Exhibit 2(a)
AMENDED AND RESTATED
PLAN AND AGREEMENT OF MERGER
THIS AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER (this
"Agreement") is entered into as of the 17th day of March 2004, by and among U.S.
Home & Garden Inc., a Delaware corporation ("USHG"), Ionatron Acquisition Corp.,
a Delaware corporation which is a wholly owned Subsidiary of USHG ("Merger Sub")
(USHG and Merger Sub collectively, the "USHG Parties"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇")
(for the purposes of Sections 5.9, 6.2(d), 6.2(j) and 9.4 and 10.10 only), ▇▇▇▇
▇▇▇▇▇▇ (for the purposes of Section 9.4 only), and Ionatron, Inc., a Delaware
corporation ("Ionatron"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively the "Ionatron Stockholders").
Capitalized terms not defined in this Agreement have the meanings ascribed to
them in Annex 1 hereto.
RECITALS
WHEREAS, the Board of Directors of each of USHG, Merger Sub and
Ionatron has determined that it is in the best interests of their respective
stockholders for USHG to acquire Ionatron upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the USHG Parties and Ionatron are desirous of effecting a
merger, all upon the terms and conditions set forth herein.
NOW, THEREFORE, the USHG Parties, Kassel, Ionatron, and the Ionatron
Stockholders, intending to be legally bound, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby represent, warrant, covenant, and agree as follows:
SECTION 1
THE MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement,
Merger Sub shall be merged with and into Ionatron in a transaction intended to
qualify as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and
(a)(2)(E) of the Code.
SECTION 2
TERMS OF MERGER
2.1 Terms of Merger; Effective Time. The terms of merger (the "Merger")
are as follows:
(a) Merger Sub shall be merged with and into Ionatron in
accordance with the statutory provisions of the Delaware General Corporation Law
("DGCL").
(b) Ionatron shall be the surviving corporation (the "Surviving
Corporation"), and the corporate identity, existence, purposes, powers,
franchises, rights, and immunities of Ionatron shall continue unaffected and
unimpaired by the Merger. The corporate identity, existence, purposes, powers,
franchises, rights, and immunities of Merger Sub shall be merged into the
Surviving Corporation, and the Surviving Corporation shall be fully vested
therewith.
(c) Immediately after the Closing, the Merger shall be effected by
filing with the Secretary of State of Delaware the Certificate of Merger annexed
hereto as Exhibit A (the "Certificate of Merger"). The time at which the
Certificate of Merger is filed with the Secretary of State of Delaware shall be
the "Effective Time" of the Merger. USHG shall cause the Certificate of Merger
to be so filed and recorded within one (1) business day after the Closing Date.
(d) Except insofar as specifically otherwise provided by law,
Merger Sub shall cease to exist at the Effective Time, whereupon the separate
existence of Ionatron and Merger Sub shall become a single corporation.
(e) The Certificate of Incorporation and By-laws of Ionatron shall
be the certificate of incorporation and by-laws of the Surviving Corporation.
(f) At the Effective Time, without any action by the holder
thereof, all of the issued and outstanding shares of Ionatron Common Stock, par
value $0.01 per share par value (collectively, "Ionatron Common Stock") shall be
deemed cancelled and converted into the right to receive shares of common stock,
par value $0.001 per share, of USHG (the "USHG Common Stock"). The USHG Common
Stock issuable to the Ionatron Stockholders shall be deliverable in the manner
set forth on Schedule 2.1(f) or as otherwise agreed by the parties. Except as
otherwise provided herein, the aggregate number of shares of USHG Common Stock
issued to the Ionatron Stockholders pursuant to this Section 2.1(f) shall equal,
as of the Closing Date, sixty-five percent (65%) of the USHG Common Stock on a
fully diluted basis (the "Merger Consideration").
(g) Fractional shares of USHG Common Stock shall not be issued and
each holder of Ionatron Common Stock who would otherwise be entitled to receive
any such fractional shares shall forfeit the right thereto.
(h) At the Effective Time, USHG shall direct its transfer agent to
issue certificates evidencing such number of shares of USHG Common Stock
issuable to holders of Ionatron Common Stock in the Merger pursuant to Section
2.1(f).
(i) If any certificate representing Ionatron Common Stock shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed
and, if required by USHG, the posting by such person of a bond, in such
reasonable amount as USHG may direct, as indemnity against any claim that may be
made against it with respect to such certificate, USHG will issue in exchange
for such lost, stolen or destroyed certificate the Merger Consideration and any
dividends or other distributions to which the holders thereof are entitled
pursuant to this Agreement.
2.2 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at 10:00 a.m. EST on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the parties hereto to consummate the transactions contemplated by
this Agreement (the "Closing Date"), at the offices of Blank Rome LLP, The
Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless
another time, date or place is agreed to in writing by the parties hereto.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF IONATRON
AND THE IONATRON STOCKHOLDERS
Ionatron and the Ionatron Stockholders, jointly and severally, except
where otherwise provided, represent and warrant to the USHG Parties as of the
date hereof and as of the Closing Date (except for representations and
warranties that speak as of a specific date or time, in which case, such
representations and warranties shall be true and complete as of such date or
time) as follows:
3.1 Organization of Ionatron. Ionatron is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Ionatron has the requisite corporate power and authority to own, lease, and
operate its properties, to carry on its business where such properties are now
owned, leased, or operated and such business is now conducted. Ionatron is
qualified to do business as a foreign corporation in the jurisdictions in which
the failure to so qualify would have a Material Adverse Effect. Ionatron is not
a participant in any joint venture or partnership with any other Person with
respect to any part of its operation of its business.
3.2 Capitalization; Ownership of Common Stock.
(a) The authorized capital stock of Ionatron consists of 3,000
shares of common stock, par value $0.01 per share, of which 1,600 shares are
issued and outstanding. All of the issued and outstanding shares of Ionatron
Common Stock and their ownership are as described on Schedule 3.2. All of the
outstanding shares of Ionatron Common Stock have been duly authorized, validly
issued and are fully paid and nonassessable and are held of record by the
Ionatron Stockholders as set forth Schedule 3.2 hereto. There are (a) no shares
of Ionatron Common Stock held in treasury; (b) except as set forth on Schedule
3.2, no other issued or outstanding equity securities of Ionatron or other
securities of Ionatron convertible or exchangeable at any time into equity
securities of Ionatron; and (c) no outstanding stock appreciation rights,
phantom stock rights, profit participation rights, or other similar rights with
respect to any capital stock of Ionatron. Except as set forth on Schedule 3.2,
Ionatron is not subject to any commitment or obligation that would require the
issuance or sale of additional shares of capital stock of Ionatron at any time
under options, subscriptions, warrants, rights, or other obligations. Ionatron
does not have any Subsidiaries and does not own any interests in any
corporation, association, partnership, joint venture, trust, estate, limited
liability company, limited liability partnership, organization or any other
entity.
(b) Each Ionatron Stockholder represents as to himself only that
he has good and marketable title to all of the issued and outstanding shares of
Ionatron Common Stock issued to such Ionatron Stockholder, free and clear of any
and all liens, adverse claims, security interests, pledges, mortgages, charges
and encumbrances of any nature whatsoever ("Liens"),
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and on the Closing Date will own all of his respective Ionatron Common Stock,
free and clear of any and all Liens, including, but not limited to, any claims
by any present or former stockholders of Ionatron.
3.3 Authorization, Validity and Effect of Agreements. Ionatron has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. The consummation by
Ionatron of the transactions contemplated hereby has been duly authorized by all
requisite corporate action, including approval by the Ionatron Stockholders as
required to consummate the Merger. Each Ionatron Stockholder represents as to
himself only that he is an individual having all necessary capacity, power and
authority to execute and deliver this Agreement and such other agreements to be
executed and delivered by him pursuant hereto and to consummate the transactions
contemplated hereby and thereby. This Agreement constitutes, and all agreements
and documents contemplated hereby (when executed and duly delivered pursuant
hereto) will constitute, the valid and legally binding obligations of Ionatron,
and each Ionatron Stockholder represents as to himself only, him, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
3.4 Books and Records. Except as set forth on Schedule 3.4, the minute
books, stock record books, and other records of Ionatron, all of which have been
made available to USHG, are complete and correct in all material respects. The
minute book of Ionatron contains accurate and complete records in all material
respects of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of Ionatron, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
shall be in the possession of Ionatron.
3.5 Absence of Conflicting Agreements. As to Ionatron, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement (with or without the giving of notice, the lapse of time, or
both): (a) does not require the consent of any third party or novation from any
Government Authority (as hereinafter defined); (b) will not conflict with any
provision of the Certificate of Incorporation, By-Laws, or other organizational
documents of Ionatron; (c) will not conflict with, result in a breach of, or
constitute a default under, any applicable Order, Legal Requirement, or ruling
of any court or Governmental Body to which Ionatron is subject; (d) will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license, or
permit to which Ionatron or any Ionatron Stockholder is a party or by which
Ionatron or its assets are bound; and (e) will not create any Lien upon any of
the assets of Ionatron or any of the Ionatron Common Stock. Except for the
filing of the Certificate of Merger, no filing or consent with any Governmental
Body or any other third party is required of Ionatron or the Ionatron
Stockholders to consummate this Agreement or the transactions contemplated
hereby.
3.6 Governmental Authorizations. Schedule 3.6 contains a complete and
accurate list of each Governmental Authorization that is held by Ionatron or
that otherwise relates to the
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business of, or to any of the assets owned or used by, Ionatron. Ionatron has
made available to USHG, Blank Rome LLP, or to USHG's authorized representative,
true and complete copies of all such Governmental Authorizations, except to the
extent prohibited or otherwise restricted by such Government Authorization, any
Government Contract (as defined in Section 3.9), any Government Body or any
Government Bid (as defined in Section 3.9). Each Governmental Authorization
listed or required to be listed in Schedule 3.6 is valid and in full force and
effect. No event has occurred or circumstance exists that may (with or without
notice or lapse of time) (i) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any material
Governmental Authorization listed or required to be listed in Schedule 3.6, or
(ii) result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any material
Governmental Authorization listed or required to be listed in Schedule 3.6. The
Governmental Authorizations listed in Schedule 3.6 collectively constitute all
of the Governmental Authorizations necessary to permit Ionatron and its
employees to lawfully conduct and operate Ionatron's respective business in the
manner currently conducted and operated and to permit Ionatron to own and use
its assets in the manner in which it currently owns and uses such assets.
3.7 Real Property. Ionatron does not own any real property or have any
Real Property Interests other than the lease described on Schedule 3.7, which
lease of property is suitable for the conduct of Ionatron's business and
operations as now conducted. Ionatron is not and, to its Knowledge, the landlord
of its leased premises is not, in default, violation, or breach under said
lease, and no event has occurred and is continuing that constitutes (with notice
or passage of time or both) a default, violation, or breach thereunder by
Ionatron or to Ionatron's Knowledge, the landlord. Ionatron has not received any
notice of a default under said lease. Ionatron has delivered a true and complete
copy of said lease to USHG. Ionatron has, to date, enjoyed quiet enjoyment and
practical access to the premises subject to the lease. The leased premises
(including the improvements thereon): (a) is in good condition and repair
consistent with its current use; and (b) is available for immediate use in the
conduct of Ionatron's business and operations. To Ionatron's Knowledge, no
eminent domain or condemnation proceedings are pending or threatened with
respect to the leased premises.
3.8 Tangible Personal Property. Schedule 3.8 lists the material Tangible
Personal Property owned or leased by Ionatron. Ionatron owns or leases all
Tangible Personal Property necessary to conduct Ionatron's business and
operations as now conducted. Without material exception, Ionatron owns and has
good title to each item of Tangible Personal Property owned by it, and none of
such Tangible Personal Property owned by Ionatron is subject to any Liens,
except for Permitted Encumbrances. With allowance for normal repairs,
maintenance, wear, and obsolescence, each material item of Tangible Personal
Property is in good operating condition and repair and is available for
immediate use in Ionatron's business and operations.
3.9 Contracts.
(a) Schedule 3.9(a) lists all written Contracts and true and
complete descriptions of all oral Contracts (including any amendments and other
modifications to such Contracts). All of the Contracts are in full force and
effect and are valid, binding, and enforceable against Ionatron and, to
Ionatron's Knowledge, in full force and effect as to, and valid, binding and
enforceable against the other party(ies) thereto in accordance with their terms
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except (a) as the enforceability of such Contracts may be affected by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by judicial discretion in the enforcement of equitable remedies, and (b) to
the extent any Government Contract (as defined in Subsection 3.9(b)(xii)) is
subject to termination, renegotiation or modification by its terms or pursuant
to any Order, Governmental Authorization or Legal Requirement. Ionatron is not,
and to Ionatron's Knowledge, no other party thereto is, in material default,
violation, or breach in any respect under any Contract and no event has occurred
and is continuing that constitutes (with notice or passage of time or both) a
material default, violation, or breach in any respect thereunder by Ionatron or,
to Ionatron's Knowledge, the other party(ies) thereto. Other than in the
Ordinary Course of Business, no party to any Contract has delivered notice of
any intention to terminate such Contract or amend the terms thereof. Except as
set forth in Schedule 3.9(a) or as may occur in the Ordinary Course of Business:
to the Knowledge of Ionatron, (a) no Person has or may acquire any rights under,
and no Person has or may become subject to any obligation or liability under,
any Contract that relates to the business of, or any of the assets owned or used
by Ionatron, except as and to the extent any such Contract permits assignment
hereof; and (b) no officer, director, agent, employee, consultant, or contractor
of Ionatron is bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (i) engage in
or continue any conduct, activity, or practice relating to the business of
Ionatron, or (ii) assign to Ionatron or to any other Person any rights to any
invention, improvement, or discovery.
(b) Except as set forth in Schedule 3.9(b):
(i) With respect to any Government Contract or Government Bid,
(A) Ionatron has complied in all material respects with all material terms and
conditions of each Government Contract or Government Bid; (B) Ionatron has
complied with all material requirements of all applicable laws, regulations,
written directives, or agreements pertaining to each Government Contract or
Government Bid and to Ionatron `s performance on its Government Contracts; and
(C) all material representations and certifications executed, acknowledged or
set forth in, or pertaining to each Government Contract or Government Bid were,
when given, and to the extent any such representation or certification pertains
to future events which have yet to occur are presently complete and correct in
all material respects, and Ionatron has complied, in all material respects with
all such representations and certifications.
(ii) As of the date of this Agreement, Ionatron has not
received from a party to a Government Contract any written show-cause notice,
stop work order, cure notice, notice of termination, or termination concerning a
Government Contract.
(iii) Ionatron has not received a written negative
determination of responsibility concerning a Government Bid.
(iv) Ionatron has no Knowledge of a request by any Government
Authority for a contract price adjustment including, without limitation, based
upon (A) a claim by any Government Authority of defective pricing or (B) any
cost incurred by Ionatron that has been questioned, challenged or disallowed or
has been the subject of any investigation, and no money due to Ionatron has been
(or has been attempted to be) withheld or set off with respect to
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any Government Contract, which contract price adjustment, withheld or set off
amount is reasonably expected to have a Ionatron Material Adverse Effect.
(v) To Ionatron's Knowledge, neither Ionatron nor or any of
its directors, officers, employees, consultants or agents is under
administrative, civil or criminal investigation, indictment or information or
equivalent official government charge or allegation by any Government Authority
with respect to any alleged irregularity, misstatement or omission arising under
or relating to any Government Contract or Government Bid. Ionatron has not
conducted or initiated any internal investigation or made a voluntary disclosure
to the U.S. Government with respect to any alleged irregularity, misstatement,
omission or other matter in connection with any Government Contract and/or
Government Bid. To Ionatron's Knowledge, there is no irregularity, misstatement
or omission or other matter arising under or relating to any Government Contract
or Government Bid that has led or could reasonably be expected to lead, either
before or after the Closing, to a Material Adverse Effect to Ionatron.
(vi) There exist (A) no outstanding claims or requests for
equitable adjustment or other contractual action for relief against Ionatron,
either by a Government Authority or by any prime contractor, subcontractor,
vendor or other Person, arising or relating to any Government Contract or
Government Bid, and (B) no disputes between Ionatron and the U.S. Government
under the Contract Disputes Act of 1978, as amended (the "Contract Disputes
Act") or between Ionatron and any prime contractor, subcontractor, vendor or
other person arising under or relating to any Government Contract or Government
Bid. To Ionatron's Knowledge, there are no fact(s) which constitute the basis
for and could reasonably be expected to result in a claim or dispute under
clause (A) or (B) of the immediately preceding sentence. Ionatron has no
interest in any pending or potential material claim under the Contract Disputes
Act against the U.S. Government or any prime contractor, subcontractor or vendor
arising under or relating to any Government Contract or Government Bid.
(vii) To Ionatron's Knowledge, neither Ionatron nor any of its
directors, officers, employees, consultants or agents, is (or for the last three
years has been) suspended or debarred or proposed to be suspended or debarred or
declared ineligible from doing business with any Government Authority or is the
subject of a finding of nonresponsibility or ineligibility for contracting with
any Government Authority. To Ionatron's Knowledge, no facts or circumstances
exist that would warrant or could reasonably lead to the institution of
suspension or debarment proceedings or the finding of nonresponsibility or
ineligibility on the part of Ionatron or any such director, officer, employee,
consultant or agent.
(viii) The cost accounting systems with respect to Government
Contracts of Ionatron are in compliance in all material respects with all the
requirements set forth in, and Legal Requirements governing, such Government
Contracts.
(ix) It has engaged in no conduct that could lead to the
imposition of material liability relating to mischarging, fraud, false claims,
false certifications, and the Foreign Corrupt Practices Act of 1977, as amended.
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(x) Ionatron has complied in all material respects with all of
its obligations under Government Contracts relating to any government furnished
property or similar property or equipment owned by the United States or any
contractor.
(xi) Ionatron is not in material violation of (A) any laws,
directives, or regulations relating to security clearances of the protection of
classified information; (B) its security agreements relating thereto; or (C) any
laws, directives, or regulations relating to export controls.
(xii) For the purposes of this Agreement, (i) the term
"Government Bid" shall mean any written quotations, bids or proposals that, if
accepted, would bind any Person to perform the resultant Government Contract to
furnish products or services to (A) any Government Authority, (B) any prime
contractor of any Government Authority, or (C) any subcontractor, at any tier
level, to any contract described in clauses (A) or (B) above; (ii) the term
"Government Contract" shall mean a written, mutually binding legal relationship
with (A) any Government Authority, (B) any prime contractor of any Government
Authority, or (C) any subcontractor, at any tier level, to any contract
described in clauses (A) or (B) above which obligates any Person to furnish
products or services to a Government Authority, to which Ionatron is a party on
or as of the Closing Date; and (iii) the term "Government Authority" shall mean
the U.S. Government and any and all agencies, commissions, branches,
instrumentalities and departments thereof.
(xiii) Schedule 3.9(b) sets forth a list and description of
each final audit, inspection or investigation, or in the absence thereof, a
draft thereof, received by Ionatron and performed by or for any prime or
higher-tiered contractor or subcontractor, or Government Authority, including
the Defense Contract Audit Agency, the Defense Contract Management Command, the
Defense Contract Administration Service Management Area, the Defense Criminal
Investigative Service, any government agencies under the supervision of the
Secretary of Defense, any investigative agency, the Defense Security Service,
any Inspector General, the Department of Justice, the Department of State, or
the General Accounting Office (other than routine audits by resident auditors,
none of which is material to the business of Ionatron). Schedule 3.9(b) also
briefly describes the current status of such matters.
(xiv) Schedule 3.9(b) sets forth a list and description of
each settlement agreement concerning Government Contracts between Ionatron and
the U.S. Government which currently has or is expected to have a binding effect
on Ionatron after the Closing Date, and under which Ionatron has material
unperformed obligations with respect thereto.
3.10 Intangibles. Schedule 3.10 is a true and complete list of all
material Intangibles owned or used by Ionatron in its business and operations as
now conducted. Without material exception, Ionatron owns or has the right to use
all Intangibles required for the conduct of Ionatron's business and operations
as now intended. Ionatron has provided or made available to the USHG Parties
correct and complete copies of all documents establishing or evidencing the
Intangibles listed on Schedule 3.10, and evidencing ownership or the right to
use same, except to the extent prohibited or otherwise restricted by any
Governmental Authorization, Government Contract, Governmental Body or Legal
Requirement. Ionatron is the sole owner of or has the lawful right to use the
Intangibles. Except as set forth on Schedule 3.10, (a) Ionatron has not
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received any notice or demand alleging that it is infringing upon or otherwise
acting adversely to any trademarks, service marks, trade names, service names,
copyrights, patents, patent applications, know-how, methods, processes or other
intellectual property of any other Person, and there is no claim, proceeding or
action pending or threatened with respect thereto; (b) to Ionatron's Knowledge,
no Person is infringing upon Ionatron's rights or ownership interest in the
Intangibles; (c) to Ionatron's Knowledge, Ionatron is not improperly using any
trade secrets, or improperly using any confidential information about any of its
past or present employees; and (d) to Ionatron's Knowledge, the ownership and
use of such Intangibles does not, and will not as a result of the continued
operation of the business as presently conducted and presently proposed to be
conducted, violate any law, statute, ordinance or regulation, including without
limitation those concerning the export or import of the Intangibles from or to
any jurisdiction, and none of the Intangibles are subject to any outstanding
order, decree, judgment, stipulation or any lien, security interest or other
encumbrance whatsoever. With respect to each Intangible license, sublicense,
agreement, or permission (a) neither Ionatron nor to its Knowledge, the other
party(ies) to the license, sublicense, agreement, or permission is in material
breach or default, and no event has occurred which with notice or lapse of time
would constitute a material breach or default or permit termination,
modification, or acceleration thereunder; (b) no party to the license,
sublicense, agreement, or permission has repudiated any provision thereof; and
(c) with respect to each sublicense, the representations and warranties set
forth in subsections (a) and (b) above are true and correct with respect to the
underlying license. To Ionatron's Knowledge, no portion of any Intangible
contains any "back door," "time bomb," "Trojan horse," "worm," "drop dead
device," "virus" or other software routine, code, or program or hardware
component that permits unauthorized access to or use of or disables or erases
software, hardware, or data without the consent of the user, or that is intended
or designed to do so.
3.11 Financial Statements. Ionatron has delivered to USHG preliminary
unaudited financial statements, including the balance sheet, statement of
income, changes in stockholder's equity and cash flow statements for the year
ended December 31, 2003, which financial statements are under audit by BDO
▇▇▇▇▇▇▇, independent public accountants (the "Financial Statements"). Each of
the foregoing Financial Statements (including, in all cases, the notes thereto,
if any) (i) was accurate and complete in all material respects as of the date
thereof, (ii) fairly presented the financial condition and results of operations
of Ionatron set forth therein, and (iii) were prepared in accordance with GAAP
applied on a consistent basis throughout the period covered thereby. Except as
set forth in Schedule 3.11, Ionatron has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise, including, without limitation, any capital commitments) except for
liabilities or obligations reflected or reserved against in the Financial
Statements and liabilities incurred in the Ordinary Course of Business since the
dates thereof. No off-balance sheet transactions exist in which Ionatron is a
party.
3.12 Tax Matters.
(a) Ionatron has filed all Tax Returns required to be filed. All
such Tax Returns were correct and complete and have been prepared in compliance
in all material respects with all applicable laws and regulations. All Taxes
owed by Ionatron (whether or not shown on any Tax Return) have been paid.
Ionatron currently is not the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by a Governmental
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Body in a jurisdiction where Ionatron does not file Tax Returns that it may be
subject to taxation by that jurisdiction. There are no Liens on any of the
Assets of Ionatron that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Ionatron has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other Person for whom Taxes are
required to be withheld and paid for all periods for which the statutory period
of limitations for the assessment of such Tax has not yet expired and all IRS
Forms W-2 and 1099 required with respect thereto have been properly completed
and timely filed.
(c) No foreign, federal, state or local Tax audits or
administrative Tax proceedings are pending or being conducted with respect to
Ionatron. Neither Ionatron nor any director or officer (or employee responsible
for Tax matters) of Ionatron has received from any foreign, federal, state or
local Taxing Authority (including jurisdictions where Ionatron has not filed Tax
Returns) any (i) notice indicating an intent to open an audit or other review;
(ii) request for information related to Tax matters; or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted or
assessed by any Taxing Authority against Ionatron.
(d) Schedule 3.12 (i) lists all federal, state, local and foreign
Tax Returns filed with respect to Ionatron for taxable periods ending on or
after December 31, 2002; (ii) indicates those Tax Returns that have been
audited; and (iii) indicates those Tax Returns that currently are the subject of
an audit. Correct and complete copies of all material federal, state, local and
foreign income Tax Returns, examination reports, and statements of deficiencies
assessed against, or agreed to by, Ionatron filed or issued since its inception
have been provided to USHG;
(e) Ionatron has not (i) waived any statute of limitations in
respect of any Tax which has continuing effect or (ii) agreed to any extension
of time with respect to a Tax assessment or deficiency which has not expired;
(f) The unpaid Taxes of Ionatron did not, as of December 31, 2003,
exceed the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Financial Statements and (ii) do not exceed the reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past customs and practice of Ionatron in filing its Tax Returns. Since its
inception, Ionatron has not incurred any liability for Taxes arising from
extraordinary gains or losses, as the term is used in GAAP, outside the ordinary
course of business consistent with past custom and practice.
(g) Ionatron has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code.
(h) Ionatron (i) is not and has not been a party to any Tax
allocation or sharing agreement or (ii) has not been a member of an Affiliated
Group (as defined in Section 1504(a) of the Code) filing a consolidated federal
income Tax Return (other than a group the common
10
parent of which is Ionatron) or has a liability for Taxes of any person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract or otherwise.
(i) Ionatron has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(j) There is no contract, agreement, plan or arrangement covering
any persons that, individually or collectively, could give rise to the payment
of any amount that would not be deductible by reason of Section 280G of the
Code, or would constitute compensation in excess of the limitations set forth in
Section 162(m) of the Code.
(k) Ionatron has not been the "distributing corporation" (within
the meaning of Section 355(a)(1) of the Code) nor the "controlled corporation"
(within the meaning of Section 355(a)(1) of the Code) within the two-year period
ending as of the date of this Agreement.
(l) Ionatron has disclosed to the Internal Revenue Service on the
appropriate Tax Returns any Reportable Transaction in which it has participated.
Ionatron has retained all documents and other records pertaining to any
Reportable Transaction in which it has participated, including documents and
other records listed in Treasury Regulation Section 1.6011-4(g) and any other
documents or other records which are related to any Reportable Transaction in
which it has participated but not listed in Treasury Regulation Section
1.6011-4(g).
(m) Except as provided for on Schedule 3.12, Ionatron will not be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any: (i) change in accounting method for a
taxable period ending on or prior to the Closing Date under Section 481(a) of
the Code (or any corresponding provision of state, local or foreign income Tax
law); (ii) "closing agreement" as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law); (iii)
installment sale or open transaction disposition made on or prior to the Closing
Date; or (iv) prepaid amount received on or prior to the Closing Date.
(n) From its inception through December 31, 2003, Ionatron was a
Subchapter S corporation within the meaning of Sections 1361 and 1362 of the
Code and any comparable and applicable provision of income tax law of each state
and local jurisdiction listed on Schedule 3.12.
3.13 Insurance. Ionatron maintains insurance coverage with reputable
insurers in such amounts and covering such risks as are in accordance with
normal industry practice for companies engaged in businesses similar to that of
Ionatron (taking into account the cost and availability of such insurance).
Schedule 3.13 sets forth a complete listing of all insurance maintained by
Ionatron (indicating form of coverage, name of carrier and broker, coverage
limits
11
and premium, whether occurrence or claims made, expiration dates, deductibles
and all endorsements).
3.14 Personnel and Employee Benefits.
(a) Employees and Compensation. Schedule 3.14 contains a true and
complete list of all employees employed by Ionatron as of the date hereof.
Schedule 3.14 also contains a true and complete list of all employee benefit
plans or arrangements covering the officers and employees employed by Ionatron,
including, with respect to the employees any:
(i) "Employee welfare benefit plan," as defined in Section
3(1) of ERISA (a "Welfare Plan");
(ii) "Multiemployer pension plan," as defined in Section 3(37)
of ERISA (a "Multiemployer Plan" and, together with the Welfare Plans, the
"Benefit Plans");
(iii) "Employee pension benefit plan," as defined in Section
3(2) of ERISA (other than a Multiemployer Plan) (a "Pension Plan");
(iv) Employee plan that is maintained in connection with any
trust described in Section 501(c)(9) of the Code; and
(v) Employment, severance, or other similar contract,
arrangement, or policy and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, or retirement benefits or arrangement for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits that is not a Welfare Plan, Pension Plan,
or Multiemployer Plan, (collectively, "Benefit Arrangements").
(b) Pension Plans. Ionatron does not sponsor, maintain, or
contribute to any Pension Plan other than any Pension Plan listed on Schedule
3.14. Each Pension Plan complies currently and has been maintained in
substantial compliance with its terms and, both as to form and in operation,
with all requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such plans, including ERISA and the Code.
(c) Welfare Plans. Each Welfare Plan complies currently and has
been maintained in compliance with its terms and, both as to form and in
operation, with all requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including ERISA and the
Code. Ionatron does not sponsor, maintain, or contribute to any Welfare Plan
that provides health or death benefits to former employees of Ionatron other
than as required by Section 4980B of the Code or other applicable laws.
(d) Benefit Arrangements. Each Benefit Arrangement has been
maintained in compliance with its terms and with the requirements prescribed by
all statutes, orders, rules and regulations that are applicable to such Benefit
Arrangement. Ionatron is not a party to written contract prohibiting the
termination of any employee.
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(e) Multiemployer Plans. Except as disclosed in Schedule 3.14,
Ionatron has not at any time been a participant in any Multiemployer Plan.
(f) Delivery of Copies of Relevant Documents and Other
Information. Ionatron has delivered or made available to USHG true and complete
copies of each of the following documents:
(i) Each Welfare Plan and Pension Plan (and, if applicable,
related trust agreements) and all amendments thereto, and written descriptions
thereof that have been distributed to Employees, all annuity contracts or other
funding instruments; and
(ii) Each Benefit Arrangement and written descriptions thereof
that have been distributed to Employees and complete descriptions of any Benefit
Arrangement that is not in writing.
(g) Labor Relations. Except as set forth in Schedule 3.14(g),
Ionatron is not a party to or subject to any collective bargaining agreement or
written or oral employment agreement with any employee. Except as set forth in
Schedule 3.14(g), with respect to the employees, Ionatron has complied in all
material respects with all laws, rules and regulations relating to the
employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination, and the payment of social
security and other payroll related taxes, and has not received any notice
alleging that Ionatron has failed to comply with any such laws, rules, or
regulations. No proceedings are pending or overtly threatened between Ionatron,
on the one hand, and any employee (singly or collectively), on the other hand.
No labor union or other collective bargaining unit represents or claims to
represent any of the employees. Except as set forth in Schedule 3.14(g), there
is no union campaign being conducted to solicit cards from any employees to
authorize a union to represent any of the employees of Ionatron or to request a
National Labor Relations Board certification election with respect to any
employees.
3.15 Legal Actions and Orders.
(a) Except as disclosed on Schedule 3.15(a), there is no claim,
legal action, counterclaim, suit, arbitration, or other legal or administrative
proceeding, or Tax Proceeding pending or overtly threatened, against Ionatron or
relating to the assets used by Ionatron, or the business or operations of
Ionatron, nor does Ionatron have Knowledge of any basis for the same.
(b) There is no Order to which Ionatron or the assets owned or
used by Ionatron or any of its Subsidiaries, or to which Ionatron's business or
operations, is subject.
(c) No officer or director or, to Ionatron's Knowledge, agent, or
employee of Ionatron is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of Ionatron.
3.16 Environmental Compliance.
(a) Except as disclosed on Schedule 3.16: (i) none of Ionatron's
Tangible Personal Property, nor, to Ionatron's Knowledge, its leased premises
contains (x) any asbestos,
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polychlorinated biphenyls or any PCB contaminated oil; (y) any Contaminants; and
(ii) to Ionatron's Knowledge, all of the Leased Property Interests are in
compliance with applicable Environmental Laws.
(b) Ionatron has obtained any Governmental Authorizations that are
required under all Environmental Laws, and has no liability, contingent or
otherwise, under or arising from any violation by Ionatron or any third party,
of any Environmental Law.
3.17 Compliance with Legal Requirements. Except as set forth in Schedule
3.17:
(a) Ionatron is, and at all times has been, in compliance with
each material Legal Requirement including Environmental Law that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a violation by
Ionatron of, or a failure on the part of Ionatron to comply with, any material
Legal Requirement, or (ii) may give rise under any Legal Requirement to any
material obligation on the part of Ionatron to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(c) Ionatron has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (i) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (ii) any actual, alleged,
possible, or potential obligation on the part of Ionatron under any Legal
Requirement to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
3.18 Conduct of Business in Ordinary Course. Except as set forth in
Schedule 3.18, since December 31, 2003 and through the date hereof, there has
not been any Material Adverse Effect involving Ionatron. Without limiting the
generality hereof, since that date, Ionatron has not:
(a) made any material sale, assignment, lease, or other transfer
of assets other than in the Ordinary Course of Business with suitable
replacements being obtained therefor;
(b) canceled any debts owed to or claims held by Ionatron outside
the Ordinary Course of Business;
(c) made any changes in Ionatron's accounting practices;
(d) suffered any material write-down of the value of any assets or
any write-off as uncollectable of any of its accounts receivable;
(e) transferred or granted any right under, or entered into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, franchise, or similar right, or modified any
existing right;
(f) imposed any security interest upon any of its assets, tangible
or intangible;
14
(g) made any capital expenditures outside the Ordinary Course of
Business;
(h) made any capital investment in or any loan to any other Person
outside the Ordinary Course of Business;
(i) created, incurred, assumed, or guaranteed more than $20,000.00
in aggregate indebtedness for borrowed money in capitalized lease obligations;
(j) made any or authorized any change to its Certificate of
Incorporation or Bylaws;
(k) issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital stock;
(l) declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(m) experienced any material damage, destruction, or loss (whether
or not covered by insurance) to its property;
(n) made any loan to, or entered into any other transaction with,
any of its directors, officers, and employees outside the Ordinary Course of
Business;
(o) granted any increase in the base compensation of or made any
other change of employment terms for any of its officers, directors or employees
outside the Ordinary Course of Business;
(p) made or changed any Tax election or taken any other action
with respect to Taxes not in the Ordinary Course of Business and consistent with
past practices; or
(q) committed to do any of the foregoing.
3.19 Insolvency Proceedings. Ionatron is not, and its assets and
properties are not, the subject of any pending or overtly threatened insolvency
proceedings of any character, including, without limitation, bankruptcy,
receivership, reorganization, or composition with creditors, voluntary or
involuntary. Ionatron has not made an assignment for the benefit of creditors or
taken any action in contemplation of or which would constitute a valid basis for
the institution of any such insolvency proceedings.
3.20 Accounts Receivable. The accounts receivable shown in the Ionatron's
Financial Statements arose in the ordinary course of business and represented,
as of the date of the Financial Statements, bona fide claims against debtors for
services, licenses and other charges. All accounts receivable of Ionatron
arising after the date of the Financial Statements through the date of this
Agreement arose in the ordinary course of business and, as of the date of this
Agreement, and except as set forth on Schedule 3.20, are not subject to any
discount, contingency, claim of off-set or recoupment or counterclaim. The
amount carried for
15
allowances, including, without limitation, markdowns, price protection, bad debt
allowance and reserves, disclosed in the Financial Statements is, to Ionatron's
Knowledge, as of the date of this Agreement sufficient to provide for any losses
which may be sustained on realization of the accounts receivable shown in the
Financial Statements.
3.21 Customers and Suppliers; Loss of Business.
(a) Schedule 3.21 accurately identifies, and provides an accurate
and complete breakdown of the revenues, amounts paid to or the value of goods
received from, as applicable (i) each customer of Ionatron that, since
Ionatron's inception, individually accounted for more than $50,000 of aggregate
consolidated gross revenues of Ionatron, and (ii) each supplier of Ionatron that
received, purchase or other orders from Ionatron in an aggregate amount in
excess of $50,000 of supplies, merchandise and other goods and services ordered
by Ionatron.
(b) Ionatron has no Knowledge that the transactions contemplated
by this Agreement will result in any loss of business or reduction in volume
with any of the present suppliers or customers of Ionatron. There exists no
actual or, overtly threatened, termination, cancellation or limitation of, or
any adverse modification or change in, the business relationship between
Ionatron and any material supplier or customer of Ionatron.
3.22 Relationships with Related Persons. No Related Person of Ionatron
has, or has had, any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to Ionatron's
business. Except as set forth in Schedule 3.22, no Related Person of Ionatron
is, or has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has (i) had business
dealings or a financial interest in any transaction with Ionatron other than
business dealings or transactions conducted in the Ordinary Course of Business
with Ionatron at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with Ionatron with
respect to any line of the products or services of Ionatron (a "Competing
Business") in any market presently served by Ionatron except for ownership of
less than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the over-the-counter
market. Except as set forth in Schedule 3.22, no Related Person of Ionatron is a
party to any Contract with, or has any claim or right against, Ionatron.
3.23 Brokers or Finders. Except as set forth in Schedule 3.23, neither
Ionatron, nor the Ionatron Stockholders, nor any director, officer, agent or
employee of Ionatron, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement.
3.24 Disclosure. No representation or warranty of Ionatron or the
Ionatron Stockholders in this Agreement and no statement in the Schedules omit
to state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
3.25 Due Diligence. Except as provided in Schedule 3.25, Ionatron has
provided to USHG, Blank Rome LLP, counsel to USHG, or to USHG's authorized
representative, all
16
agreements, certificates, correspondence and other items, documents and
information requested, except to the extent prohibited or otherwise restricted
by any Governmental Authorization, Government Contract or Governmental Body.
3.26 Investment Intent. Each of the Ionatron Stockholders represents and
warrants to USHG as to himself only that:
(a) He understands that the shares of USHG Common Stock are
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act and that the shares have not been registered under the Securities
Act or any other applicable state securities laws ("Other Securities Laws"), and
may not be sold, transferred or otherwise disposed of, except if an effective
registration statement is then in effect or pursuant to an exemption from
registration under said Act and that USHG is under no obligation to register the
shares of USHG Common Stock under the Securities Act or Other Securities Laws,
and that the USHG is not obligated to take any other action in order to make
compliance with an exemption from the registration provisions of the Securities
Act or Other Securities Laws available, except that, until Rule 144(k) is
available to the Ionatron Stockholders who continue to own any shares of USHG
Common Stock which can only be sold or disposed of in accordance with Rule 144,
USHG shall comply with the current public information requirements thereunder so
that the applicable Ionatron Stockholder will be able to avail himself of Rule
144 in order to sell or dispose of such shares of USHG Common Stock.
(b) He understands that the certificates representing the shares
of USHG Common Stock will bear a restrictive legend thereon substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAWS, AND ARE RESTRICTED SECURITIES AS THAT TERM IS
DEFINED UNDER RULE 144 PROMULGATED UNDER THE ACT. THESE
SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
DISTRIBUTED OR OTHERWISE DISPOSED OF IN ANY MANNER
UNLESS THEY ARE REGISTERED UNDER THE ACT AND ANY
APPLICABLE SECURITIES LAWS, OR UNLESS THE REQUEST FOR
TRANSFER IS ACCOMPANIED BY AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT
SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT
AND ANY OTHER SECURITIES LAWS."
(c) He understands that USHG will direct its transfer agent for
the USHG Common Stock to place a stop transfer instruction against the
certificates representing the shares of USHG Common Stock and will instruct its
transfer agent to refuse to effect any transfer thereof in the absence of a
registration statement declared effective by the SEC with respect to
17
the shares of USHG Common Stock or a favorable opinion of counsel, satisfactory
to USHG, that such transfer is exempt from registration under the Act and Other
Securities Laws.
(d) He has received copies of the USHG Annual Report on Form 10-K
for the year ended June 30, 2003 and the Quarterly Reports on Form 10-Q for the
quarters ended September 30 and December 31, 2003 and all other documents that
USHG filed with the SEC under Sections 13, 14(a) and 15(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), subsequent to the filing of
such Form 10-K, including, in each case, the exhibits thereto; and that he has
had the opportunity to review public information concerning USHG, and
understands such information.
(e) He is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act and is familiar with the
type of risks inherent in the acquisition of securities such as the shares of
USHG Common Stock and that, by reason of his knowledge and experience in
financial and business matters in general, and investments of this type in
particular, he is capable of evaluating the merits and risks of an investment in
the shares of USHG Common Stock.
(f) He is able to bear the economic risk of an investment in the
shares of USHG Common Stock, including, without limiting the generality of the
foregoing, the risk of losing part or all of his investment in the shares of
USHG Common Stock and his possible inability to sell or transfer the shares of
USHG Common Stock for an indefinite period of time.
(g) He is acquiring the shares of USHG Common Stock for his own
account and for the purpose of investment and not with a view to, or for resale
in connection with, any distribution within the meaning of the Securities Act or
any Other Securities Laws, in violation of the Securities Act or any applicable
Other Securities Laws.
(h) He acknowledges that USHG has relied on the representations
contained herein and that the statutory basis for exemption from the
requirements of Section 5 of the Securities Act may not be present if,
notwithstanding such representations, he is acquiring the shares of USHG Common
Stock for resale or distribution upon the occurrence or non-occurrence of some
predetermined event.
SECTION 4
REPRESENTATIONS AND WARRANTIES
OF THE USHG PARTIES
The USHG Parties, jointly and severally, represent and warrant to Ionatron
as of the date hereof and as of the Closing Date (except for representations and
warranties that speak as of a specific date or time, in which case, such
representations and warranties shall be true and complete as of such date or
time) as follows:
4.1 Organization of USHG and Merger Sub. USHG and Merger Sub are each
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Each other direct or indirect subsidiary of USHG is duly
organized, validly existing, and in good standing under the laws of the state of
its formation. USHG and each of its Subsidiaries has the requisite corporate
power and authority to own, lease, and operate its properties, to carry on its
18
business where such properties are now owned, leased, or operated and such
business is now conducted. USHG and each of its Subsidiaries is qualified to do
business as a foreign corporation in the jurisdictions in which the failure to
so qualify would have a Material Adverse Effect. Neither USHG nor any of its
Subsidiaries is a participant in any joint venture or partnership with any other
Person with respect to any part of its operations of its business.
4.2 Capitalization. The authorized capital stock of USHG consists of
75,000,000 shares of common stock, par value $0.001 per share, of which as of
the date hereof 18,001,090 shares are issued and outstanding and 54,772 are held
in treasury, and 1,000,000 authorized shares of preferred stock, of which there
are no shares outstanding. All of the issued and outstanding shares of USHG
Common Stock have been duly authorized, validly issued and are fully paid and
nonassessable. Except as described on Schedule 4.2, (a) no shares of USHG Common
Stock are held in treasury; (b) there are no other issued or outstanding equity
securities of USHG or other securities of USHG convertible or exchangeable at
any time into equity securities of USHG; (c) there are no outstanding stock
appreciation rights, phantom stock rights, profit participation rights, or other
similar rights with respect to any capital stock of USHG. Schedule 4.2 also sets
forth all commitments or obligations that would require the issuance or sale of
additional shares of capital stock of USHG at any time under any options,
subscriptions, warrants, rights, or other obligations to purchase USHG Common
Stock. USHG owns the Subsidiaries set forth on Schedule 4.2. Other than Golden
West Agri-Products, Inc., all such Subsidiaries are inactive, have no material
assets, no liabilities, known or unknown, contingent or otherwise (other than
any indemnification obligations set forth in the Easy Gardener Sale Agreement
(as defined below) which are due to expire on October 29, 2004), and no
commitments other than immaterial obligations with respect to tax filings,
corporate maintenance, and other similar ongoing expenses. USHG has, at all
times, been a holding company, and all commercial activities of USHG were
conducted by Subsidiaries.
4.3 Authorization, Validity and Effect of Agreements. USHG and Merger
Sub have the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The consummation
by USHG and Merger Sub of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and duly
delivered pursuant hereto) will constitute, the valid and legally binding
obligations of USHG and Merger Sub, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
4.4 Books and Records. Except as set forth on Schedule 4.4, the minute
books, stock record books, and other records of USHG and each of its
Subsidiaries, all of which have been made available to Ionatron, are complete
and correct in all material respects. The minute books of USHG and its
Subsidiaries contain accurate and complete records in all material respects of
all meetings held of, and corporate action taken by, the respective
stockholders, the respective Board of Directors, and committees of the Board of
Directors of USHG and its Subsidiaries, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records shall be in the possession of USHG and delivered to
Ionatron's office in Tucson, Arizona.
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4.5 Absence of Conflicting Agreements. As to USHG and its Subsidiaries,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement (with or without the giving of
notice, the lapse of time, or both): (a) do not require the consent of any third
party; (b) will not conflict with any provision of the Certificate of
Incorporation, By-Laws, or other organizational documents of USHG or any of its
Subsidiaries; (c) will not conflict with, result in a breach of, or constitute a
default under any applicable Order, Legal Requirement, or ruling of any court or
Governmental Body to which USHG or any of its Subsidiaries is subject; (d) will
not conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of, any material agreement, instrument,
license, or permit to which USHG or any of its Subsidiaries is a party or by
which USHG or any of its Subsidiaries or their respective assets are bound; and
(e) will not create any Lien upon any of the assets of USHG or any of its
Subsidiaries or any of the USHG Common Stock. Except for the filing of the
Certificate of Merger and the Schedule 14f-1 Filing (as hereinafter defined) and
a Form D Filing pursuant to Regulation D of the Securities Act, no filing with
any Governmental Body or any other third party is required to consummate this
Agreement or the transactions contemplated hereby.
4.6 SEC Filings; Financial Statements.
(a) Since June 30, 2000, USHG has timely filed all forms, reports
and documents required to be filed by USHG with the SEC (collectively, the "USHG
SEC Reports"). The USHG SEC Reports (a) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (b) did not at the time they were filed
(or if amended or superseded by a subsequent filing, then on the date of such
subsequent filing), contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such USHG SEC Reports or
necessary in order to make the statements in such USHG SEC Reports, in the light
of the circumstances under which they were made, not misleading. To the
Knowledge of the USHG Parties, there is no information not contained in the USHG
SEC Reports which a reasonable investor would consider material in making an
investment decision in a similar situation.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) contained in the USHG SEC Reports during the last
three fiscal years (the "USHG Financial Statements"), complied as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q or 8-K promulgated by the SEC), were accurate and
complete in all material respects and fairly presented the consolidated
financial position of USHG as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
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4.7 Sale of Operating Assets to Easy Gardener Products, Ltd.; Assets and
Liabilities.
(a) On October 29, 2003, USHG completed the sale of substantially
all of the assets of its material operating Subsidiaries to Easy Gardener
Products, Ltd. ("Easy Gardener") which included the assignment and assumption of
all operational liabilities of its material Subsidiaries and all obligations of
USHG under the Trust Preferred Documents, pursuant to that certain Asset
Purchase Agreement dated as of December 11, 2002, as amended May 23, 2003 and
July 31, 2003, by and between Easy Gardener Products Ltd., EYAS International,
Inc., USHG, Ampro Industries, Inc. and Weed Acquisition Corp. (the "Easy
Gardener Sale Agreement"). The representations and warranties set forth in the
Easy Gardener Sale Agreement were true and correct as of the dates made or
deemed to have been made as of the date hereof, and USHG has not received any
claim or notice of any intention to make a claim by Easy Gardener of any breach
of the representations, warranties or obligations of USHG set forth in the Easy
Gardener Sale Agreement.
(b) As of the date hereof, USHG and its Subsidiaries have only
those assets and those liabilities set forth on Schedule 4.7. As of the Closing
Date, USHG shall have (i) approximately $10 million in cash (including
approximately $57,000 in prepayments made on USHG's D&O insurance policy), (ii)
its current director and officer's insurance policy in full force and effect,
(iii) a $1,600,000 Subordinated Promissory Note set forth in Schedule 4.7
including accrued and unpaid interest thereon or the proceeds therefrom, and
(iv) no liabilities, taxes due or any other obligations, contractual, or
otherwise, whether or not contingent or known or unknown, other than (A)
$500,000 to be paid in partial settlement of the severance pay due to Kassel
under that certain Employment Agreement dated as of April 1, 1996 between USHG
and Kassel (the "Kassel Employment Agreement") and (B) the obligation to pay the
$54,500 annual consulting fee due to ▇▇▇▇▇ Associates, LLC ("▇▇▇▇▇") so long as
▇▇▇▇▇ remains a shareholder of USHG, (C) the obligations to ▇▇▇▇▇ and its
affiliates pursuant to the agreements set forth on Schedule 4.7, (D) the USHG
D&O policy (E) any indemnification obligations of USHG and its Subsidiaries
pursuant to the Easy Gardener Sale Agreement and (F) any obligations pursuant to
the agreements governing USHG's Derivative Securities (as hereinafter defined)
(collectively, the "Permitted Liabilities and Obligations").
(c) Except as set forth on Schedule 4.7, since October 29, 2003,
neither USHG nor any Subsidiaries other than Golden West Agri-Products, Inc. has
engaged in any commercial or other business activities.
4.8 Tax Matters.
(a) USHG and each of its Subsidiaries has timely filed all Tax
Returns required to be filed. All such Tax Returns were correct and complete and
have been prepared in compliance in all material respects with all applicable
laws and regulations. All Taxes owed by USHG and each of its Subsidiaries
(whether or not shown on any Tax Return) have been paid. Neither USHG nor any of
its Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by a Governmental Body
in a jurisdiction where either USHG or any of its Subsidiaries do not file Tax
Returns that they may be subject to taxation by that jurisdiction. There are no
Liens on any of the Assets of either
21
USHG or any of its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) USHG and each of its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
Person for whom taxes are required to be withheld and paid for all periods for
which the statutory period of limitations for the assessment of such Tax has not
yet expired and all IRS Forms W-2 and 1099 required with respect thereto have
been properly completed and timely filed.
(c) No foreign, federal, state or local Tax audits or
administrative Tax proceedings are pending or being conducted with respect to
USHG or any of its Subsidiaries. Neither USHG nor any of its Subsidiaries nor
any director or officer (or employee responsible for Tax matters) of USHG or any
of its Subsidiaries has received from any foreign, federal, state or local
Taxing Authority (including jurisdictions where USHG and its Subsidiaries have
not filed Tax Returns) any (i) notice indicating an intent to open an audit or
other review; (ii) request for information related to Tax matters; or (iii)
notice of deficiency or proposed adjustment for any amount of Tax proposed,
asserted or assessed by any Taxing Authority against USHG or any of its
Subsidiaries.
(d) Schedule 4.8 (i) lists all federal, state, local and foreign
Tax Returns filed with respect to USHG or any of its Subsidiaries for taxable
periods ending on or after December 31, 2000; (ii) indicates those Tax Returns
that have been audited; and (iii) indicates those Tax Returns that currently are
the subject of an audit. Correct and complete copies of all material federal,
state, local and foreign income Tax Returns, examination reports, and statements
of deficiencies assessed against, or agreed to by, USHG or any of its
Subsidiaries filed or issued since December 31, 2000 have been provided to
Ionatron.
(e) Neither USHG nor any of its Subsidiaries have (i) waived any
statute of limitations in respect of any Tax which has continuing effect or (ii)
agreed to any extension of time with respect to a Tax assessment or deficiency
which has not expired;
(f) The unpaid Taxes of USHG and its Subsidiaries did not, as of
December 31, 2003, exceed the reserve for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the USHG Financial Statements and (ii) do
not exceed the reserve as adjusted for the passage of time through the Closing
Date in accordance with the past customs and practice of USHG and its
Subsidiaries in filing their Tax Returns. Since December 31, 2003, neither USHG
nor any of its Subsidiaries have incurred any liability for Taxes arising from
extraordinary gains or losses, as the term is used in GAAP, outside the ordinary
course of business consistent with past custom and practice.
(g) USHG and each of its Subsidiaries have disclosed on their
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
22
(h) Neither USHG nor any of its Subsidiaries (i) is or has been a
party to any Tax allocation or sharing agreement or (ii) has been a member of an
Affiliated Group (as defined in Section 1504(a) of the Code) filing a
consolidated federal income Tax Return (other than a group the common parent of
which is USHG) or has a liability for Taxes of any person under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(i) Neither USHG nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(j) There is no contract, agreement, plan or arrangement covering
any persons that, individually or collectively, could give rise to the payment
of any amount that would not be deductible by reason of Section 280G of the
Code, or would constitute compensation in excess of the limitations set forth in
Section 162(m) of the Code.
(k) Neither USHG nor any of its Subsidiaries has been the
"distributing corporation" (within the meaning of Section 355(a)(1) of the Code)
nor the "controlled corporation" (within the meaning of Section 355(a)(1) of the
Code) within the two-year period ending as of the date of this Agreement.
(l) USHG and each of its Subsidiaries has disclosed to the
Internal Revenue Service on the appropriate Tax Returns any Reportable
Transaction in which it has participated. USHG and each of its Subsidiaries have
retained all documents and other records pertaining to any Reportable
Transaction in which it has participated, including documents and other records
listed in Treasury Regulation Section 1.6011-4(g) and any other documents or
other records which are related to any Reportable Transaction in which it has
participated but not listed in Treasury Regulation Section 1.6011-4(g).
(m) Except as provided for on Schedule 4.8, neither USHG nor any
of its Subsidiaries will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any: (i) change in
accounting method for a taxable period ending on or prior to the Closing Date
under Section 481(a) of the Code (or any corresponding provision of state, local
or foreign income Tax law); (ii) "closing agreement" as described in Section
7121 of the Code (or any corresponding provision of state, local or foreign
income Tax law); (iii) installment sale or open transaction disposition made on
or prior to the Closing Date; or (iv) prepaid amount received on or prior to the
Closing Date.
4.9 Insurance. USHG and each of its Subsidiaries maintain insurance
coverage with reputable insurers in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to that of USHG (taking into account the cost and availability of such
insurance). Schedule 4.9 sets forth a complete listing of all insurance
maintained by USHG and any of its Subsidiaries (indicating form of coverage,
name of carrier and broker, coverage limits and premium, whether occurrence or
claims made, expiration dates, deductibles and all endorsements).
23
4.10 Personnel and Employee Benefits.
(a) Employees and Compensation. Schedule 4.10 contains a true and
complete list of all employees employed by USHG or any of its Subsidiaries as of
the date hereof. Schedule 4.10 also contains a true and complete list of all
employee benefit plans or arrangements covering the officers and employees
employed by USHG or any of its Subsidiaries at any time, including, with respect
to the employees, any:
(i) Welfare Plan;
(ii) Multiemployer Plans;
(iii) Pension Plan;
(iv) Employee plan that is maintained in connection with any
trust described in Section 501(c)(9) of the Code; and
(v) Benefit Arrangements.
(b) Pension Plans. Neither USHG nor any of its Subsidiaries
sponsors, maintains, or contributes to any Pension Plan other than any Pension
Plan listed on Schedule 4.10. Each Pension Plan complies currently and has been
maintained in substantial compliance with its terms and, both as to form and in
operation, with all requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including ERISA and the
Code.
(c) Welfare Plans. Each Welfare Plan complies currently and has
been maintained in compliance with its terms and, both as to form and in
operation, with all requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including ERISA and the
Code. Neither USHG nor any of its Subsidiaries sponsors, maintains, or
contributes to any Welfare Plan that provides health or death benefits to former
employees of USHG or any of its Subsidiaries other than as required by Section
4980B of the Code or other applicable laws.
(d) Benefit Arrangements. Each Benefit Arrangement has been
maintained in compliance with its terms and with the requirements prescribed by
all statutes, orders, rules and regulations that are applicable to such Benefit
Arrangement. Neither USHG nor any of its Subsidiaries is a party to written
contract prohibiting the termination of any employee.
(e) Multiemployer Plans. Except as disclosed in Schedule 4.10,
neither USHG nor any of its Subsidiaries has at any time been a participant in
any Multiemployer Plan.
(f) Delivery of Copies of Relevant Documents and Other
Information. USHG has delivered or made available to Iaonatron true and complete
copies of each of the following documents:
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(i) Each Welfare Plan and Pension Plan (and, if applicable,
related trust agreements) and all amendments thereto, and written descriptions
thereof that have been distributed to Employees, all annuity contracts or other
funding instruments; and
(ii) Each Benefit Arrangement and written descriptions
thereof that have been distributed to Employees and complete descriptions of any
Benefit Arrangement that is not in writing.
(g) Prior Employees. Except as set forth in Schedule 4.10, USHG
does not have any obligation to any present or former employee of USHG or any of
its present or former Subsidiaries, under any Plan or Benefit Arrangement
described in Subsections 4.10(a), 4.10(b) or 4.10(c) or for indemnification for
any matter or in any other respect.
(h) Labor Relations. Except as set forth in Schedule 4.10, neither
USHG nor any of its Subsidiaries is a party to or subject to any collective
bargaining agreement or written or oral employment agreement with any employee.
Except as set forth in Schedule 4.10, with respect to the employees, USHG and
each of its Subsidiaries have complied in all material respects with all laws,
rules and regulations relating to the employment of labor, including those
related to wages, hours, collective bargaining, occupational safety,
discrimination, and the payment of social security and other payroll related
taxes, and has not received any notice alleging that USHG or any of its
Subsidiaries has failed to comply with any such laws, rules, or regulations. No
proceedings are pending or overtly threatened between USHG or any of its
Subsidiaries, on the one hand, and any employee (singly or collectively), on the
other hand. No labor union or other collective bargaining unit represents or
claims to represent any of the employees. Except as set forth in Schedule 4.10,
there is no union campaign being conducted to solicit cards from any employees
to authorize a union to represent any of the employees of USHG or any of its
Subsidiaries or to request a National Labor Relations Board certification
election with respect to any employees.
4.11 Legal Actions and Orders.
(a) Except as disclosed on Schedule 4.11, there is no claim, legal
action, counterclaim, suit, arbitration, or other legal or administrative
proceeding, or Tax Proceeding pending or overtly threatened, against USHG or any
of its Subsidiaries or relating to the assets used by USHG or any of its
Subsidiaries, or the business or operations of USHG or any of its Subsidiaries,
nor does USHG or any of its Subsidiaries have Knowledge of any basis for the
same.
(b) There is no Order to which USHG or any of its Subsidiaries or
the assets owned or used by USHG or any of its Subsidiaries, or to which USHG's
or any of its Subsidiaries' business or operations, is subject; and
(c) No officer or director or, to USHG's Knowledge, agent or
employee of USHG or any of its Subsidiaries is subject to any Order that
prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of USHG
and its Subsidiaries.
25
4.12 Environmental Compliance.
(a) Except as disclosed on Schedule 4.12: (i) none of the Tangible
Personal Property, nor to USHG's Knowledge its leased premises, contains (x) any
asbestos, polychlorinated biphenyls or any PCB contaminated oil; (y) any
Contaminants; and (ii) to USHG's Knowledge, all of such Leased Real Property
Interests were through October 29, 2003 and, if still in force against USHG,
through the date hereof, in compliance with applicable Environmental Laws.
(b) USHG and each of its Subsidiaries have obtained all
Governmental Authorizations that are required under all Environmental Laws, and
USHG has no liability, contingent or otherwise, under or arising from any
violation by USHG, any of its Subsidiaries or any third party, of any
Environmental Law.
4.13 Compliance with Legal Requirements. Except as set forth in Schedule
4.13:
(a) USHG and each of its Subsidiaries are, and at all times have
been, in compliance with each material Legal Requirement, including
Environmental Laws that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets;
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a violation by
USHG or any of its Subsidiaries of, or a failure on the part of USHG or any of
its Subsidiaries to comply with, any material Legal Requirement, or (ii) may
give rise under any Legal Requirement to any material obligation on the part of
USHG or any of its Subsidiaries to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(c) neither USHG nor any of its Subsidiaries has received any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (i) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or
(ii) any actual, alleged, possible, or potential obligation on the part of USHG
or any of its Subsidiaries under any Legal Requirement to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature.
4.14 Stock Issuable in Merger. The Merger Consideration, when issued,
will be duly authorized and validly issued, fully paid and non-assessable, will
be delivered hereunder free and clear of any liens, adverse claims, security
interests, pledges, mortgages, charges and encumbrances of any nature
whatsoever, except that the Merger Consideration shall not be registered under
the Securities Act or any state securities law and will be "restricted
securities", as such term is defined in the rules and regulations of the SEC
promulgated under the Securities Act, and will be subject to restrictions on
transfers pursuant to such rules and regulations. USHG has reserved an adequate
number of shares of USHG Common Stock to enable it to issue the Merger
Consideration.
4.15 Brokers or Finders. Except as set forth in Schedule 4.15, neither
USHG nor any of its Subsidiaries, nor any director, officer, agent or employee
thereof, has employed any broker
26
or finder or has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement.
4.16 Disclosure. No representation or warranty of USHG in this Agreement
and no statement in the Schedules omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
4.17 Due Diligence. USHG has provided to Ionatron all agreements,
certificates, correspondence and other items, documents and information
requested.
SECTION 5
COVENANTS
5.1 Procedure for Exchange. Immediately after the Effective Time, USHG
shall make appropriate provision for issuance of certificates representing the
Merger Consideration against surrender of the Ionatron Common Stock.
5.2 Conduct of Ionatron's Business Prior to Closing. Except as otherwise
contemplated by this Agreement, from the date hereof through the earlier of the
termination of this Agreement or the Effective Time, Ionatron shall conduct its
business in the Ordinary Course of Business. Without limiting the generality of
the foregoing, except as contemplated by this Agreement or as consented to by
USHG, during the period set forth in the preceding sentence, Ionatron shall act
as follows:
(a) Ionatron shall not adopt any change in any method of
accounting or accounting practice, except as contemplated or required by GAAP;
(b) Ionatron shall not amend its Certificate of Incorporation or
Bylaws;
(c) subject to the fiduciary obligations of its board of
directors, Ionatron shall not merge or consolidate with, or agree to merge or
consolidate with, or purchase or agree to purchase all or substantially all of
the assets of, or otherwise acquire, any other business entity
(d) except for the disposition of obsolete equipment in the
Ordinary Course of Business, Ionatron shall not sell, mortgage, pledge, or
otherwise dispose of any assets or properties owned, leased, or used in the
operation of its business;
(e) Ionatron shall not authorize for issuance, issue, or sell any
additional shares of its capital stock or issue any securities or obligations
convertible or exchangeable into shares of its capital stock or issue or grant
any option, warrant, or other right to purchase any shares of its capital stock;
(f) Ionatron shall not incur, or agree to incur, any debt for
borrowed money;
(g) Ionatron shall not change its historic practices concerning
the payment of accounts payable;
27
(h) except in the Ordinary Course of Business, Ionatron shall not
take any action, or fail to take action, to cause its liabilities to increase;
(i) Ionatron shall not declare, issue, or otherwise approve the
payment of dividends of any kind in respect of its capital stock or redeem,
purchase, or acquire any of its capital stock;
(j) Ionatron shall not terminate the existing insurance policies
on the assets of its business or other policies providing substantially similar
coverages;
(k) except in the Ordinary Course of Business or as otherwise
contemplated by this Agreement, Ionatron shall not permit any increases in the
compensation of any of its employees except as required by law or existing
contract or agreement or enter into or amend any Welfare Plan, Pension Plan,
Benefit Plan or Benefit Arrangement;
(l) except in the Ordinary Course of Business, Ionatron shall not
enter into or renew, extend or terminate, or waive any Contract, or incur any
obligation that will be binding on Ionatron after Closing;
(m) Ionatron shall not enter into any transactions with any
Affiliate that will be binding upon Ionatron following the Closing Date;
(n) Ionatron shall maintain its material assets or replacements
thereof in good operating condition and adequate repair, normal wear and tear
excepted;
(o) Ionatron shall not make or change any Tax election, amend any
Tax Return, or take or omit to take any other action not in the Ordinary Course
of Business that would have the effect of increasing any Taxes of Ionatron;
(p) Ionatron shall file all Tax Returns when due; and
(q) Ionatron shall preserve its business and assets and use its
best efforts to keep available its present employees and to preserve present
relationships with their customers, employees, and others having business
relations with it.
5.3 Conduct of USHG's Business Prior to Closing. Except as otherwise
contemplated by this Agreement, from the date hereof through the earlier of the
termination of this Agreement or the Effective Time, neither USHG nor any of its
Subsidiaries other than Golden West Agri-Products, Inc. shall conduct any
business. In addition, without limiting the generality of the foregoing, except
as contemplated by this Agreement or as consented to by Ionatron, during the
period set forth in the preceding sentence, USHG and its Subsidiaries shall act
as follows:
(a) neither USHG nor any of its Subsidiaries shall adopt any
change in any method of accounting or accounting practice, except as
contemplated or required by GAAP;
(b) neither USHG nor any of its Subsidiaries shall amend its
Certificate of Incorporation or Bylaws;
28
(c) subject to the fiduciary obligations of its board of
directors, neither USHG nor any of its Subsidiaries shall merge or consolidate
with, or agree to merge or consolidate with, or purchase or agree to purchase
all or substantially all of the assets of, or otherwise acquire, any other
business entity;
(d) except for up to 135,000 shares of USHG Common Stock issuable
to ▇▇▇▇▇ ▇▇▇▇▇▇ as ▇▇▇▇▇▇▇▇▇ compensation upon termination from USHG prior to
the Closing Date and except as otherwise set forth in this Agreement, neither
USHG nor any of its Subsidiaries shall authorize for issuance, issue, or sell
any additional shares of its capital stock or issue any securities or
obligations convertible or exchangeable into shares of its capital stock or
issue or grant any option, warrant, or other right to purchase any shares of its
capital stock;
(e) neither USHG nor any of its Subsidiaries shall incur, or agree
to incur, any debt for borrowed money;
(f) neither USHG nor any of its Subsidiaries shall declare, issue,
or otherwise approve the payment of dividends of any kind in respect of its
capital stock or redeem, purchase, or acquire any of its capital stock;
(g) USHG and its Subsidiaries shall not terminate the existing
director's and officer's insurance policy or any other insurance policy Ionatron
notifies USHG to maintain in effect;
(h) except in the Ordinary Course of Business of Golden West
Agri-Products, Inc. or except as otherwise contemplated by this Agreement,
neither USHG nor any of its Subsidiaries shall permit any increases in the
compensation of any of its employees except as required by law or existing
contract or agreement or enter into or amend any Welfare Plan, Pension Plan,
Benefit Plan or Benefit Arrangement;
(i) except as contemplated by this Agreement and in the Ordinary
Course of Business as regards only Golden West Agri-Products, Inc., neither USHG
nor any of its Subsidiaries shall enter into, amend, renew, extend or terminate,
or waive any Contract, or incur any obligation that will be binding on USHG or
any such Subsidiary;
(j) except as contemplated by this Agreement, neither USHG nor any
of its Subsidiaries shall enter into any transactions, including any with any
Affiliate that will be binding upon USHG or any of its Subsidiaries following
the Closing Date;
(k) USHG and its Subsidiaries shall maintain their respective
assets and records in good condition;
(l) neither USHG nor any of its Subsidiaries shall make or change
any Tax election, amend any Tax Return, or take or omit to take any other action
not in the Ordinary Course of Business that would have the effect of increasing
any Taxes of USHG or any of its Subsidiaries or which would prevent or impede
the merger from qualifying as a tax-free reorganization; and
29
(m) USHG and each of its Subsidiaries shall file all Tax Returns
when due to the extent such Tax Returns are due prior to the Closing Date.
5.4 Access to Information.
(a) From and after the date of this Agreement until the Closing
Date, Ionatron shall, subject to any limitations imposed by any Governmental
Authorization, Governmental Body, Government Contract or Government Bid (i) give
the USHG Parties and the USHG Parties' employees, accountants and counsel
(subject to agreements by such persons to use and treat Confidential Information
described in Subsection 5.4(c) subject to the restrictions set forth in
Subsection 5.4(c)), full and complete access upon reasonable notice during
normal business hours, to all officers, employees, offices, properties,
agreements, records and affairs of Ionatron to perform its due diligence review
of Ionatron; (ii) provide the USHG Parties with all financial information of
Ionatron that is distributed to the officers and directors of Ionatron,
including, but not limited to, the monthly internal financial statements
prepared by Ionatron promptly upon distribution of such information to the
officers and directors of Ionatron; and (iii) provide copies of such information
concerning Ionatron as the USHG Parties may reasonably request.
(b) From and after the date of this Agreement until the Closing
Date, USHG shall (i) give Ionatron, the Ionatron Stockholders and their
employees, accountants and counsel full and complete access upon reasonable
notice during normal business hours, to all officers, employees, offices,
properties, agreements, records and affairs of USHG and its Subsidiaries to
perform its due diligence review of USHG and its Subsidiaries; (ii) provide
Ionatron with all financial information of USHG and its Subsidiaries that is
distributed to the officers and directors of USHG, including, but not limited
to, the monthly internal financial statements prepared by USHG promptly upon
distribution of such information to the officers and directors of USHG; and
(iii) provide copies of such information concerning USHG and its Subsidiaries as
Ionatron may reasonably request.
(c) All confidential information of a party to which the other
party obtains pursuant to this Section 5.4 shall deemed "Confidential
Information" pursuant to that certain Mutual Confidentiality Agreement dated
February 13, 2004 by and between USHG and Ionatron (the "Confidentiality
Agreement").
5.5 Merger Consideration Adjustment. If as of the Closing Date it is
determined that USHG has cash less than $9.5 million, net of all outstanding
liabilities except the Permitted Liabilities and Obligations, the Merger
Consideration shall be adjusted so that the Ionatron Stockholders shall receive,
pro rata to the deficit, a greater percentage of the issued and outstanding
shares of USHG (on a fully diluted basis). Such percentage shall be determined
by subtracting from 100% the number that is determined by the following ratio:
$9.5 million over 35% equals the actual USHG cash at closing (as the numerator),
over "X" (as the denominator), where "X" shall be the aggregate percentage not
issued to the Ionatron Stockholders pursuant to Section 2.1(f).
5.6 Kassel Termination; Kassel Closing Shares.
30
(a) At the Effective Time, the Kassel Employment Agreement shall
be terminated and Kassel shall resign all of his positions as a director and
officer of USHG and all of its Subsidiaries. In lieu of and in satisfaction of
the substantial cash severance package payable to Kassel upon the early
termination of the Kassel Employment Agreement, Kassel hereby agrees to accept
(i) $500,000, payable in immediately available funds (the "Kassel Cash
Severance"), at the Effective Time, (ii) 750,000 shares of USHG Common Stock
(the "Kassel Closing Shares"), (iii) the cancellation and foregiveness of loans
to Kassel by USHG in the principal amount of $487,000, plus interest accrued
through the Closing Date.
(b) Commencing at the Effective Time, ▇▇▇▇▇▇ and/or his
assignee(s) shall have the right to purchase all, but not less than all, of the
Kassel Closing Shares for a period of six (6) months following the Effective
Time (the "▇▇▇▇▇▇ Option Period") at a purchase price of $500,000 (the "▇▇▇▇▇▇
Option"). If the ▇▇▇▇▇▇ Option is not exercised prior to the expiration of the
▇▇▇▇▇▇ Option Period, then, for a period of five business days following the
expiration of the ▇▇▇▇▇▇ Option Period, Kassel shall have the right to sell, and
▇▇▇▇▇▇ shall have the obligation to purchase or caused to be purchased, all, but
not less than all, of the Kassel Closing Shares at a purchase price of $500,000.
5.7 Resignation of Employees; Appointment of Directors and Officers. At
the Effective Time, USHG shall cause all of its employees and the employees of
its Subsidiaries other than Golden West Agri-Products, Inc., and the officers
and directors of USHG to resign so as to effectuate the election of ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
(collectively, the "New Board") to fill the vacancies resulting from such
resignations, to hold office in accordance with applicable law, the Certificate
of Incorporation and By-Laws of USHG until resignation, removal or replacement.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and such other officers as are designated by the New Board shall, at the
Effective Time, be duly nominated and appointed as Chairman of the Board and
Secretary; President, Chief Executive Officer, Chief Financial Officer,
Treasurer and Assistant Secretary; Vice President of Engineering; and Vice
President of Business Development, respectively, in each case to serve at the
pleasure of the New Board in accordance with applicable law, the Certificate of
Incorporation and By-Laws of USHG until resignation, removal or replacement.
Each resigning employee, officer and director shall execute a release of all
claims and future rights against USHG, except as relates to option or warrant
agreements which are intended to continue after the Closing and benefits
available under director and officer liability insurance.
5.8 USHG Derivative Securities. All issued and outstanding options,
warrants, or other rights, contracts or commitments to purchase or obtain
(including upon conversion, exchange, or exercise) any of USHG's capital stock
(collectively, "Derivative Securities") shall remain in full force and effect,
notwithstanding any provisions under the respective agreements or plan governing
such derivative securities which call for their termination upon termination of
any employee, officer or director relationship with USHG; provided however, that
prior to the Effective Time, with the exception of the warrants set forth on
Schedule 4.7, all of the agreements governing such USHG's Derivative Securities
will be amended to provide (i) they are fully vested, and (ii) that they will
expire on the fifth anniversary of the Effective Date and (iii) that they will
be exercisable on a "cashless basis."
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5.9 Sale of Golden West Agri-Products, Inc. The parties hereto shall
negotiate in good faith for the sale of all of the stock of Golden West
Agri-Products, Inc., a Subsidiary of USHG, to Kassel, for a purchase price
consistent with the Valuation Analysis (as hereinafter defined) (the "Golden
West Sale"). The Golden West Sale shall close simultaneously with the Closing
and the cash proceeds of such sale shall be included for the purposes of
calculating USHG's cash at Closing.
5.10 Partial Conversion and Repayment of ▇▇▇▇▇▇ Note. On or prior to
Closing (i) ▇▇▇▇▇▇ shall convert $2 million of the total amount owed to ▇▇▇▇▇▇
by Ionatron pursuant to that certain Convertible Promissory Note dated March 15,
2003, of Ionatron in favor of ▇▇▇▇▇▇ (the "▇▇▇▇▇▇ Note"), in the principal
amount of $5.1 million into Ionatron Common Stock (without increasing the Merger
Consideration) and (ii) Ionatron may repay $300,000 of the principal amount of
the ▇▇▇▇▇▇ Note.
5.11 Amendment to ▇▇▇▇▇▇ Note. On or prior to the Closing Date, the
▇▇▇▇▇▇ Note shall be amended to (i) remove its convertibility feature so that it
is no longer convertible into Ionatron Common Stock, (ii) restrict repayment as
provided in Section 5.12, (iii) reduce the revolving credit amount thereunder to
$3 million and (iv) provide that interest payable thereunder shall be made on a
quarterly basis.
5.12 Restrictions on Payments under ▇▇▇▇▇▇ Note. From and after the
Closing Date, no repayment of principal shall be made under the ▇▇▇▇▇▇ Note or
any other loan from ▇▇▇▇▇▇ to Ionatron or USHG if and to the extent and only for
so long as such payment would, in the judgment of the Board of Directors of USHG
(i) impair the ability of the Surviving Corporation or USHG to operate their
respective businesses, (ii) cause the Surviving Corporation or USHG to borrow
funds to be used for working capital or (iii) in the event USHG Common Stock is
trading on the Nasdaq National Market System or the NASDAQ SmallCap System, such
payment would cause, or be reasonably likely to cause, the USHG Common Stock to
no longer qualify for trading on such system or exchange or would otherwise
impair or adversely impact such listing.
5.13 Termination of all USHG Obligations and Release of all USHG
Liabilities. Prior to the Closing, USHG shall take all actions necessary to
terminate all of USHG's contractual obligations and to obtain the release of
USHG and all of its Subsidiaries other than Golden West Agri-Products, Inc. from
all their respective liabilities, with the exception of the Permitted
Liabilities and Obligations.
5.14 Indemnification and Insurance. Following the Closing Date, USHG
shall (i) indemnify the former members of its Board of Directors to the fullest
extent provided by USHG's Certificate of Incorporation, Bylaws and Section 145
of Delaware General Corporation Law, (ii) shall use its best efforts to list
such former directors as additionally insured parties on USHG's D&O insurance
policy and (iii) during all periods of time during which the Representatives (as
defined in Section 9.4) have obligations under this Agreement, use its best
efforts to name such Representatives as additional insured parties under USHG's
D&O insurance policy or any other insurance policy of USHG; provided, however,
USHG shall not be required to incur any additional expense with respect to
complying with items (ii) and (iii).
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5.15 Consummation of Transaction. Each of the parties hereto hereby
agrees to use its commercially reasonable efforts to cause all conditions
precedent to its obligations (and to the obligations of the other parties hereto
to consummate the transactions contemplated hereby) to be satisfied, including,
but not limited to, using all commercially reasonable efforts to obtain all
required (if so required by this Agreement) consents, waivers, amendments,
modifications, approvals, authorizations, novations and licenses; provided,
however, that nothing herein contained shall be deemed to modify any of the
absolute obligations imposed upon any of the parties hereto under this Agreement
or any agreement executed and delivered pursuant hereto.
5.16 Cooperation/Further Assurances.
(a) Each of the parties hereto hereby agrees to fully cooperate
with the other parties hereto in preparing and filing any notices, applications,
reports and other instruments and documents which are required by, or which are
desirable in the reasonable opinion of any of the parties hereto, or their
respective legal counsel, in respect of, any Legal Requirement in connection
with the transactions contemplated by this Agreement.
(b) Each of the parties hereto hereby further agrees to execute,
acknowledge, deliver, file and/or record, or cause such other parties to the
extent permitted by law to execute, acknowledge, deliver, file and/or record
such other documents as may be required by this Agreement and such parties, or
their respective legal counsel may reasonably require in order to document and
carry out the transactions contemplated by this Agreement.
5.17 Notice of Developments. Each of the parties hereto shall give prompt
written notice to the other Parties of any material adverse development causing
a breach of any of its own representations and warranties in Section 3, and
Section 4 above. No disclosure by any Party pursuant to this Section 5.17,
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant.
5.18 Shareholder Questionnaires; Schedule 14f-1 Filing. USHG has caused
to be filed a Schedule 14f-1 with respect to the Ionatron Stockholders pursuant
to Rule 14f-1 of the Exchange Act (the "Schedule 14f-1 Filing"). Each Ionatron
Stockholder has provided USHG with a completed Shareholder Questionnaire, in a
form reasonably acceptable to USHG, providing the information necessary to
complete the Schedule 14f-1 Filing.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE PARTIES
6.1 Conditions to Obligations of the USHG Parties. All obligations of
the USHG Parties to consummate the Merger and the other transactions
contemplated by this Agreement are subject, at the USHG Parties' option, to the
fulfillment or waiver prior to or at the Closing Date of each of the following
conditions:
(a) Representations and Warranties. All representations and
warranties of Ionatron contained in this Agreement shall be true and complete at
and as of the Closing Date as
33
though made at and as of that time (except for representations and warranties
that speak as of a specific date or time which need only be true and complete as
of such date or time).
(b) Covenants and Conditions. Ionatron and the Ionatron
Stockholders shall have performed and complied with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by
them prior to or on the Closing Date.
(c) No Litigation. No action, suit or proceeding against Ionatron
relating to the consummation of any of the transactions contemplated by this
Agreement or any governmental action seeking to delay or enjoin any such
transactions shall be pending or threatened.
(d) Cancellation of Kassel Indebtedness to USHG. As a result of
Kassel's agreement to substantially reduce the compensation payable to him upon
the early termination of the Kassel Employment Agreement and subject to all
applicable legal requirements, prior to the Closing, USHG shall have canceled
and forgiven the loans to Kassel in the aggregate principal amount of $487,000,
plus interest accrued through the Closing Date.
(e) Fairness Opinion; Valuation. USHG shall have received (i) an
opinion of ▇▇▇▇ Capital Partners, LLC to the effect that, as of the date of such
opinion, the issuance of the Merger Consideration is fair to USHG and its
stockholders from a financial point of view, a copy of which opinion shall have
been delivered to Ionatron, and (ii) a valuation analysis of Golden West
Agri-Products, Inc. by ISI Capital Capital Partners, LLC, a copy of which shall
have been delivered to Ionatron (the "Valuation Analysis").
(f) Ionatron Employee Stock Options, Warrants and Other Rights.The
stock option plans of Ionatron, if any, shall have been terminated. Any warrant
and every other call, subscription or right to acquire Ionatron Common Stock or
other securities of Ionatron shall have been cancelled and extinguished.
(g) Golden West Sale. The Golden West Sale shall have been
consummated.
(h) Consents and Approvals. All required consents and approvals
hereunder shall have been received and the transactions contemplated by this
Agreement shall have been approved unanimously by the Ionatron Stockholders.
(i) Due Diligence Review. USHG shall be satisfied with its due
diligence review of Ionatron as conducted in accordance with the provisions of
Section 5.4.
(j) Financial Statements. Ionatron shall have delivered to the
USHG Parties its Audited Financial Statements for the fiscal year ended December
31, 2003.
(k) Schedule 14f-1 Filing. USHG shall have filed and mailed to
USHG Stockholders the Schedule 14f-1 Filing with the SEC not less than ten days
prior to the Closing.
(l) Opinion of Counsel. Receipt of an opinion dated the Closing
Date from ▇▇▇▇▇▇▇▇ Labaton Rudoff & Sucharow LLP in a form acceptable to USHG
and USHG's counsel.
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6.2 Conditions to Obligations of Ionatron. All obligations of Ionatron
to consummate the Merger and the other transactions contemplated by this
Agreement, are subject, at Ionatron's option, to the fulfillment or waiver prior
to or at the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of the USHG Parties contained in this Agreement shall be true and
complete in all material respects at and as of the Closing Date as though made
at and as of that time (except for representations and warranties that speak as
of a specific date or time which need only be true and complete as of such date
or time).
(b) Covenants and Conditions. The USHG Parties shall have performed
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(c) No Litigation. No action, suit or proceeding against any of
the USHG Parties relating to the consummation of any of the transactions
contemplated by this Agreement or any governmental action seeking to delay or
enjoin any such transactions shall be pending or threatened.
(d) Assumption of Obligations by Kassel. Prior to the Closing,
Kassel shall have assumed (i) his current car lease agreement, and (ii) the
Lease for USHG's telephone system (the "Telephone Lease"). Kassel shall not have
any personal liability with respect to any liabilities or obligations of the
USHG Parties with the exception of the liabilities assumed pursuant to this
Section 6.2(d).
(e) Satisfaction of Other Liabilities. USHG shall have terminated
all of its contractual obligations and shall have obtained the release of USHG
and all of its Subsidiaries other than Golden West Agri-Products, Inc. from all
of their respective liabilities, with the exception of the Permitted Liabilities
and Obligations.
(f) Consents and Approvals. Any required consents and approvals
hereunder shall have been received, and the transactions contemplated by this
Agreement shall have been approved unanimously by the Ionatron Stockholders.
(g) Due Diligence Review. Ionatron shall be satisfied with its due
diligence review of USHG as conducted in accordance with the provisions of
Section 5.4.
(h) Opinions of Counsel. Receipt of an opinion dated the Closing
Date from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Finger, which shall opine that USHG has no
obligations under the First Trust Agreement and no further obligations under the
Second Trust Agreement and an opinion of Blank Rome LLP dated the Closing Date,
which shall opine (i) that USHG shall have no obligations under the Indentures
and Guarantees, (ii) that the Merger shall qualify as a tax-free reorganization
under the Code, and (iii) such other corporate opinions in a form acceptable to
Ionatron and Ionatron's counsel.
(i) Cancellations. The cancellations of Indebtedness and the
Golden West Sale referred to in Subsections 6.1(d) and 6.1(f).
35
(j) Termination of Kassel and any other Employment Agreement. The
Kassel Employment Agreement and any other employment agreement to which USHG or
any of its Subsidiaries other than Golden West Agri-Products, Inc. is a party
shall have been terminated.
(k) Resignation of Employees. All current officers, directors and
employees of USHG and its subsidiaries, other than Golden West Agri-Products,
Inc., shall resign and release USHG from all claims and liabilities except under
stock option or warrant agreements intended to continue as provided herein.
(l) Schedule 14f-1 Filing. USHG shall have filed and mailed to
USHG Stockholders the Schedule 14F-1 Filing with the SEC not less than 10 days
prior to the Closing.
(m) Due Diligence Review. Ionatron and the Ionatron Stockholders
shall be satisfied with their due diligence review of the USHG Parties.
SECTION 7
CLOSING DELIVERIES
7.1 Deliveries by Ionatron. On the Closing Date, Ionatron shall deliver
to the USHG Parties the following, in form and substance reasonably satisfactory
to the USHG Parties and their counsel:
(a) Certificate of Merger. The Certificate of Merger in the form
attached hereto as Exhibit A dated the Closing Date and duly executed by the
appropriate officers of Ionatron;
(b) Certificate. A certificate, dated as of the Closing Date,
executed by an appropriate officer of Ionatron, certifying to USHG: (i) that the
representations and warranties of Ionatron contained in this Agreement are true
and complete in all material respects as of the Closing Date as though made on
and as of that date (except for representations and warranties that speak as of
a specific date or time, which need only be true and complete as of such date or
time) and (ii) that Ionatron has in all material respects performed and complied
with all of their respective obligations, covenants and agreements in this
Agreement to be performed and complied with on or prior to the Closing Date;
(c) Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by Ionatron's Secretary (i) certifying that the
resolutions, as attached to such certificate, were duly adopted by each of
Ionatron's Board of Directors and Stockholders, authorizing and approving the
execution of this Agreement and the consummation of the transaction contemplated
hereby and that such resolutions remain in full force and effect, and (ii)
providing, as attachments thereto, Ionatron's Certificate of Incorporation and
Bylaws, with all amendments;
(d) Good Standing Certificates. Certificates as to the good
standing of Ionatron issued by the Delaware Secretary of State to be dated not
more than a reasonable number of days prior to the Closing Date;
(e) Stockholders' Certificates. Certificates representing all of
the outstanding shares of Ionatron Common Stock held by the Ionatron
Stockholders as of the
36
Closing Date, accompanied by all documents required to effect the surrender of
such certificates and evidence that any applicable stock transfer taxes have
been paid;
(f) ▇▇▇▇▇▇ Note Amendment. The amended ▇▇▇▇▇▇ Note, duly executed
by Ionatron and ▇▇▇▇▇▇ and;
(g) Other Documents. Such other documents as are listed in this
Agreement or as are reasonably requested by the USHG Parties or their counsel
for complete implementation of this Agreement and consummation of the
transaction contemplated hereby.
7.2 Deliveries by the USHG Parties. Prior to or on the Closing Date, the
USHG Parties shall deliver the following, in form and substance reasonably
satisfactory to Ionatron and its counsel:
(a) Delivery of Merger Consideration. Stock certificate(s)
representing the shares of USHG Common Stock constituting Merger Consideration
in the amounts contemplated by this Agreement or an instruction letter from USHG
to its transfer agent directing it to issue such certificate(s);
(b) Certificate of Merger. The Certificate of Merger duly executed
by the appropriate officers of Merger Sub;
(c) Officer's Certificate. A certificate, dated as of the Closing
Date, executed on behalf of an officer of each of the USHG Parties, certifying
(i) that the representations and warranties of each of the USHG Parties
contained in this Agreement are true and complete in all material respects as of
the Closing Date as though made on and as of that date, and (ii) that each of
the USHG Parties have in all material respects performed and complied with all
of its obligations, covenants and agreements in this Agreement to be performed
and complied with on or prior to the Closing Date;
(d) Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by each of the USHG Parties' Secretary: (i) certifying
that the resolutions, as attached to such certificate, were duly adopted by each
of the USHG Parties' Board of Directors, authorizing and approving the execution
of this Agreement and the consummation of the transaction contemplated hereby
and that such resolutions remain in full force and effect; and (ii) providing,
as an attachment thereto, each of the USHG Parties' Certificates of
Incorporation and Bylaws;
(e) Good Standing Certificates. Certificates as to the good
standing of the USHG Parties issued by the Delaware Secretary of State to be
dated a date not more than a reasonable number of days prior to the Closing
Date;
(f) Kassel Severance. The Kassel Cash Severance and stock
certificates representing the Kassel Closing Shares;
(g) Kassel Investment Representation Letter. A letter from Kassel
to USHG in a form acceptable to USHG pursuant to which Kassel shall make certain
investment
37
representations regarding the issuance to Kassel of the Kassel Closing Shares
similar to those set forth in Section 3.26 hereof;
(h) Evidence of Kassel Note and Employment Agreement Cancellation.
Evidence of the cancellation of the loans to Kassel and the Kassel and any other
Employment Agreements;
(i) Officer, Director and Other Employee Resignations.
Resignations of all employees, directors and officers of USHG;
(j) Evidence of Assignment and Assumption. Evidence of the
assignment, assumption, release and indemnification by Kassel with respect to
his current car lease and the Telephone Lease, duly executed by USHG and Kassel;
and
(k) Other Documents. Such other documents listed in this Agreement
or as are reasonably requested by Ionatron or its counsel for complete
implementation of this Agreement and consummation of the transactions
contemplated hereby.
SECTION 8
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to Closing by the mutual consent of the parties.
8.2 Other Termination. This Agreement may be terminated by any party
hereto and the Merger abandoned if any other party hereto (the USHG Parties, on
the one hand, and Ionatron and the Ionatron Stockholders, on the other hand)
shall have failed to satisfy any of its respective conditions precedent under
Section 6 hereof (unless such failure results primarily from the terminating
party's breach of any representation, warranty or covenant contained in this
Agreement or under any other agreement contemplated hereunder) or the Closing
shall not have occurred on or before March 31, 2004.
8.3 Termination by USHG. The USHG Parties may terminate this Agreement
by giving written notice to Ionatron and the Ionatron Stockholders at any time
prior to the Closing in the event Ionatron or the Ionatron Stockholders have
breached any representation, warranty or covenant contained in this Agreement in
any material respect, the USHG Parties have notified Ionatron and the Ionatron
Stockholders of the breach and the breach has continued without cure for a
period of 10 days after the notice of breach.
8.4 Termination by Ionatron. Ionatron may terminate this Agreement by
giving written notice to USHG at any time prior to the Closing in the event the
USHG Parties have breached any representation, warranty or covenant contained in
this Agreement in any material respect, Ionatron has notified USHG of the breach
and the breach has continued without cure for a period of 10 days after the
notice of breach.
8.5 Payment of Fees and Expenses Upon Breach. In addition to all other
rights and remedies that the USHG Parties, on the one hand, and Ionatron and the
Ionatron Stockholders, on the other hand, may have, (i) if this Agreement is
terminated by the USHG Parties pursuant to
38
Section 8.3, Ionatron and the Ionatron Stockholders shall pay, jointly and
severally, the USHG Parties' expenses incurred in connection with the
authorization, preparation, execution and performance of this Agreement,
including all fees and expenses of counsel, accountants, agents and
representatives, and (ii) if this Agreement is terminated by the Ionatron and
the Ionatron Stockholders pursuant to Section 8.4, USHG shall pay Ionatron's and
the Ionatron Stockholders' expenses incurred in connection with the
authorization, preparation, execution and performance of this Agreement,
including all fees and expenses of counsel, accountants, agents and
representatives.
SECTION 9
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
9.1 Survival. Each of the parties hereto hereby agrees that: (i) the
representations and warranties of Ionatron and the Ionatron Stockholders set
forth in Section 3.2 (Capitalization; Ownership of Common Stock), Section 3.12
(Tax Matters), Section 3.14 (Personnel and Employee Benefits), and Section 3.17
(Compliance with Legal Requirements) solely as the same relates to products
liability and except as set forth below, and the representations and warranties
of the USHG Parties set forth in Section 4.2 (Capitalization), Section 4.7(b)
(Assets and Liabilities), Section 4.8 (Tax Matters), Section 4.10 (Personnel and
Employee Benefits), and Section 4.13 (Compliance with Legal Requirements) solely
as same relates to product liability and except as set forth below, shall
survive Closing until the third anniversary of the Effective Time, (ii) the
representations and warranties of Ionatron and the Ionatron Shareholders set
forth in Section 3.3 (Authorization, Validity and Effect of Agreements), Section
3.16 (Environmental Compliance) and Section 3.17 (Compliance with Legal
Requirements), solely as they relate to Environmental Laws, and the
representations and warranties of the USHG Parties in Section 4.3
(Authorization, Validity and Effect of Agreements), Section 4.12 (Environmental
Compliance) and Section 4.13 (Compliance with Legal Requirements), solely as
they relate to Environmental Laws, shall survive the Closing indefinitely, and
(iii) all other representations and warranties of the parties hereto shall
survive the Closing until March 31, 2006. All covenants and agreements of the
parties contained in or made pursuant to this Agreement or in any certificate
furnished pursuant hereto shall survive the Closing.
9.2 Indemnification.
(a) Indemnification by the Ionatron Stockholders.
The Ionatron Stockholders, jointly and severally, except
individually where a representation is made only by an individual Ionatron
Stockholder, hereby indemnify and agree to defend and hold harmless each of USHG
and Merger Sub from and against any and all losses, obligations, deficiencies,
liabilities, claims, damages, costs and expenses (including, without limitation,
the amount of any settlement entered into pursuant hereto, and all reasonable
legal and other expenses incurred in connection with the investigation,
prosecution or defense of any matter indemnified pursuant hereto) (collectively,
the "Losses") which either of them may sustain, suffer or incur and which arise
out of, are caused by, relate to, or result or occur from or in connection any
misrepresentation of a material fact contained in any representation of Ionatron
and/or the Ionatron Stockholders contained in, or the breach by Ionatron, or the
Ionatron Stockholders of any warranty or covenant made by any one or all of them
in this Agreement.
39
The foregoing indemnification shall also apply to direct claims by USHG and/or
Merger Sub against the Ionatron Stockholders.
Indemnification by the Ionatron Stockholders pursuant to this
Section 9.2(a) shall be paid, in lieu of cash, by an adjustment to the Merger
Consideration whereby the Ionatron Stockholders shall forfeit, return, assign
and transfer to USHG the appropriate number of shares of USHG Common Stock to
adjust the total number of shares of USHG Common Stock received by them
hereunder to the number of shares which would have been issued to them at the
Closing assuming (i) the value ascribed to USHG on a fully diluted basis for the
purposes of determining the exchange ratio remained the same at the Closing and
(ii) the value ascribed to Ionatron for the purposes of determining the exchange
ratio was the same at the Closing less the indemnifiable amount.
(b) Indemnification by USHG Parties. Each of USHG and Merger Sub,
jointly and severally, indemnifies and agrees to defend and hold harmless each
of the Ionatron Stockholders and Ionatron (before the Effective Date) from and
against any and all Losses, which it or he may sustain, suffer or incur and
which arise out of, are caused by, relate to, or result or occur from or in
connection with any misrepresentation of a material fact contained in any
representation of USHG and/or Merger Sub contained herein or in the Easy
Gardener Sale Agreement or the breach by USHG or Merger Sub of any warranty or
covenant made by either or both of them herein. The foregoing indemnification
shall also apply to direct claims by Ionatron or the Ionatron Stockholders
against USHG and/or Merger Sub.
Indemnification by the USHG Parties pursuant to this Section
9.2(b) shall be paid, in lieu of cash, by an adjustment to the Merger
Consideration whereby a number of shares of USHG Common Stock will be issued to
the Ionatron Stockholders to adjust the total number of shares received by them
to the number which would have been issued at the Closing, based upon the
outstanding number of shares as of the Closing Date on a fully diluted basis,
assuming that the value ascribed to Ionatron for purpose of determining the
exchange ratio at the Closing remained the same and that the value ascribed to
USHG was the amount of cash held at Closing less the indemnifiable amount, with
such adjustment not taking into effect any reduction to $9,500,000.
(c) Third Party Claims. If a claim by a third party is made
against any party or parties hereto and the party or parties against whom said
claim is made intends to seek indemnification with respect thereto under
Sections 9.2(a) or 9.2(b), the party or parties seeking such indemnification
shall promptly notify the indemnifying party or parties, in writing, of such
claim; provided, however, that the failure to give such notice shall not affect
the rights of the indemnified party or parties hereunder except to the extent
that such failure materially and adversely affects the indemnifying party or
parties due to the inability to timely defend such action. The indemnifying
party or parties shall have ten (10) business days after said notice is given to
elect, by written notice given to the indemnified party or parties, to
undertake, conduct and control, through counsel of their own choosing (subject
to the consent of the indemnified party or parties, such consent not to be
unreasonably withheld) and at their sole risk and expense, the good faith
settlement or defense of such claim, and the indemnified party or parties shall
cooperate with the indemnifying parties in connection therewith; provided: (a)
all settlements require the prior reasonable consultation with the indemnified
party and the prior written consent
40
of the indemnified party, which consent shall not be unreasonably withheld, and
(b) the indemnified party or parties shall be entitled to participate in such
settlement or defense through counsel chosen by the indemnified party or
parties, provided that the fees and expenses of such counsel shall be borne by
the indemnified party or parties. So long as the indemnifying party or parties
are contesting any such claim in good faith, the indemnified party or parties
shall not pay or settle any such claim; provided, however, that notwithstanding
the foregoing, the indemnified party or parties shall have the right to pay or
settle any such claim at any time, provided that in such event they shall waive
any right of indemnification therefor by the indemnifying party or parties. If
the indemnifying party or parties do not make a timely election to undertake the
good faith defense or settlement of the claim as aforesaid, or if the
indemnifying parties fail to proceed with the good faith defense or settlement
of the matter after making such election, then, in either such event, the
indemnified party or parties shall have the right to contest, settle or
compromise (provided that all settlements or compromises require the prior
reasonable consultation with the indemnifying party and the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld) the claim at their exclusive discretion, at the risk and expense of
the indemnifying parties.
(d) Assistance. Regardless of which party is controlling the defense
of any claim, each party shall act in good faith and shall provide reasonable
documents and cooperation to the party handling the defense.
9.3 Limitations on Indemnification.
(a) Notwithstanding anything contained in this Agreement to the
contrary, no party shall be obligated to indemnify any other party unless and
until Losses equal or exceed $100,000, in which the indemnified party shall be
entitled to indemnification against the full amount of all damages that have
been incurred or suffered in connection with the transactions contemplated by
this Agreement (and not merely the portion of the damages exceeding $100,000);
provided, however, that this Section 9.3 shall not apply with respect to claims
based upon any Losses arising out of or relating to any and all Taxes which
should have properly been reflected in the individual Tax Returns of the
indemnifying party.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the liability for indemnity under this Section 9.3 shall be limited to
an amount equal to the value of the Merger Consideration on the Closing Date.
(c) With respect to any Indemnification Matter under Section 9 the
indemnifying party shall have no liability unless the party being indemnified
gives notice of demand for indemnity with respect thereto on or before the date
that is fifteen (15) days following the expiration of the applicable
representation survival period pursuant to Section 9.1.
9.4 Indemnification Representatives.
(a) Appointment of Representatives. The USHG Parties hereby
irrevocably appoint Kassel and ▇▇▇▇ ▇▇▇▇▇▇ as their respective agents (the
"Representatives") for the sole purpose of (i) giving and receiving any and all
notices under this Section 9 and (ii) making any and all claims for
indemnification and taking any and all actions under this Section 9
41
which are applicable to the USHG Parties under this Agreement or any document
contemplated hereby to assert and resolve the indemnification obligations of
Ionatron and the Ionatron Stockholders or to defend and resolve any direct or
third party claims for which Ionatron or the Ionatron Stockholders may seek
indemnification against the USHG Parties.
(b) Information Provided to Representatives. In addition to all
USHG SEC Reports filed with the SEC subsequent to the Closing Date, the New
Board shall cause to be delivered to each Representative in a timely manner, all
information it believes in good faith is necessary for such Representative to
determine whether there is a breach of any representation, warranty or covenant
by Ionatron or the Ionatron Shareholders under this Agreement which would be the
basis for any claim or potential claim available to the USHG Parties pursuant to
Section 9.2(a). USHG shall bear all costs of preparing and providing these
reports.
(c) Indemnification of Representatives. The USHG Parties agree,
jointly and severally, to hold the Representatives harmless and to indemnify the
Representatives against any loss, liability, expense (including reasonable
attorneys' fees and expenses), claim, or demand arising out of or in connection
with the performance of their obligations in accordance with the provisions of
this Agreement, except for gross negligence or willful misconduct of the
Representatives or any action taken by such Representative in bad faith,
including but not limited to all expenses incurred by the Representatives
arising in connection with the enforcement or defense of any indemnification to
or from the USHG Parties pursuant to this Agreement. The foregoing indemnities
shall survive the resignation or incapacity of a Representative or the
termination of such Representative's obligations hereunder. The costs and
expenses of enforcing this right of indemnification shall be paid by USHG.
(d) Specific Duties; No Liability. The Representatives' duties are
only such as are specifically provided herein and, except as specifically
provided herein, the Representatives are not charged with any duties or
responsibilities in connection with any other agreement as a consequence of
their activity as Representatives under this Section 9), and the Representatives
shall incur no liability whatsoever to the USHG Parties, except for gross
negligence, willful misconduct or any action taken by such Representative in bad
faith. The Representatives may consult with counsel and shall be fully protected
in any action taken in good faith in accordance with such advice.
(e) Resignation; New Representatives. A Representative may resign
at any time by giving written notice thereof to the other parties hereto, but
such resignation shall not become effective until a successor Representative is
approved by USHG. In the event both Representatives resign, die or become
incapacitated, the Board of Directors of USHG shall appoint a new Representative
who shall be independent and not an affiliate of USHG, and who shall not be a
member of USHG's board of directors.
(f) Termination. The rights and obligations of the Representatives
shall terminate upon the expiration of the indemnification obligations set forth
in Section 9 of this Agreement and resolution to any matters pending thereunder.
9.5 Dispute Resolution. In the event of any dispute, claim or
controversy concerning, arising out of or relating to this Agreement, its
effect, the breach thereof, or the
42
transactions contemplated by hereby, the parties shall mutually appoint a
Mediator and first attempt to resolve the dispute through non-binding mediation.
If the parties are unsuccessful in resolving the dispute through mediation, the
same shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA Rules"). The
arbitration shall be before one neutral arbitrator to be selected in accordance
with the AAA Rules and whose decision shall be rendered in writing. The results
of the arbitration shall be final and binding upon the parties, with costs paid
by the party who does not prevail in the arbitration, and judgment on the award
may be entered in any court having jurisdiction thereof. In rendering the award,
the arbitrator shall determine the rights and obligations of the parties
according to the substantive and procedural laws of the State of Delaware. The
arbitration shall be held in the City of New York, or at such other place as may
be selected by mutual agreement of the parties. The arbitrator shall have no
authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Neither a party hereto nor the arbitrator may disclose the existence,
content, or results of any arbitration hereunder without the prior written
consent of all of the parties, unless required to do so by order of a
Governmental Body, or as required by any party's auditors in connection with the
preparation of audited financial statements, or as required by the disclosure
requirements of any U.S. or foreign securities law, regulation or stock exchange
rule, or if a petition to enforce arbitration is necessary to be filed with a
court of competent jurisdiction.
SECTION 10
MISCELLANEOUS
10.1 Fees and Expenses. In the event the transaction contemplated by this
Agreement is consummated in accordance with the terms herein, the Surviving
Corporation shall bear all costs and expenses of all of the parties hereto. In
the event such transaction is not consummated, USHG and Kassel, on the one hand,
and Ionatron and the Ionatron Stockholders, on the other hand, shall pay their
own expenses incurred in connection with the authorization, preparation,
execution and performance of this Agreement, including all fees and expenses of
counsel, accountants, agents and representatives, and each party shall be
responsible for all fees or commission payable to any finder, broker, advisor,
or similar Person retained by or on behalf of such party. The provisions of this
Section 10.1 shall survive the termination of this Agreement.
10.2 Notices. All notices, requests, consents, payments, demands, and
other communications required or contemplated under this Agreement shall be in
writing and (a) personally delivered or sent via telecopy (receipt confirmed and
followed promptly by delivery of the original), or (b) sent by Federal Express
or other reputable overnight delivery service (for next business day delivery),
shipping prepaid, as follows:
If to the USHG Parties or Representatives to:
U.S. Home & Garden Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
43
▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Blank Rome LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Ionatron or the Ionatron Stockholders:
Ionatron Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ Labaton Rudoff & Sucharow LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
10.3 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
executors personal and legal representatives.
44
10.4 Further Assurances. The parties shall take any actions and execute
any other documents that may be necessary or desirable (before or after the
Closing) to the implementation and consummation of this Agreement.
10.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
10.6 Entire Agreement. The Confidentiality Agreement, this Agreement and
the Exhibits and the Schedules hereto, each of which Exhibits and Schedules are
hereby incorporated herein by reference, and all documents, certificates and
other documents to be delivered by the parties pursuant hereto, collectively,
represent the entire understanding and agreement between the USHG Parties,
Ionatron and the Ionatron Stockholders with respect to the subject matter of
this Agreement. Except for the aforementioned confidentiality agreement, this
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented, or changed except by an agreement in writing duly
executed by each of the parties hereto. There are no representations or
warranties by any party except as expressly set forth herein.
10.7 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 10.7.
10.8 Headings. The headings of the Sections and subsections contained in
this Agreement are inserted for convenience only and do not form a part or
affect the meaning, construction or scope thereof.
10.9 Counterparts. This Agreement may be signed in two or more
counterparts with the same effect as if the signature on each counterpart were
upon the same instrument.
10.10 Cooperation. The parties hereto shall reasonably cooperate with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and in connection with any litigation after the implementation and
consummation of this Agreement, and otherwise use their commercially reasonable
efforts to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement, including, without limitation, the obligation
of USHG after the Closing Date to take all such action as may be necessary to
have available sufficient authorized capital stock to satisfy its indemnity
obligations hereunder.
10.11 Public Announcements. The parties hereto shall consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this
45
Agreement or the transactions contemplated herein and shall not issue any such
press release or make any such public statement without the prior written
consent of the other party, which shall not be unreasonably withheld; provided,
however, that a party may, without the prior written consent of the other party,
issue such press release or make such public statement as may be required by law
or any listing agreement with the securities exchange to which the USHG Parties
are a party if it has used all reasonable efforts to consult with the other
party and to obtain such party's consent but has been unable to do so in a
timely manner. This provision of this Section 10.11 shall survive the
termination of this Agreement.
[The remainder of this page has been intentionally left blank.]
46
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of Ionatron and the USHG Parties as of the date first
written above.
The USHG Parties:
U.S. Home & Garden Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
Ionatron Acquisition Corp.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Representatives, for purposes of Section
9.4 only:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, individually for the
purposes of Section 5.9, 6.2(d), 6.2(j),
9.4 and 10.10 only
47
Ionatron:
Ionatron Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
Ionatron Stockholders:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
48
Annex 1
CERTAIN DEFINITIONS
The following terms, as used in this Agreement, have the meanings set
forth in this Annex 1 (terms defined in the singular to have the correlative
meaning in the plural and vice versa):
"Affiliate" means, with respect to any Person, (a) any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person, or (b) an officer or
director of such Person or of an Affiliate of such Person within the meaning of
clause (a) of this definition. For purposes of clause (a) of this definition,
(i) a Person shall be deemed to control another Person if such Person (A) has
sufficient power to enable such Person to elect a majority of the board of
directors of such Person, or (B) owns a majority of the beneficial interests in
income and capital of such Person; and (ii) a Person shall be deemed to control
any partnership of which such Person is a general partner.
"Closing" means the closing of the transactions contemplated by this
Agreement on the Closing Date.
"Closing Date" means the date on which the Closing occurs, as determined
pursuant to Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contaminant" shall mean and include any pollutant, contaminant, hazardous
material (as defined in any of the Environmental Laws), toxic substances (as
defined in any of the Environmental Laws), asbestos or asbestos-containing
material, urea formaldehyde, polychlorinated biphenyls, regulated substances and
wastes, radioactive materials, and petroleum or petroleum by-products, including
crude oil or any fraction thereof.
"Contracts" means all contracts, consulting agreements, leases,
non-governmental licenses and other agreements (including leases for personal or
real property and employment agreements), written or oral (including any
amendments and other modifications thereto) that relate to or affect a party's
assets, properties, or its business or operations, the performance of which
involves annual consideration in excess of $50,000 and that either (a) are in
effect on the date of this Agreement, or (b) are entered into by any party
hereto between the date of this Agreement and the Closing Date.
"Environmental Laws" shall mean and include, but not be limited to, any
applicable federal, state or local law, statute, charter, ordinance, rule or
regulation or any Governmental Body interpretation, policy or guidance,
including, without limitation, applicable safety/environmental/health laws, such
as, but not limited to, the Resource Conservation and Recovery Act of 1976,
Comprehensive Environmental Response Compensation and Liability Act, Federal
Emergency Planning and Community Right-to-Know Law, the Clean Air Act, the Clean
Water Act, and the Toxic Substance Control Act, as any of the foregoing have
been amended, and any Governmental Authorization or Order applicable to or
affecting any property
(real or personal) used by or relating to a party or issued pursuant to any
Environmental Laws which pertains to, governs, or controls the generation,
storage, remediation or removal of Contaminants or otherwise regulates the
protection of health and the environment, including, but not limited to, any of
the following activities, whether on site or off site if such could materially
affect the site: (i) the emission, discharge, release, spilling or dumping of
any Contaminant into the air, surface water, ground water, soil or substrata; or
(ii) the use, generation, processing, sale, recycling, treatment, handling,
storage, disposal, transportation, labeling or any other management of any
Contaminant.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Executive Options" shall have the meaning ascribed to such term in
Section 5.9 hereof.
"GAAP" means generally accepted United States accounting principles,
applied on a consistent basis.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" means any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body;
(e) self-regulatory organization (including, with limitation, NASD);
or
(f) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, domain names, licenses, patents, and any applications
therefore, permits, proprietary information, technical information and data,
databases, machinery and equipment, hardware, software and information systems,
warranties, and other intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by
Ionatron or under which Ionatron is licensed or franchised and that are used in
its business and operations, together with any additions thereto between the
date of this Agreement and the Closing Date.
"Ionatron Stockholders" shall have the meaning ascribed to such term in
the preamble.
2
"Knowledge" means (i) with respect to the Ionatron Stockholders, their
actual Knowledge and (ii) with respect to the Ionatron and USHG Parties, the
actual knowledge of such party's officers and directors, provided that such
persons shall have made due and diligent inquiry of those employees of such
party who such officers and directors reasonably believe would have actual
knowledge of the matters represented.
"Leased Real Property" means all real property and all buildings and other
improvements thereon and appurtenant thereto leased or held by either USHG or
Ionatron, as the case may be.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, self regulatory organization or court or other
administrative order, constitution, law, ordinance, principle of common law,
rule, regulation, statute, treaty, by-law, or the like.
"Losses" means any loss, liability, damage, cost, or expense, including,
without limitation, reasonable attorneys' fees and expenses.
"Material Adverse Effect" shall mean a material adverse effect on the
business, prospects, operations, properties, financial condition, assets,
liabilities or results of operations of the Person referred to, taken as a
whole, or the ability of such Person to consummate the transactions contemplated
by this Agreement.
"Order" means any award, decision, injunction, judgment, decree, order,
ruling, writ, determination, subpoena, or verdict entered, issued, made, or
rendered by any court, administrative agency, or other Governmental Body or by
any arbitrator.
"Ordinary Course of Business" an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Permitted Encumbrances" means (a) encumbrances of a landlord, or other
statutory lien not yet due and payable, or landlord's liens arising in the
Ordinary Course of Business, (b) encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of the Contracts
set forth on the Schedules, which Contracts have been made available to the USHG
Parties, (c) encumbrances for Taxes not yet delinquent or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on books of the contesting party in accordance
with generally accepted accounting principles, (d) encumbrances that do not
materially detract from the value of any of
3
material assets of Ionatron or materially interfere with the use thereof as
currently used or (e) encumbrances arising in connection with the ▇▇▇▇▇▇ Note or
any other loan from ▇▇▇▇▇▇ to Ionatron.
"Person" means an individual, corporation, association, partnership, joint
venture, trust, estate, limited liability company, limited liability
partnership, organization or other entity or Governmental Body.
"Real Property Interests" means all interests in Leased Real Property,
including fee estates, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, and rights of way, and all buildings and
other improvements thereon and appurtenant thereto, owned or held by Ionatron
that are used in the business or operations of Ionatron, together with any
additions, substitutions and replacements thereof and thereto between the date
of this Agreement and the Closing Date.
"Related Person" means with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity); and
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the
4
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"Reportable Transaction" shall mean any transaction listed in Treasury
Regulation Section 1.6011-4(b).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" or "Subsidiaries" means, with respect to any party, any
corporation, limited liability company, partnership, trust, limited partnership,
joint venture, or other business association or entity, twenty percent (20%) or
more of the voting securities or economic interests of which is or was directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts and other tangible personal property owned or held by Ionatron that
is used or useful in the conduct of the business or operations of Ionatron,
together with any additions, substitutions and replacements thereof and thereto
between the date of this Agreement and the Closing Date.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding, or other
tax or similar governmental assessment, together with any interest, additions,
or penalties with respect thereto and any interest in respect of such additions
or penalties.
"Tax Proceeding" means any audit, examination, claim, or other
administrative or judicial proceeding involving Taxes.
"Tax Return" shall mean all returns and reports, amended returns,
information returns, statements, declarations, estimates, schedules, notices,
notifications, forms, elections, certificates or other documents required to be
filed or submitted to any Governmental Body with respect to the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of, or compliance with, any Tax.
"Taxing Authority" shall mean any Governmental Body exercising tax
regulatory authority.
"Trust Preferred Documents" means the Amended and Restated Trust
Agreement, dated as of April 17 1998, among the USHG, as Depositor, Wilmington
Trust Company ("Wilmington Trust"), as Property Trustee and Delaware Trustee,
and the Administrative Trustees named therein (the "First Trust Agreement"); the
Second Amended and Restated Trust Agreement, dated as of October 29, 2003, among
the USHG, as Depositor, Wilmington
5
Trust, as Property Trustee and Delaware Trustee, and the Administrative Trustees
named therein (the "Second Trust Agreement"); the Junior Subordinated Indenture,
dated as of April 17, 1998, between the USHG and Wilmington Trust, as trustee
(the "First Indenture"); the Amended and Restated Junior Subordinated Indenture,
dated as of October 29, 2003, between the USHG and Wilmington Trust, as trustee
(together with the First Indenture, the "Indentures"); the Guarantee Agreement,
dated as of April 17, 1998, between the USHG and the Wilmington Trust, as
trustee (the "First Guarantee"); and the Amended and Restated Guarantee
Agreement, dated as of October 29, 2003, between the USHG and the Wilmington
Trust, as trustee (together with the First Guarantee, the "Guarantees").
6
Pursuant to Item 601(b)(2) of Regulation S-K, the following is a list of omitted
schedules to the Amended and Restated Plan and Agreement of Merger. USHG agrees
to provide complete copies of the foregoing schedules upon request.
Ionatron Schedules
Schedule 2.1(f) USHG Common Stock to be Issued at Closing
Schedule 3.2 Capitalization, Ownership of Common Stock
Schedule 3.4 Books and Records
Schedule 3.6 Governmental Authorizations
Schedule 3.7 Real Property
Schedule 3.8 Tangible Personal Property
Schedule 3.9(a) Contracts in Excess of $50,000
Schedule 3.9(b) Matters Relating to Government Contracts and Government
Bids
Schedule 3.10 Material Intangibles
Schedule 3.11 Financial Statements
Schedule 3.12 Tax Matters
Schedule 3.13 Insurance
Schedule 3.14 Personnel and Employee Benefits
Schedule 3.14(g) Labor Relations
Schedule 3.15(a) Material Legal Actions and Orders
Schedule 3.16 Environmental Compliance
Schedule 3.17 Compliance with Legal Requirements
Schedule 3.18 Conduct of Business in Ordinary Course
Schedule 3.20 Accounts Receivable
Schedule 3.21 Customers and Suppliers Accounting for More than $50,000
to Date
Schedule 3.22 Relationships with Related Persons
Schedule 3.23 Brokers or Finders
Schedule 3.25 Due Diligence
USHG Schedules
Schedule 4.2 Capitalization; Subsidiaries
Schedule 4.4 Books and Records
Schedule 4.7 USHG Assets and Liabilities
Schedule 4.8 Tax Matters
Schedule 4.9 List of Insurance Carriers
Schedule 4.10 Employees; Employee Benefits; Labor Relations
Schedule 4.11 Legal Actions and Orders
Schedule 4.12 Environmental Compliance
Schedule 4.13 Compliance with Legal Requirements
Schedule 4.15 Brokers or Finders
7
Exhibit A
CERTIFICATE OF MERGER
OF
IONATRON ACQUISITION CORP.
INTO
IONATRON, INC.
Pursuant to Section 251(c) of the General Corporation Law
Ionatron Acquisition Corp., a Delaware corporation, desiring to
merge with Ionatron, Inc., a Delaware corporation, pursuant to the provisions of
Section 251(c) of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
FIRST: The names and states of incorporation of each constituent
corporation are:
Name State of Incorporation
-------------------------- ----------------------
Ionatron Acquisition Corp. Delaware
Ionatron, Inc. Delaware
SECOND:An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each constituent corporation in
accordance with Section 251(c) of the General Corporation Law.
THIRD: The name of the surviving corporation is Ionatron, Inc.
FOURTH:The Certificate of Incorporation of Ionatron, Inc. shall be the
Certificate of Incorporation of the surviving corporation.
FIFTH: An executed copy of the Agreement and Plan of Merger is on file at
the principal place of business of the surviving corporation, c/o Ionatron,
Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and a
copy of the Agreement and Plan of Merger will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
IN WITNESS WHEREOF, Ionatron, Inc. has caused this Certificate to be
executed this 18th day of March, 2004.
IONATRON, INC.
By: ________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer