLE>
iv
<TABLE>
Section 9.08 Entire Agreement; No Third-Party Beneficiaries.................................................53
Section 9.09 Governing Law..................................................................................53
Section 9.10 Assignment.....................................................................................53
Section 9.11 Disputes; Waiver of Jury Trial.................................................................53
Exhibit A - Form of Affiliate Letter
Exhibit B - Form of Company Tax Opinion
Exhibit C - Form of USV Merger Agreement
</TABLE>
v
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.
(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
2
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 Common
Stock owned by ▇▇. ▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇ which was issued by the Company
from and after the date hereof upon conversion of Preferred Stock (as
3
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.
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
4
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 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
5
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
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
6
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 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.
7
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
(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 Se-
8
▇▇▇▇ 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 of Company Common Stock and
Preferred Stock may vote ("Voting Company Debt").
9
(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).
(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
10
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.
(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
11
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 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
Ef-
12
fect 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.
(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,
13
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 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 Sub-
14
sidiary 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.
(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 subsur-
15
face 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:
(i) "Company Intellectual Property" means all
Intellectual Property owned, singly or jointly, by the Company or any of the
Company Subsidiaries;
16
(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 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 Com-
17
pany 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 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 follow-
18
ing 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.
(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.
19
(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
(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);
20
(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 (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
21
(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. (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
22
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.
(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
23
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.
(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.
24
(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 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.
25
(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.
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
26
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 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
27
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").
(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
28
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 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 con-
29
stitutes 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 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.
30
(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 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.
31
(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 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
32
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 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, licen-
33
sees, 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;
(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
34
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 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
35
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 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
36
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;
(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 ma-
37
terial 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 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
38
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
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 Com-
39
pany 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 of its stockholders
(the "Parent Stockholders Meeting") for the purpose of, among
other things, seeking the Parent Stockholder Approval. Parent
shall use its rea-
40
sonable 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.
Section 6.05 Tax Free Reorganization Treatment. Neither
the Company nor Parent shall, nor shall either of them permit any of
their respective subsidi-
42
aries 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
certificate of incorporation and by-laws, individual indemnity
agreements or otherwise, and such obligations shall survive
the Merger. The certificate of in-
43
corporation 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 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
44
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
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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 simi-
52
lar 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 CEO
Solely with respect to Sections 6.06 and 6.07:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Solely with respect to Section 6.06:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Member