EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 5, 1997
AMONG
IDEAS FOR MEDICINE, INC.,
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ JUDGE,
▇▇▇▇▇ ▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D.,
AND ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
CRYOLIFE, INC.
AND
CRYOLIFE ACQUISITION CORPORATION
AGREEMENT AND PLAN OR MERGER
IDEAS FOR MEDICINE INC. AND CRYOLIFE, INC.
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF CONSTRUCTION................. 1
1.1. Defined Terms.............................................. 1
1.2. Principles of Construction................................. 5
ARTICLE 2 THE MERGER................................................. 6
2.1. The Merger................................................. 6
2.2. Effective Time............................................. 6
2.3. Effect of the Merger....................................... 6
2.4. Subsequent Actions......................................... 6
2.5. Certificate of Incorporation; By-Laws;
Directors and Officers..................................... 6
ARTICLE 3 MERGER CONSIDERATION....................................... 7
3.1. Merger Consideration....................................... 7
3.2. Distributions of Closing Consideration..................... 8
3.3. Closing.................................................... 8
3.4. Allocation................................................. 8
ARTICLE 4 ADDITIONAL COVENANTS....................................... 8
4.1. Consents................................................... 8
4.2. Consulting Agreement....................................... 8
4.3. Conduct of Business by IFM Pending Merger.................. 8
4.4. Expenses................................................... 10
4.5. Notification of Certain Matters............................ 10
4.6. Public Announcements....................................... 11
4.7. No Negotiations............................................ 11
4.8. Confidentiality............................................ 11
4.9. Termination of Stock Rights................................ 12
4.10. Disclosures Required by Law................................ 12
4.11. Facilities Agreements...................................... 12
4.12. CryoLife's Access and Inspection........................... 12
4.13. Non-Competition Agreements................................. 12
4.14. Short Term Tax Returns..................................... 12
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF IFM...................... 13
5.1. Organization and Authority of IFM.......................... 13
5.2. Corporate Power and Authority; Due Authorization........... 13
5.3. Sufficiency of Assets...................................... 14
5.4. No Conflict; Required Consents............................. 14
5.5. Capitalization............................................. 14
5.6. Compliance with Laws....................................... 14
5.7. Licenses and Permits....................................... 15
5.8. Financial Information...................................... 15
5.9. No Undisclosed Liabilities................................. 16
5.10. Absence of Certain Changes................................. 16
5.11. Taxes...................................................... 17
5.12. Title to Properties; Encumbrances.......................... 18
5.13. Vehicles; Fixed Assets..................................... 18
5.14. Inventory.................................................. 18
5.15. Trade Payables; Accrued Expenses........................... 18
5.16. Accounts Receivable........................................ 19
5.17. Contracts and Commitments.................................. 19
5.18. Leases..................................................... 19
5.19. Intellectual Property Rights; Employee Restrictions........ 19
5.20. Litigation................................................. 20
5.21. Employee Benefit Plans..................................... 21
5.22. Union; Labor............................................... 23
5.23. Immigration Matters........................................ 23
5.24. Hazardous Substance........................................ 24
5.25. Insurance.................................................. 25
5.26. Certain Other Contracts.................................... 25
5.27. Bank Accounts.............................................. 25
5.28. Advisors Fees.............................................. 25
5.29. Complete Documentation..................................... 25
5.30. Disclosure................................................. 26
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF CRYOLIFE AND
NEWCO...................................................... 26
6.1. Organization of CryoLife and Newco......................... 26
6.2. Corporate Power and Authority; Due Authorization........... 26
6.3. No Conflict; Consents...................................... 26
6.4. Brokers Fees and Expenses.................................. 27
6.5. Shares to be Delivered..................................... 27
6.6. Accuracy of Securities Filings............................. 27
6.7. Approvals.................................................. 27
6.8. Accuracy of Representations................................ 28
6.9. Access to Information...................................... 28
6.10. Disclosure................................................. 28
ARTICLE 7 INDEMNIFICATION............................................ 28
7.1. Indemnification by Stockholders............................ 28
7.2. Indemnification by CryoLife................................ 29
7.3. Provisions Regarding Indemnification....................... 29
7.4. Survival................................................... 29
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF CRYOLIFE AND NEWCO
TO CLOSE............................................................ 30
8.1. Representations and Warranties True at Closing............. 30
8.2. Obligations Performed...................................... 30
8.3. Consents................................................... 30
8.4. Closing Deliveries......................................... 30
8.5. No Challenge............................................... 31
8.6. No Investigations of IFM or Business....................... 31
8.7. No Material Adverse Effect................................. 31
8.8. Securities Laws............................................ 31
8.9. Approval................................................... 31
8.10. Revised Schedules.......................................... 31
8.11. Legality................................................... 32
8.12. Regulatory Matters......................................... 32
8.13. Repayment of Debts......................................... 32
8.14. Termination of Stock Rights................................ 32
8.15. Releases................................................... 32
8.16. Facilities................................................. 32
ARTICLE 9 CONDITIONS TO IFM'S AND STOCKHOLDERS' OBLIGATIONS.......... 32
9.1. Representations and Warranties True at Closing............. 32
9.2. Obligations Performed...................................... 33
9.3. Closing Deliveries......................................... 33
9.4. No Challenge............................................... 33
ARTICLE 10 PROVISIONS REGARDING THE DEBENTURE......................... 34
10.1. Representations by the Debenture Holder.................... 34
10.2. Covenants of the Debenture Holder.......................... 34
10.3. Legend, etc................................................ 34
10.4. Due Diligence.............................................. 34
10.5. Registration............................................... 34
10.6. Expenses of Offering....................................... 35
10.7. Registration Procedures and Expenses....................... 35
10.8. Limitation on Obligations to Register...................... 35
10.9. Indemnification............................................ 36
10.10. Investment Representations.................................. 37
10.11. Compliance with Securities Laws............................. 37
ARTICLE 11 TERMINATION................................................ 38
11.1. Termination................................................ 38
11.2. Effects of Termination..................................... 38
ARTICLE 12 MISCELLANEOUS PROVISIONS................................... 38
12.1. Risk of Loss............................................... 38
12.2. Severability............................................... 39
12.3. Modification............................................... 39
12.4. Assignment, Survival and Binding Agreement................. 39
12.5. Counterparts............................................... 39
12.6. Notices.................................................... 39
12.7. Entire Agreement; No Third Party Beneficiaries............. 40
12.8. Governing Law; Jurisdiction and Venue...................... 40
12.9. Mutual Contribution........................................ 40
12.10. Attorney's Fees.............................................. 40
12.11. Further Assurances........................................... 40
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 5, 1997 (the
"Agreement"), among IDEAS FOR MEDICINE, INC., an Florida corporation ("IFM"),
CRYOLIFE, INC., a Florida corporation ("CryoLife"), CRYOLIFE ACQUISITION
CORPORATION, a Florida corporation and a wholly-owned subsidiary of CryoLife
("Newco"), J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ JUDGE, ▇▇▇▇▇ ▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D., AND ▇▇▇▇▇▇▇
▇▇▇▇▇▇, residents of Florida and the stockholders of IFM (the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of IFM, CryoLife and Newco have each
determined that it is in the best interests of their respective stockholders for
IFM to be merged with and into Newco upon the terms and subject to the
conditions set forth herein, with the surviving corporation becoming a
wholly-owned subsidiary of CryoLife; and
WHEREAS, in furtherance of such acquisition, the Board of Directors and
stockholders of Newco, and the Board of Directors and stockholders of IFM have
each approved the merger (the "Merger") of IFM with and into Newco in accordance
with the Florida General Corporation Act ("Florida Act") and upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, IFM,
CryoLife, Newco and the Stockholders hereby agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1. DEFINED TERMS. As used in this Agreement:
"Accounts Receivable" shall have the meaning ascribed to it in Section 5.16
hereof.
"Additional Consideration" shall have the meaning ascribed to it in Section
3.1(b) hereof.
"Aggregate Closing Cash Consideration" shall have the meaning ascribed to
it in Section 3.1(a) hereof.
"Annual Limit" shall have the meaning ascribed to it in Section 10.5.
"Annual Net Revenues" shall mean the annual gross revenues of the Surviving
Corporation less returns and allowances. Gross revenues of the Surviving
Corporation shall include gross revenues from sales and licensing of any and all
products now or hereafter
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developed, manufactured or licensed by the Surviving Corporation or any
subsidiary of the Surviving Corporation whether marketed, sold or otherwise
handled for profit by the Surviving Corporation, CryoLife or any controlled
subsidiary of the Surviving Corporation or CryoLife. In the event any such
product is sold or licensed by more than one of the foregoing companies only the
gross revenues of the company receiving the largest revenue from such sale or
license shall be included in gross revenues of the Surviving Corporation.
"Assets" means all of IFM's assets, of every kind and nature.
"Closing" and "Closing Date" shall have the meaning ascribed to such terms
in Section 3.3 hereof.
"Closing Consideration" shall have the meaning ascribed to it in Section
3.1(a) hereof.
"Closing Documents" means this Agreement and all other documents to be
executed and delivered either simultaneously herewith or at Closing in
connection with the Transactions.
"Closing Trade Payables and Accrued Expenses List" shall have the meaning
ascribed to it in Section 5.15 hereof.
"COBRA" shall have the meaning ascribed to it in Section 5.21(c) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" shall have the meaning ascribed to it in Section 5.17 hereof.
"CryoLife Common Stock" shall mean shares of the Common Stock of CryoLife,
Inc., a Florida corporation, Corporate Number G79500, FEI# ▇▇-▇▇▇▇▇▇▇.
"Debenture" shall have the meaning ascribed to it in Section 3.1 hereof.
"Debenture Holder" shall mean J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D., and his
assigns.
"DOL" shall have the meaning ascribed to it in Section 5.21(b) hereof.
"Effective Time" shall have the meaning ascribed to it in Section 2.2
hereof.
"Employee Benefit Plan" shall have the meaning ascribed to it in Section
5.21(a) hereof.
"ERISA" shall have the meaning ascribed to it in Section 5.21(a) hereof.
"ERISA Affiliate" shall have the meaning ascribed to it in Section 5.21(c)
hereof.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and all regulations promulgated pursuant thereto.
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"FAMLA" shall have the meaning ascribed to it in Section 5.21(c) hereof.
"FDA" shall have the meaning ascribed to it in Section 11.1 hereof.
"Filing" shall have the meaning ascribed to it in Section 10.8(b) hereof.
"Florida Act" shall have the meaning ascribed to it in the preamble.
"Georgia Act" shall mean the Georgia Securities Act of 1973, as amended.
"Governmental Authority" shall include any and all governmental or
quasi-governmental bodies, agencies, bureaus, departments, boards, commissions,
instrumentalities or other entities having or asserting jurisdiction over
CryoLife, Newco or IFM, as applicable.
"Hazardous Substance" shall have the meaning ascribed to it in Section 5.24
hereof.
"Historical Balance Sheet" shall have the meaning ascribed to it in Section
5.8(a) hereof.
"Historical Financials" shall have the meaning ascribed to it in Section
5.8(a) hereof.
"Historical Income Statement" shall have the meaning ascribed to it in
Section 5.8(a) hereof.
"IFM Employee" shall have the meaning ascribed to it in Section 5.21(a)
hereof.
"Independent Consulting Agreement" shall have the meaning ascribed to it in
Section 4.2 hereof.
"Intellectual Property" shall have the meaning ascribed to it in Section
5.10(a) hereof.
"Interim Financials" shall have the meaning ascribed to it in Section
5.8(b) hereof.
"IRCA" shall have the meaning ascribed to it in Section 5.23 hereof.
"Inventory" shall have the meaning ascribed to it in Section 5.32 hereof.
"IRS" shall have the meaning ascribed to it in Section 5.21(b) hereof.
"Leased Property" shall have the meaning ascribed to it in Section 4.11.
"Limit Amount" shall have the meaning ascribed to it in Section 3.1(b).
"Material Adverse Effect" means any change in or effect on the business of
IFM that (a) is or will be materially adverse to the business, operations,
properties (including tangible properties), condition (financial or otherwise),
assets, liabilities or regulatory status of IFM by virtue of the fact that it
would have an adverse effect of in excess of $50,000 for a single
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incident or $200,000 in the aggregate, (b) would represent a potential liability
or claim in excess of $50,000 for a single incident or $200,000 in the
aggregate, (c) would constitute a criminal act, (d) would affect the legality,
validity, binding effect, or enforceability of this Agreement, or (e) would
prevent or impede the ability of IFM to perform its obligations under this
Agreement. For purposes of computing the aggregate adverse effect of an event
hereunder, all single incidents (including those of less than $50,000) shall be
included in determining the aggregate amount.
"Merger" shall have the meaning ascribed to it in the preamble.
"Merger Shares" shall mean shares of CryoLife Common Stock receivable by
the Stockholders upon conversion of the Debenture(s).
"Non-Competition Agreement" shall have the meaning ascribed to it in
Section 4.13 hereof.
"Participating Holder" shall have the meaning ascribed to it in Section
10.5.
"PBGC" shall have the meaning ascribed to it in Section 5.21(b) hereof.
"Performance Goal" shall have the meaning ascribed to it in Section 3.1(b)
hereof.
"Person" means an individual, corporation, partnership, trust, joint
venture, association or unincorporated organization or a Governmental Authority.
"Proportionate Debenture Amount" shall have the meaning ascribed to it in
Section 10.5.
"Proportionate Share" shall mean, for each respective Stockholder, the
number of shares of the outstanding capital stock of IFM held by a Stockholder
immediately before the Closing, divided by the total number of shares of capital
stock of IFM outstanding immediately before the Closing.
"Remainder Amount" shall have the meaning ascribed to it in Section 3.1(b).
"Revised Schedules" shall have the meaning ascribed to it in Section 8.10
hereof.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Section 7.1 Indemnified Claims" shall have the meaning ascribed to it in
Section 7.1 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and all
regulations promulgated pursuant thereto.
"Securities Filings" shall mean the Registration Statement on Form S-3
filed with the SEC on November 21, 1996, Annual Report on Form 10-K for the year
ended December 31,
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1995, as amended by Form 10-K/A dated May 9, 1996, Quarterly Reports on Form
10-Q for the three month periods ended March 31, 1996, June 30, 1996, and
September 30, 1996, and Report on Form 8-K filed with the SEC on April 16, 1996,
Press Release dated October 22, 1996, Press Release dated October 30, 1996 and
1995 Annual Report to Shareholders, each without exhibits, but including such
exhibits thereto as may be reasonably requested by IFM or the Stockholders.
"Stock Rights" shall have the meaning ascribed to it in Section 4.9 hereof.
"Surviving Corporation" shall have the meaning ascribed to it in Section
2.1 hereof.
"Tax" shall mean any federal, state, local, foreign, and other taxes,
assessments or other governmental charges, including, without limitation,
income, estimated income, business, occupation, franchise, property, sales,
gross receipt, employment, or withholding taxes, including interest, penalties
and additions in connection therewith for which the Company is or may be liable,
as well as any sales, stamp, use, transfer, recording or intangible tax
liability with respect to the Mergers, and any other taxes or charges imposed by
any governmental authority, if any, assessed in connection with, on account of
or resulting from the consummation of the Merger.
"Tax Return" shall mean any return, amended return, estimated return,
information return and statement (including any related or supporting
information) filed or to be filed with any Tax authority in connection with the
determination, assessment, collection or administration of any Tax or filed by
or including IFM or its stockholders in respect of the business of IFM.
"Ten Year Term" shall have the meaning ascribed to it in Section 3.1(b).
"Transactions" means the transactions contemplated by this Agreement.
"Vehicles and Fixed Assets" shall have the meaning ascribed to it in
Section 5.13 hereof.
1.2. PRINCIPLES OF CONSTRUCTION. A statement made herein to the knowledge
of a Person is made to the actual knowledge of such Person without any
independent duty of investigation.
ARTICLE 2
THE MERGER
2.1. THE MERGER. At the Effective Time (as defined in Section 2.2) and
subject to and upon the terms and conditions of this Agreement and Florida Act,
IFM shall be merged into Newco and the separate corporate existence of IFM shall
cease, and Newco shall continue as the surviving corporation. Newco as the
surviving corporation after the Merger hereinafter sometimes is referred to as
the "Surviving Corporation".
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2.2. EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Articles 8 and 9, the parties hereto shall
cause the Merger to be consummated by filing Articles of Merger with the
Secretary of State of the State of Florida, in such form as required by, and
executed in accordance with, the relevant provisions of Florida Act and attached
hereto as Exhibit 2.2 (the time of such filing being the "Effective Time").
2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Florida Act. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all property, rights, privileges, powers and franchises of IFM and Newco
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of IFM and Newco shall become the debts, liabilities and duties of the Surviving
Corporation. As of the Effective Time, the Surviving Corporation shall be a
direct and wholly-owned subsidiary of CryoLife.
2.4. SUBSEQUENT ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurance or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of IFM or Newco acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either Newco or IFM, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name of and on behalf of each such
corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
2.5. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS.
(a) Except for a provision changing the name of Newco to Ideas for
Medicine, Inc., unless otherwise determined by CryoLife and IFM before the
Effective Time, at the Effective Time the Certificate of Incorporation of Newco,
as in effect immediately before the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation.
(b) The By-Laws of Newco, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
(c) The legal corporate directors and officers of IFM in office
immediately before the Effective Time shall, by virtue of the approval of this
Agreement by the stockholders and directors of IFM, be removed from office
effective immediately after the Effective Time, and the directors and officers
of Newco in office immediately before the Effective Time shall, by virtue of the
approval of this Agreement by the stockholders and directors of Newco, be the
directors and officers of the Surviving Corporation, all of whom shall hold
their directorships
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and offices until the election and qualification of their respective successors
or until their tenure is otherwise terminated by law, or in accordance with the
By-Laws of the Surviving Corporation.
ARTICLE 3
MERGER CONSIDERATION
3.1. MERGER CONSIDERATION.
(a) Closing Consideration. The aggregate consideration payable at the
Closing ("Closing Consideration") shall be $9,500,000 payable:
(i) $4,500,001 in cash (the "Aggregate Closing Cash
Consideration"); plus,
(ii) delivery of a Convertible Subordinated Debenture in an
aggregate principal amount of $4,999,999 substantially in the form of Exhibit
3.1 attached hereto (the "Debenture").
(b) Contingent Consideration. In addition, additional consideration
(the "Additional Consideration") in an aggregate amount of not more than
$1,750,000 (the "Limit Amount") shall be payable after the Closing if, and only
if, the Surviving Corporation attains the Performance Goal (as defined below).
In any calendar year during the ten year period following the Closing (the "Ten
Year Term") that the Surviving Corporation attains Annual Net Revenues of more
than $7,500,000 (the "Performance Goal"), the Stockholders shall be entitled to
Additional Consideration in an aggregate amount equal to 10% of the Annual Net
Revenues in excess of $7,500,000; provided, that the aggregate amount of
Additional Consideration paid under this Section 3.1(b) shall not exceed the
Limit Amount during or after the Ten Year Term. Each Stockholder shall be
entitled to receive his Proportionate Share of any Additional Consideration
payable hereunder. On or before March 31st of each year during the ten year
period following the Closing (unless the Limit Amount of Additional
Consideration has been previously paid), CryoLife shall send to the Stockholders
(i) a report of the amount of Annual Net Revenues, (ii) a report of the amount
of Additional Consideration, if any, payable with respect to the previous
calendar year (or portion thereof), (iii) a copy of the audited financial
statements of CryoLife as included in CryoLife's Annual Report on Form 10-K for
the previous year, as prepared by CryoLife's certified public accountants, and
(iv) if applicable, a check for the amount of Additional Consideration payable
to such Stockholder. CryoLife shall have the option, at any time, to terminate
its obligations under this Section 3.1(b) by paying to the Stockholders an
amount equal to the then current present value of an amount (the "Remainder
Amount") determined by subtracting from the Limit Amount the aggregate of all
amounts of Additional Consideration previously paid to the Stockholders.
Calculation of the current present value of the Remainder Amount shall be based
on the assumption that the Remainder Amount
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would be paid in equal annual installments ending on the sixth anniversary of
Closing and an assumed interest rate of 8% per annum.
3.2. DISTRIBUTIONS OF CLOSING CONSIDERATION. At the Effective Time, each
share of IFM Common Stock shall be converted into the right to receive cash and
debentures as set forth herein. The Aggregate Closing Cash Consideration and
Debenture shall be distributed to the Stockholders in accordance with Schedule
3.2 attached hereto.
3.3. CLOSING. The parties shall use their best efforts to complete the
closing of the Transactions (the "Closing") on or before March 3, 1997, at the
offices of CryoLife's counsel or another mutually agreed upon location on the
business day following compliance or waiver of the terms, conditions and
contingencies contained herein or such other date as is mutually agreed upon by
the parties hereto (such date to be herein referred to as the "Closing Date").
3.4. ALLOCATION. The Closing Consideration received by the Stockholders
shall be allocated, for tax purposes, among each item or class of the assets of
IFM pursuant to Schedule 3.4 attached hereto. IFM, CryoLife, and each
Stockholder agrees that it will prepare and file any required tax notice or
other filings based on such tax allocation of the Closing Consideration.
ARTICLE 4
ADDITIONAL COVENANTS
4.1. CONSENTS. On or before the Closing Date, IFM shall have obtained all
third party consents and approvals required with respect to IFM and/or the
Stockholders for consummation of the Transactions, including without limitation,
those consents listed on Schedule 4.1 hereof, but excluding such consents the
failure of which to obtain in the aggregate would not have a Material Adverse
Effect.
4.2. CONSULTING AGREEMENT. Concurrently with the Closing, J. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇., M.D. shall enter into an independent consulting agreement with
CryoLife and Newco in the form of Exhibit 4.2 attached hereto (the "Independent
Consulting Agreement").
4.3. CONDUCT OF BUSINESS BY IFM PENDING MERGER. IFM and the Stockholders
covenant and agree that, unless CryoLife shall otherwise consent in writing or
except as otherwise set forth herein, between the date hereof and the Closing,
the business of IFM shall be conducted only in, and IFM shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and IFM will use its best efforts to preserve intact the
business organization of IFM, to keep available the services of the present
officers, employees and consultants of IFM and to preserve the present
relationships of IFM with customers, suppliers and other persons with which IFM
has significant business relations. IFM and the Stockholders covenant that IFM
and the Stockholders shall not, between the date hereof and the Closing,
directly or indirectly, do any of the following without the prior written
consent of CryoLife:
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(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock
of, or any other ownership interest in, IFM; (ii) amend or propose to amend the
Articles of Incorporation or By-Laws of IFM; (iii) split, combine or reclassify
any outstanding share of IFM's capital stock, or declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise with
respect to IFM's capital stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of IFM's capital
stock; or (v) authorize or propose or enter into any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 4.3(a); provided, however, notwithstanding the foregoing, IFM shall be
entitled to distribute cash dividends in a manner consistent with past
practices, provided that, after giving effect to the distribution thereof, the
monthly earnings and cash flow for the effected period equal or exceed monthly
earnings and cash flow for comparable prior periods;
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) except in the ordinary course of business and in a manner
consistent with past practices, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any Assets
of IFM; (iii) enter into any material contract or agreement, except in the
ordinary course of business; (iv) authorize any capital expenditure outside the
ordinary course of business; or (v) enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 4.3(b);
(c) take any action other than in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to increasing compensation of any officer,
director, stockholder or employee or with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies of IFM in effect on the
date hereof and fully disclosed to CryoLife prior to the date hereof) or with
respect to any increase of benefits payable under its severance or termination
pay policies in effect on the date hereof;
(d) make any payments except in the ordinary course of business and in
amounts and in a manner consistent with past practice (none of which payments
shall be unreasonable or unusual), under any Employee Benefit Plan or otherwise
to any employee of, or independent contractor or consultant to, IFM, enter into
any Employee Benefit Plan, any employment or consulting agreement, grant or
establish any new awards under any such existing Employee Benefit Plan or
agreement, or adopt or otherwise amend any of the foregoing;
(e) take any action except in the ordinary course of business and in a
manner consistent with past practice or make any change in its methods of
management, distribution, marketing, accounting or operating (or practices
relating to payment of trade accounts or to other payments);
(f) except in the ordinary course of business or as permitted herein,
take any action to incur or increase prior to Closing any indebtedness for
borrowed money from banks
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or other financial institutions or cancel, without payment in full, any notes,
loans or receivables except in the ordinary course of business; or
(g) loan or advance monies to any Person under any circumstance
whatsoever except for credit transactions with customers on terms consistent
with past practices.
4.4. EXPENSES. All of the expenses incurred by CryoLife and Newco in
connection with the authorization, preparation, execution and performance of
this Agreement and other agreements referred to herein, including, without
limitation, all fees and expenses of agents, representatives, brokers, counsel
and accountants for CryoLife and Newco, shall be paid by CryoLife. All expenses
incurred by the Stockholders and IFM in connection with the authorization,
preparation, execution and performance of this Agreement and the other
agreements referred to herein, including without limitation, all fees and
expenses of advisors, agents, representatives, brokers, counsel and accountants,
shall be paid by Stockholders.
4.5. NOTIFICATION OF CERTAIN MATTERS.
(a) IFM shall give prompt notice to CryoLife of the following:
(i) the occurrence or nonoccurrence of any event known to IFM or
the Stockholders whose occurrence or nonoccurrence would be likely to cause,
either (A) any representation or warranty of IFM or any Stockholder contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Closing, or (B) directly or indirectly, any Material
Adverse Effect; or
(ii) any material failure of IFM, any Stockholder, any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
(b) CryoLife shall give prompt notice to IFM of the following:
(i) the occurrence or nonoccurrence of any event whose occurrence
or nonoccurrence would be likely to cause either (A) any representation or
warranty of CryoLife or Newco contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, or (B) an event, the disclosure of which is required by the Exchange
Act.
(ii) Any material failure of CryoLife or Newco, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
(c) Notwithstanding the foregoing, the delivery of any notice pursuant
to this Section shall not waive or release the Stockholders from their
representations or warranties under this Agreement.
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4.6. PUBLIC ANNOUNCEMENTS.
(a) Except for any public announcement relating to the Transactions
previously made by CryoLife, as may be required by law or as provided in this
Section, each of IFM, the Stockholders, CryoLife and Newco agrees that until the
consummation of the Transactions, each of such parties will not, and will direct
its directors, officers, employees, representatives and agents who have
knowledge of the Transactions not to, disclose to any Person who is not a
participant in discussions concerning the Transactions (other than Persons whose
consent is required to be obtained hereunder), any of the terms, conditions or
other facts with respect to the Transactions.
(b) IFM and the Stockholders shall obtain the prior oral or written
consent of CryoLife before issuing any press release or otherwise making any
public statements with respect to the Transactions and shall not issue any such
press release or make any such public statement prior to receiving such consent,
except as may be in the good faith belief of the party issuing such press
release required by law. The parties acknowledge and agree that CryoLife expects
to issue a press release with respect to the Transactions immediately after
signing of this Agreement.
4.7. NO NEGOTIATIONS. The Stockholders and IFM covenant that subject to the
termination provisions contained herein, from and after the date hereof, neither
IFM nor its officers or directors nor anyone acting on behalf of IFM or such
Persons, or any Stockholders shall, directly or indirectly, solicit, engage in
discussions or negotiations with, or provide any information to, any Person,
firm or other entity or group (other than CryoLife or its representatives)
concerning any merger, sale of substantial assets, purchase or sale of shares of
capital stock or similar transaction involving IFM.
4.8. CONFIDENTIALITY. Until the Closing, each of CryoLife and Newco shall,
and shall cause its respective employees, agents, counsel, accountants,
consultants and other representatives to hold in strict confidence any and all
information obtained from IFM or the Stockholders and to not disclose any such
information (unless such information is or becomes ascertainable from public
sources or public disclosure of such information is in the good faith judgment
of CryoLife required by law); provided, however, that nothing contained herein
shall limit the right of any such persons to disclose any such information to
CryoLife, Newco, or their respective employees, agents, representatives,
counsel, accountants, financial advisors and/or underwriters for the purpose of
facilitating the consummation of the Transactions.
4.9. TERMINATION OF STOCK RIGHTS. Any and all convertible securities,
options, warrants, or other contracts, commitments, agreements, understandings,
arrangements or restrictions by which IFM is bound to issue any additional
shares of its capital stock or other securities (collectively, "Stock Rights")
are described on Schedule 4.9 hereto. Each of the Stock Rights (if any) shall be
terminated by IFM on or before the Closing.
4.10. DISCLOSURES REQUIRED BY LAW. In the event that any party hereunder
makes an announcement or disclosure under Section 4.6 or 4.8 that it deems to be
required by law, such
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party shall provide all other parties hereunder prior written notice of the
content thereof as well as the legal requirement necessitating the announcement
or disclosure.
4.11. FACILITIES AGREEMENTS. At the Closing, Newco and the J. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Family Trust dated 9/14/76, as amended, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., Trustee
(the "Trust") shall enter into a Commercial Lease Agreement (the "New Facility
Lease Agreement") in the form of Exhibit 4.11(a) attached hereto, pursuant to
which the Trust shall agree to lease to Newco the real property located at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, and the facility (the "New Facility")
located thereat. All obligations and duties of Newco under the New Facility
Lease Agreement shall be guaranteed for the lease term by Cryolife pursuant to a
Guaranty Agreement in the form of Exhibit 4.11(b) attached hereto to be executed
at the Closing (the "New Facility Guaranty"). Upon issuance of a Certificate of
Occupancy and substantial completion of the tenant improvements to be made to
the New Facility as described in the New Facility Lease Agreement, J. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇., M.D., shall release Newco from the lease agreement governing IFM's
present facilities at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Present Facility").
4.12. CRYOLIFE'S ACCESS AND INSPECTION. On reasonable notice, IFM and the
Stockholders shall provide CryoLife full access during normal business hours
from and after the date hereof until the Closing to all of the books and records
of IFM as they relate to IFM's business and the Assets, and shall furnish such
information concerning the business and affairs of IFM as may be requested, in
each case for the purpose of making such continuing investigation of IFM and its
respective predecessors and the Assets as CryoLife may desire. IFM and the
Stockholders shall cause personnel to assist CryoLife in such continuing
investigation and shall cause their personnel, counsel, accountants and other
non-employee representatives to be reasonably available to CryoLife in
connection with its continuing investigation.
4.13. NON-COMPETITION AGREEMENTS. At the Closing, each of the Stockholders
of IFM shall execute and deliver a Non-Competition Agreement in the form of
Exhibit 4.13 attached hereto (the "Non-Competition Agreement").
4.14. SHORT TERM TAX RETURNS. ▇▇. ▇▇▇▇▇▇, Sr. agrees to cause to be
prepared in a timely fashion any short year tax return required of IFM for the
period preceding the Closing. CryoLife and Newco agree to cooperate with ▇▇.
▇▇▇▇▇▇, Sr. in the preparation of such returns.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF IFM
In order to induce CryoLife and Newco to enter into this Agreement and
consummate the transactions contemplated hereby, each of IFM, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇. ("▇▇. ▇▇▇▇▇▇, Sr."), M.D., and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, jointly and severally,
represents and warrants to CryoLife and Newco as follows, each of which
warranties and representations is material to and relied upon by CryoLife and
Newco:
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5.1. ORGANIZATION AND AUTHORITY OF IFM. IFM is a corporation duly organized
and validly existing under the laws of the State of Florida. IFM is and has
continuously been since its incorporation on November 9, 1979, an S Corporation
under applicable provisions of the Code. IFM is not required to be qualified as
a foreign corporation in any other jurisdiction where its failure to qualify
would have a Material Adverse Effect. IFM has all necessary corporate power and
authority to own, lease and operate its properties and conduct its business as
it is currently being conducted. IFM does not own, directly or indirectly, any
equity interest in any corporation, partnership, joint venture, or other entity
and does not have any subsidiaries, which for purposes of this Agreement means
any corporation or other legal entity of which IFM (either alone or through or
together with any other affiliate of IFM) owns, directly or indirectly, more
than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
5.2. CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. IFM has full
corporate power and authority, and each of the Stockholders has full power and
authority, to execute and deliver this Agreement and each of the Closing
Documents to which IFM or any Stockholder is or will be a party and to
consummate the Transactions. Each Stockholder represents and warrants that such
Stockholder is the lawful owner of, and has good and marketable title to, the
number of shares of IFM's outstanding capital stock as shown on Schedule 5.2 as
being owned by such Stockholder, free and clear of any mortgage, pledge, claim,
lien, charge, encumbrance or other right in any third party to purchase, vote or
direct the voting of, any shares thereof. The directors of IFM and the
Stockholders have duly approved and authorized the execution and delivery of
this Agreement and each of the Closing Documents and the consummation of the
Transactions, and no other corporate proceedings other than approval of the
Transactions by the Stockholders is necessary to approve the Transactions.
Assuming that this Agreement and each of the Closing Documents to which CryoLife
or Newco is a party constitutes a valid and binding agreement of CryoLife or
Newco, this Agreement and each of the Closing Documents to which IFM and/or any
Stockholder is a party constitutes, or will constitute when executed and
delivered, a valid and binding agreement of IFM and/or such Stockholder, as the
case may be, in each case enforceable in accordance with its terms, except as
the enforceability thereof may be limited by applicable bankruptcy, insolvency
or other similar laws relating to the enforcement of creditors' rights generally
and by the application of general principles of equity. The duly elected
officers and directors of IFM are set forth on Schedule 5.2 attached hereto.
Copies of the Articles of Incorporation, the Bylaws and all minutes of IFM are
contained in the minute books of IFM, and any stock certificates not outstanding
are contained in the stock book of IFM. True, correct and complete copies of the
minute books and stock book of IFM have been delivered or made available to
CryoLife.
5.3. SUFFICIENCY OF ASSETS. All material assets and rights relating to
IFM's business are held solely by, and all agreements, obligations, expenses and
transactions relating to IFM's business have been entered into, incurred and
conducted solely by IFM.
5.4. NO CONFLICT; REQUIRED CONSENTS. Assuming all consents, approvals,
authorizations and other actions listed on Schedule 4.1 hereto have been
obtained or taken and assuming the appropriate filings are made by CryoLife and
Newco to effectuate the Merger
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under Florida law, except as set forth on Schedule 5.4 hereto, the execution and
delivery by IFM and each Stockholder of this Agreement and the Closing Documents
and the consummation by IFM and each Stockholder of the Transactions do not and
will not (a) require the consent, approval or action of, or any filing or notice
to, any corporation, firm, Person or other entity or any public, governmental or
judicial authority (except for such consents, approvals, actions, filings or
notices the failure of which to make or obtain will not have a Material Adverse
Effect); (b) violate in any material respect the terms of any instrument,
document or agreement to which IFM or any Stockholder is a party, or by which
IFM or any Stockholder or the property of IFM or any Stockholder is bound, or be
in conflict in any material respect with, result in a material breach of or
constitute (upon the giving of notice or lapse of time or both) a material
default under any such instrument, document or agreement, or result in the
creation of any lien upon any of the property or assets of IFM or any
Stockholder; (c) violate IFM's Articles of Incorporation or Bylaws; or (d)
violate any order, writ, injunction, decree, judgment, ruling, law, rule or
regulation of any federal, state, county, municipal, or foreign court or
governmental authority applicable to IFM or any Stockholder, or the business or
assets of IFM. Neither IFM nor any Stockholder is subject to, or is a party to,
any mortgage, lien, lease, agreement, contract, instrument, order, judgment or
decree or any other material restriction of any kind or character which would
prevent or hinder the continued operation of the business of IFM after the
Closing on substantially the same basis as theretofore operated.
5.5. CAPITALIZATION. The authorized capital stock of IFM consists of
150,000 shares of common stock, $.01 par value per share, 105,590 shares of
which are outstanding, and no shares of which are held in the treasury of IFM.
All outstanding shares of IFM's capital stock have been duly authorized, and are
validly issued, fully paid and nonassessable. No preemptive (whether statutory
or contractual) rights have been violated. The Stockholders are the sole record
and beneficial owners of all of the issued and outstanding capital stock of IFM.
No one other than the Stockholders has any beneficial or record interest in the
capital stock of IFM. IFM has no convertible securities, options, warrants, or
other contracts, commitments, agreements, understandings, arrangements or
restrictions by which it is bound to issue any additional shares of its capital
stock or other securities. All securities of IFM were offered and sold in
compliance with (or exempt from) all registration requirements under applicable
Federal and state securities laws.
5.6. COMPLIANCE WITH LAWS. IFM is in compliance with all applicable laws,
orders, rules and regulations of all governmental bodies and agencies, except
where such noncompliance has and will have, individually or in the aggregate, no
Material Adverse Effect. Neither IFM nor any Stockholder has received notice of
any noncompliance with the foregoing.
5.7. LICENSES AND PERMITS. IFM holds and is in compliance with all
licenses, permits, concessions, grants, franchises, approvals and authorizations
listed in Schedule 5.7 attached hereto and any other such licenses, permits,
etc., necessary or required for the use or ownership of IFM's assets and the
operation of IFM's business, except where the failure to hold such license,
permit, concession, grant, franchise, approval or authorization has and will
have, individually or in the aggregate, no Material Adverse Effect. Neither IFM
nor any Stockholder has received notice of any violations in respect of any such
licenses, permits, concessions, grants, franchises, approvals or authorizations.
No proceeding is pending or, to the knowledge
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of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇, threatened, which seeks revocation
or limitation of any such licenses, permits, concessions, grants, franchises,
approvals or authorizations, nor is there any basis therefor.
5.8. FINANCIAL INFORMATION.
(a) Prior to the date hereof, IFM and the Stockholders have delivered
to CryoLife true, correct and complete copies of the audited financial
statements of IFM as of December 31, 1996 (collectively, the "Historical
Financials"). The Historical Financials were prepared in accordance with
generally accepted accounting principles consistently applied. The balance sheet
included in the Historical Financials fairly presents the financial condition of
IFM as of the date thereof, and the income statement included in the Historical
Financials fairly presents the results of operations for the period indicated.
(b) Prior to the date hereof, IFM and the Stockholders have delivered
true, correct and complete copies of the unaudited balance sheets of IFM as of
January 31, 1997 and unaudited income statements for the one month period then
ended (the "Interim Financials"). The Interim Financials were prepared in
accordance with generally accepted accounting principles consistently applied
throughout the period involved (except for the absence of footnotes and normal
year-end adjustments) and show all liabilities, direct and contingent, of IFM
required at the time of preparation to be shown in accordance with such
principles. The balance sheet included in the Interim Financials fairly presents
the financial position of IFM as of the date thereof, and the income statement
included in the Interim Financials fairly presents the results of operations of
IFM for the period indicated and does not contain any material items of special
or non-recurring income or any other income not earned in the ordinary course of
IFM's business.
(c) On the date hereof, there are no liabilities or obligations of IFM
of any nature, whether liquidated, accrued, absolute, contingent or otherwise
except for those (i) that are specifically reflected or reserved against as to
amount in the latest balance sheet contained in the Historical Financials, or
(ii) that arose thereafter in the ordinary course of business or (iii) that are
specifically set forth on Schedule 5.8 attached hereto; and at the Closing,
there will be no material liabilities or obligations of IFM of any nature,
whether liquidated, unliquidated, accrued, absolute, contingent or otherwise
except for those (A) that are specifically reflected or reserved against as to
amount in the latest balance sheet contained in the Historical Financials, or
(B) that arise after the date of such balance sheet in the ordinary course of
business or (C) that are specifically set forth on Schedule 5.8.
(d) IFM is not, nor has been during the 12 months immediately
preceding the execution of this Agreement, insolvent within the meaning of 11
U.S.C. ss.101(31). IFM has paid and is paying its debts as they become due.
5.9. NO UNDISCLOSED LIABILITIES. Except as and to the extent specifically
disclosed in this Agreement, as of the Closing Date, IFM had no material
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise and whether due or to become due, including, without limitation,
any liability for taxes and interest, penalties and other charges
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payable with respect thereto. Furthermore, except as set forth in the Historical
Financials, or elsewhere herein, neither IFM, nor ▇▇. ▇▇▇▇▇▇, Sr., nor ▇▇.
▇▇▇▇▇▇▇▇▇▇ knows of any reasonable basis for the assertion against IFM of any
such liability or obligation.
5.10. ABSENCE OF CERTAIN CHANGES. Except as reflected on Schedule 5.10, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
and since December 31, 1996, IFM has not and at the Closing Date will not have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured).
(b) Incurred any obligations specifically related to the Assets
(including Customer Agreements), except in the ordinary course of business
consistent with past practices.
(c) Permitted or allowed any of the Assets to be mortgaged, pledged,
or subjected to any lien or encumbrance, except liens or encumbrances
specifically excepted by the provisions of Section 5.10.
(d) Written down the value of any inventory, contract or other
intangible asset, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs and write-offs in the
ordinary course of business, consistent with past practice and at a rate no
greater than during the latest complete fiscal year; cancelled any other debts
or claims, or waived any rights of substantial value, or sold or transferred any
of its material properties or assets, real, personal, or mixed, tangible or
intangible, except in the ordinary course of business and consistent with past
practice.
(e) Sold, licensed or transferred or agreed to sell, license or
transfer, any of the Assets, except in the ordinary course of business and
consistent with past practice.
(f) To IFM, ▇▇. ▇▇▇▇▇▇, Sr.'s, and ▇▇. ▇▇▇▇▇▇▇▇▇▇' knowledge, received
notice of any pending or threatened adverse claim or an alleged infringement of
proprietary material, whether such claim or infringement is based on trademark,
copyright, patent, license, trade secret, contract or other restrictions on the
use or disclosure of proprietary materials.
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, all of which will have no Material Adverse Effect.
(h) Become aware of any event, condition or other circumstance
relating solely to the Assets (as opposed to any such event, condition, etc.
which is, for example, national or industry-wide in nature) which might
reasonably be expected to materially adversely affect the Assets.
(i) Made any capital expenditures or commitments, any one of which is
more than $5,000, for additions to property, plant, or equipment;
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(j) Made any material change in any method of accounting or accounting
practice.
(k) Paid, loaned, guaranteed, or advanced any material amount to, or
sold, transferred, or leased any material properties or assets (real, personal,
or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of IFM's officers or directors, or any
business or entity in which any officer or director of IFM, or any affiliate or
associate of any of such Persons has any direct or indirect interest;
(l) Agreed to take any action described in this Section 5.10.
5.11. TAXES.
(a) IFM has correctly and timely filed all Tax Returns required by law
to be filed on or before the date of this Agreement. All Taxes of IFM in respect
of Tax periods through the Closing Date have either been paid, accrued on the
latest balance sheet contained in the Historical Financials or are set forth on
Schedule 5.11.
(b) Except as set forth on Schedule 5.11, (i) IFM has withheld and
paid over to the appropriate tax authorities all Taxes required to be withheld
by it; (ii) neither IFM nor any of its stockholders has received a claim of
Taxes due or notice of any issues raised by the IRS or any other taxing
authority with respect to IFM; (iii) to the knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr.,
and ▇▇. ▇▇▇▇▇▇▇▇▇▇, there are no pending or threatened audits, investigations or
claims for or relating to any liability in respect of Taxes; (iv) no state,
federal or local tax liens exist with respect to IFM or any of its properties or
assets, real or personal, tangible or intangible or otherwise; and (v) IFM has
not entered into any agreements or waivers extending the time for the assessment
of any Tax.
(c) IFM has delivered to CryoLife true, correct and complete copies of
IFM's federal and state income tax returns for 1995, 1994 and 1993, which
returns were properly signed by IFM and timely filed with the Internal Revenue
Service and appropriate state tax authorities.
(d) Effective for its year ended December 31, 1979, IFM made a valid
election to be treated as an "S corporation" for all purposes of the Code, and
such election has not been terminated by revocation or otherwise, and at all
times from and after the first day of such year IFM has met all requirements of
the Code to be treated as an S corporation for Federal income tax purposes. IFM
has made all necessary elections and has met all requirements of Florida income
tax law for treatment under such law in a manner corresponding to treatment of S
corporations under the Code.
5.12. TITLE TO PROPERTIES; ENCUMBRANCES. Except as specifically identified
on Schedule 5.12 and except for items leased or licensed by IFM, IFM has good,
valid, and marketable title to all of the Assets. All of the Assets are in the
possession or under the control of IFM, and none of the Assets are subject to
any mortgage, pledge, lien, security interest, conditional sale agreement,
encumbrance, or charge of any kind except as set forth on Schedule 5.12 except
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minor imperfections of title and encumbrances, if any, that are not substantial
in amount, do not materially detract from the value or functional utility of the
property subject thereto, and do not in any way materially impair the value of
the Assets.
5.13. VEHICLES; FIXED ASSETS. Schedule 5.13 contains an accurate and
complete description of all vehicles owned by IFM and used in the operation of
IFM's business and all material fixed assets owned by IFM as of December 31,
1996, including, without limitation, all furniture, fixtures and equipment,
owned by IFM (collectively, the "Vehicles and Fixed Assets"). The Vehicles and
Fixed Assets are in good operating condition and repair, subject to normal wear
and tear. Since December 31, 1996 any purchases and sales of vehicles,
furniture, fixtures and equipment have been made in the ordinary course of
business.
5.14. INVENTORY. Schedule 5.14 attached hereto is a true, correct and
complete list of the Inventory as of December 31, 1996. Prior to the Closing,
IFM shall deliver a true, correct and complete list of the Inventory as of a
date which is within five business days of the Closing Date. All of the
inventory is good and merchantable and of a quality and quantity usable and/or
salable, as appropriate, in the ordinary course of business ("Inventory"). As of
Closing, there will be on hand Inventory levels in amounts consistent with IFM's
ordinary business practices and at levels sufficient for Surviving Corporation
to operate IFM's business in the ordinary course.
5.15. TRADE PAYABLES; ACCRUED EXPENSES.
(a) Schedule 5.15(a) is a true, correct and complete list of the trade
payables and accrued expenses of IFM outstanding as of December 31, 1996, which
list indicates the number of days such payables have been outstanding. All such
trade payables and accrued expenses have been incurred in the ordinary course of
business.
(b) At the Closing, IFM shall deliver to CryoLife an updated list of
trade payables and accrued expenses of IFM (the "Closing Trade Payables and
Accrued Expenses List") listing all trade payables and accrued expenses of IFM
as of a date which is within tend days of the Closing. The Closing Trade
Payables and Accrued Expenses List will be true, correct and complete as of such
date.
(c) Schedule 5.15(c) attached hereto is a true, correct and complete
list of all obligations for indebtedness owed by IFM as of the date hereof
(other than trade payables) and all obligations of IFM as of the date hereof
incurred other than in the ordinary course of business, stating the origin of
the obligation and the amount owed.
5.16. ACCOUNTS RECEIVABLE. Schedule 5.16 sets forth a true, correct and
complete list of all receivables of IFM as of a date which is within ten days of
Closing (the "Accounts Receivable"). All outstanding Accounts Receivable are
bona fide, arose in the ordinary course of business and are current and
collectible, and no account is more than 30 days overdue unless otherwise
designated as such on Schedule 5.16 attached.
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5.17. CONTRACTS AND COMMITMENTS.
Schedule 5.17 sets forth a true and complete list of all written or oral
contracts, agreements and other instruments to which IFM or its Assets are
subject or bound, including without limitation agreements with developers, sales
representatives, distributors, suppliers and independent contractors in the
operation of IFM's business, except any contract, agreement or understanding
involving an aggregate annual expenditure of less than $10,000 (collectively,
the "Contracts"). Prior to execution of this Agreement, IFM has provided to
CryoLife true, correct and complete copies of the Contracts, including any and
all amendments and waivers thereto. Except as otherwise disclosed to CryoLife in
writing, such Contracts are valid, legally binding and enforceable against the
parties thereto. Except as otherwise disclosed to CryoLife in writing, neither
IFM nor, to the best of IFM's, ▇▇. ▇▇▇▇▇▇, Sr.'s, or ▇▇. ▇▇▇▇▇▇▇▇▇▇' knowledge,
any other party to any of the Contracts is in breach of, or in default under,
any of the Contracts and no event has occurred which, with the notice or lapse
of time, or both, would constitute a default by IFM or any other party to any of
the Contracts.
5.18. LEASES. Schedule 5.18 contains a list of all leases pursuant to which
IFM leases real or personal property which is a part of the Assets utilized by
IFM in conducting IFM's business, copies of which leases have been delivered to
CryoLife. All such leases are valid, binding, and enforceable in accordance with
their terms (subject to bankruptcy, equitable and other considerations of
general applicability), are in full force and effect, and except as set forth on
Schedule 5.18, no event has occurred which is a default or which with the
passage of time will constitute a default by IFM thereunder, nor has any such
event occurred to the knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇
which is a default by any other party to such lease. All property leased by IFM
as lessee is in the possession of IFM. Except as indicated in Schedule 4.1 or
Schedule 5.18, no consent of any lessor is required in connection with the
Transactions.
5.19. INTELLECTUAL PROPERTY RIGHTS; EMPLOYEE RESTRICTIONS.
(a) Set forth on Schedule 5.19(a) is a list and brief description of
all patents, patent rights, trademarks, service marks, trade secrets, trade
names, copyrights, and all applications for such which are in the process of
being prepared, are owned by, or are registered in the name of IFM, or of which
IFM is a licensor or licensee or in which IFM has any right, and in each case a
brief description of the nature and source of such right. IFM owns or possesses
adequate licenses to use, free and clear of claims and rights of any other
person, all patents, patent rights, trademarks, service marks, trade names,
copyrights, and all applications for such devices, manufacturing processes,
programming processes, formulae, trade secrets, customer lists, and know how
(collectively, "Intellectual Property") necessary to the conduct of its business
as presently conducted and as proposed to be conducted. All Intellectual
Property that is used or incorporated into the IFM's products or services or
contemplated products or services and which is unique or proprietary to IFM was
developed by or for IFM by the employees or consultants of IFM or was purchased
or licensed by IFM, and is either owned exclusively by IFM free and clear of
claims or rights of any other person or licensed under a valid license
agreement. IFM is not aware of any infringement by any other person of any
rights of IFM under any Intellectual Property. No claim is pending or, to the
best knowledge
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of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇, threatened against IFM, nor has IFM
received any notice from any third party, to the effect that any Intellectual
Property owned or licensed by IFM, or which IFM otherwise has the right to use,
or the operation or products or services of IFM infringe upon or conflict with
the asserted rights of any other person under any Intellectual Property, and to
the best knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or, to the best knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇,
threatened against IFM, nor has IFM received any notice from any third parties,
to the effect that any Intellectual Property owned or licensed by IFM, or which
IFM otherwise has the right to use, is invalid or unenforceable by IFM, and to
the best knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇, there is no
basis for any such claim (whether or not pending or threatened).
(b) All technical information developed by or belonging to IFM and
which is material to the business of IFM which has not been patented has been
kept confidential. IFM is not making unlawful use of any Intellectual Property
of any other person, including, without limitation, any former employer of any
past or present employee of IFM. Except as disclosed in Schedule 5.19(a),
neither IFM nor any of IFM's employees or consultants has any agreements or
arrangements with former employers, which interfere or conflict with the
performance of such employee's or consultant's duties for IFM or results in any
former employers of such employees and consultants having any rights in, or
claims on, IFM's Intellectual Property. The activities of IFM's employees and
consultants on behalf of IFM do not violate any agreements or arrangements which
any such employees have with former employers. IFM has taken all commercially
reasonable steps required to establish and preserve its ownership of all of the
Intellectual Property; each of the employees of IFM listed on Schedule 5.19(b),
has executed an agreement regarding confidentiality, proprietary information,
and assignment of inventions to IFM substantially in the form of Schedule
5.19(b) hereto, and, to the best knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇.
▇▇▇▇▇▇▇▇▇▇, all such employees are not in violation of such agreements.
5.20. LITIGATION. Except as set forth in Schedule 5.20, (i) to IFM's, ▇▇.
▇▇▇▇▇▇, Sr.'s, and ▇▇. ▇▇▇▇▇▇▇▇▇▇' knowledge, there are no actions, proceedings
or regulatory agency investigations against IFM or the Stockholders involving
the Assets pending (served) or threatened against IFM or the Stockholders, (ii)
neither IFM, ▇▇. ▇▇▇▇▇▇, Sr., or ▇▇. ▇▇▇▇▇▇▇▇▇▇ know of, or know of any
reasonable basis for, any such action, proceeding or investigation against IFM
or the Stockholders, and (iii) no such action, proceeding, or regulatory agency
investigation has been served during the three-year period preceding the date of
this Agreement. No assertion has ever been made to IFM to the effect that IFM
has any liability as a successor to a third party's business or product line,
and IFM knows of no basis for any such assertion.
5.21. EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.21(a) sets forth a true and complete list of each
"employee benefit plan" (as defined by Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and any other bonus, profit
sharing, pension, compensation, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission, bonus, payroll
practice, retention, or other plan, agreement, policy, trust fund or arrangement
(each such plan,
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agreement, policy, trust fund or arrangement is referred to herein as an
"Employee Benefit Plan", and collectively, the "Employee Benefit Plans"), for
the benefit of (i) directors or employees of IFM or any other persons performing
services for IFM, (ii) former directors or employees of IFM or any other persons
formerly performing services for IFM, or (iii) beneficiaries of anyone described
in (i) or (ii) (collectively, "IFM Employees") with respect to which IFM has any
liability or obligation. Except as disclosed on Schedule 5.21(a) attached
hereto, there are no other employee benefits for which IFM has any liability or
obligation.
(b) IFM has delivered to CryoLife and Newco, with respect to each
Employee Benefit Plan, true and complete copies of (i) the documents embodying
and relating to the plan, including, without limitation, the current plan
documents and documents creating any trust maintained pursuant thereto, all
amendments, investment management agreements, administrative service contracts,
group annuity contracts, insurance contracts, collective bargaining agreements,
the most recent summary plan description with each summary of material
modification, if any, and employee handbooks, (ii) annual reports, if required,
including but not limited to Forms 5500, 990 and 1041 for the last three years
for the plan and any related trust, (iii) financial statements for the last
three years, and (iv) each communication involving the plan or any related trust
to or from the Internal Revenue Service ("IRS"), Department of Labor ("DOL"),
Pension Benefit Guaranty Corporation ("PBGC") or any other governmental
authority including, without limitation, the most recent determination letter
received from the IRS pertaining to any Employee Benefit Plan intended to
qualify under Sections 401(a).
(c) IFM, each "ERISA Affiliate" (hereby defined to include any mode of
business, whether or not incorporated, which has employees who are or have been
at any time during the immediately preceding six years, treated pursuant to
Section 4001(a)(14) of ERISA and/or Section 414 of the Code as employees of a
single employer which includes IFM), each Employee Benefit Plan and each
Employee Benefit Plan "sponsor" or "administrator" (within the meaning of
Section 3(16) of ERISA) has complied in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such
statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA"). Schedule 5.21(c) attached hereto lists the name of
each IFM Employee who has experienced a "Qualifying Event" (as defined in COBRA)
with respect to an Employee Benefit Plan who is eligible for "Continuation
Coverage" (as defined in COBRA) and whose maximum period for Continuation
Coverage required by COBRA has not expired. Included in such list are the
current address for each such individual, the date and type of each Qualifying
Event, whether the individual has already elected Continuation Coverage and, for
any individual who has not yet elected Continuation Coverage, the date on which
such individual was notified of his or her rights to elect Continuation
Coverage. Schedule 5.21(c) attached hereto also lists the name of each IFM
Employee who is on a leave of absence (whether or not pursuant to the Family and
Medical Leave Act of 1993, as amended ("FAMLA") and is receiving or entitled to
receive health coverage under an Employee Benefit Plan, whether pursuant to
FAMLA, COBRA or otherwise.
(d) With respect to each Employee Benefit Plan and except as otherwise
set forth on Schedule 5.21(d) attached hereto:
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(i) each Employee Benefit Plan which is described in Section 3(2)
of ERISA qualifies under Section 401(a) of the Code and has received a
determination letter from the IRS to the effect that the Employee Benefit Plan
is qualified under Section 401 of the Code and that any trust maintained
pursuant thereto is exempt from federal income taxation under Section 501 of the
Code, and nothing has occurred or, to IFM's, ▇▇. ▇▇▇▇▇▇, Sr.'s, or ▇▇.
▇▇▇▇▇▇▇▇▇▇' knowledge, is expected to occur, that caused or would cause the loss
of such qualification or exemption or the imposition of any penalty or tax
liability if uncorrected;
(ii) the Employee Benefit Plan complies with and has been
maintained and operated in accordance with its terms and the applicable
provisions of ERISA and the Code (including rules and regulations thereunder)
and any other applicable law;
(iii) no claim, lawsuit, arbitration or other action has been
asserted or instituted or threatened in writing against the Employee Benefit
Plan, any trustee or fiduciaries thereof, IFM or any ERISA Affiliate, any
director, officer or employee thereof, or any of the assets of the Employee
Benefit Plan or any related trust;
(iv) no "prohibited transaction" (within the meaning of Section
4975 of the Code and Section 406 of ERISA) has, to IFM's, ▇▇. ▇▇▇▇▇▇, Sr.'s, or
▇▇. ▇▇▇▇▇▇▇▇▇▇' knowledge, occurred or is expected to occur with respect to the
Employee Benefit Plan which has subjected or could subject IFM, any ERISA
Affiliate or Purchaser or any officer, director or employee of IFM, any ERISA
Affiliate, Purchaser or the Employee Benefit Plan trustee, plan administrator or
other fiduciary, to a tax or penalty on prohibited transactions imposed by
either Section 502 of ERISA or Section 4975 of the Code or any other liability
with respect thereto;
(v) the Employee Benefit Plan is not under audit or investigation
by the IRS or the DOL or any other governmental authority and no such completed
audit, if any, has resulted in the imposition of any tax, interest or penalty;
and
(vi) the Employee Benefit Plan may by its terms be amended or
terminated by IFM on no more than 90 days notice.
(e) The consummation of the Transactions will not alone give rise to
any liability for any employee benefits, including, without limitation,
liability for severance pay, unemployment compensation, termination pay or
withdrawal liability, or accelerate the time of payment or vesting or increase
the amount of compensation or benefits due to any IFM Employee other than those
listed on Schedule 5.21(e).
(f) Except as set forth on Schedule 5.21(f) attached hereto, no
Employee Benefit Plan in any way provides for any benefits (other than under
COBRA, the Federal Social Security Act or any Employee Benefit Plan qualified
under Section 401(a) of the Code) to any IFM Employee who, at the time the
benefit is to be provided, is a former director or employee of, or other
provider of services to, IFM or an ERISA Affiliate (or a beneficiary of any such
person), or any other IFM Employee, nor have any representations, agreements,
covenants or commitments been made to provide such benefits.
-22-
(g) Since December 31, 1996 and through the date hereof, except as set
forth on Schedule 5.21(g) attached hereto, neither IFM nor any ERISA Affiliate
has, nor will it, (i) institute or agree to institute any new employee benefit
plan or practice, (ii) make or agree to make any change in any Employee Benefit
Plan, (iii) make or agree to make any increase in the compensation payable or to
become payable by IFM or any ERISA Affiliate to any IFM Employee, or (iv) except
pursuant to this Agreement and except for contributions required to provide
benefits pursuant to the provisions of the Employee Benefit Plans, pay or accrue
or agree to pay or accrue any bonus, percentage of compensation, or other like
benefit to, or for the credit of, any IFM Employee.
(h) IFM's accrued sick leave and vacation time for its employees is
set forth on Schedule 5.21(h) attached hereto. IFM's liability for accrued sick
leave time for all IFM Employees, and the accrued vacation time for ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall be satisfied in full prior to the Closing, fully reserved for
on the Historical Financials and Interim Financials, or otherwise disclosed on
Schedule 5.21(h), such that from and after the Closing, neither CryoLife nor
Newco shall have any liability or obligation except with respect to the amounts
so reserved or disclosed.
(i) IFM has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), (ii) a "plan maintained by more than one employer" (within the meaning
of Section 413(c) of the Code); or (iii) an employee benefit plan subject to
Part 3 of Title I of ERISA, Title IV of ERISA and/or Section 412 of the Code.
5.22. UNION; LABOR. IFM is not a party to any collective bargaining
agreement or any other contract, written or oral, with any trade or labor union,
employees' association or similar organization. There are no strikes or labor
disputes pending or threatened, or to IFM's, ▇▇. ▇▇▇▇▇▇, Sr.'s, or ▇▇.
▇▇▇▇▇▇▇▇▇▇' knowledge, any attempts at union organization of the employees of
IFM. All salaries and wages paid and withheld by IFM are and have been in
compliance with all applicable federal, state and local laws.
5.23. IMMIGRATION MATTERS.
(a) With respect to all employees (as defined in Section 274a.1(g) of
Title 8, Code of Federal Regulations) of IFM, IFM has complied with the
Immigration Reform and Control Act of 1986 and all regulations promulgated
thereunder ("IRCA") with respect to the completion, maintenance and other
documentary requirements of Forms I-9 (Employment Eligibility Verification
Forms) for all current and former employees and the reverification of the
employment status of any and all employees whose employment authorization
documents indicated a limited period of employment authorization.
(b) Schedule 5.23 attached hereto contains a true and complete list of
all employees of IFM who are not citizens of the United States of America and
who are not permanent residents of the United States of America, together with a
true and complete list of the visa status and visa expiration dates of each such
employee.
-23-
(c) IFM has only employed individuals authorized to work in the United
States. None of the Companies has received any written notice of any inspection
or investigation relating to its alleged noncompliance with or violation of
IRCA, nor has it been warned, fined or otherwise penalized by reason of any
failure to comply with IRCA.
(d) The consummation of the transactions contemplated by this
Agreement will not (i) give rise to any liability for the failure to properly
complete and update Forms I-9, (ii) give rise to any liability for the
employment of individuals not authorized to work in the United States and (iii)
or cause any current employee to become unauthorized to work in the United
States.
5.24. HAZARDOUS SUBSTANCE. For purposes of this paragraph, "Hazardous
Substance" means any substance or material (a) identified in Section 101(14) of
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601(14) and as set forth in Title 40, Code of Federal Regulations,
Part 302, as the same may be amended from time to time, (b) determined to be
toxic, a pollutant or contaminant, under federal, state or local statute, law,
ordinance, rule, or regulation or judicial or administrative order or decision,
as same may be amended from time to time, (c) petroleum and petroleum products
and distillates, (d) asbestos, (e) radon, (f) polychlorinated biphenyls and (g)
such other materials, substances or waste subject to regulation under any
applicable law. There are no violations of federal, state or local laws relating
to health, safety and the environment relating to the operations of IFM's
business or the current or former state of the Assets (excluding violations
which would not have a Material Adverse Effect). To IFM's, ▇▇. ▇▇▇▇▇▇, Sr.'s,
and ▇▇. ▇▇▇▇▇▇▇▇▇▇' knowledge, either there are no Hazardous Substances located
on, in or under the Leased Property or used in the operation of IFM's business;
or IFM has fully disclosed to CryoLife in writing the existence, extent and
nature of any Hazardous Substances which IFM is legally authorized to maintain
on, in, or under the Leased Property or the Assets as to use in connection
therewith in Schedule 5.24 attached hereto and IFM has obtained all licenses,
permits, and approvals required with respect thereto and is in full compliance
with all of the terms, conditions and requirements of such licenses, permits and
approvals. IFM has not caused or permitted to exist, as a result of an
intentional or unintentional act or omission on its part, a releasing,
discharging, spilling, leaking, pumping, emitting, pouring, emptying, or dumping
of Hazardous Substances. Except as otherwise disclosed to CryoLife in writing,
neither IFM nor any Stockholder has received any written notice, summons,
citation, notice of violation, letter or other communication concerning any
pending or threatened claim or litigation in which any person or entity alleges
the presence, release, threat of release, placement on or at the Leased Property
or the Assets, or the generation, transportation, storage, treatment, or
disposal at, on or from the Leased Property or the Assets, of any hazardous
substance, or in which any person alleges a violation of any law governing or
imposing any liability arising out of any matter relating to health, safety or
the environment.
5.25. INSURANCE. IFM maintains property, fire, casualty, worker's
compensation, general liability insurance and other forms of insurance relating
to its Assets and the operation of IFM's business against risks of the kind
customarily insured against and in amounts customarily insured (and, where
appropriate, in amounts not less than the replacement cost of the Assets). IFM
will maintain its insurance policies in full force and effect through the
Closing
-24-
Date. Schedule 5.25 lists all of the insurance policies maintained by IFM, which
schedule includes the name of the insurance company, the policy number, a
description of the type of insurance covered by such policy, the dollar limit of
the policy, and the annual premiums for such policy.
5.26. CERTAIN OTHER CONTRACTS.
(a) IFM does not have (i) any outstanding contracts with officers,
employees, agents, consultants, advisors, salesmen, sales representatives,
distributors, suppliers, or dealers that are not cancelable by it on notice of
not longer than thirty days and without material liability, penalty, or premium
other than those listed on Schedule 5.26 attached hereto; (ii) any agreement or
arrangement providing for the payment of any material bonus or commission based
on sales or earnings; or (iii) any agreements that contain any material
severance or termination pay liabilities or obligations other than those
identified in Schedule 5.26.
(b) IFM has not given any power of attorney relating to the Assets
(whether revocable or irrevocable) to any Person, firm, or corporation for any
purpose whatsoever, other than to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. for purposes of
patent application prosecution or appointment of registered agents or agents for
service of process as required by law.
(c) IFM is not paying, and has no obligation to pay, any disability,
medical expenses, pension, deferred compensation, or retirement allowance to any
Person.
5.27. BANK ACCOUNTS. Schedule 5.27 contains a true, complete and correct
list showing the name and location of each bank or other institution in which
IFM has any deposit account or safe deposit box, together with a listing of
account numbers and names of all Persons authorized to draw thereon or have
access thereto.
5.28. ADVISORS FEES. Except as set forth on Schedule 5.28, neither IFM nor
any Stockholder has retained or utilized the services of any advisor, broker,
finder or intermediary, or paid or agreed to pay any fee or commission to any
other Person or entity for or on account of the Transactions, or had any
communications with any Person or entity which would obligate CryoLife or the
Surviving Corporation to pay any such fees or commissions.
5.29. COMPLETE DOCUMENTATION. Except as specifically indicated elsewhere
herein, all documents delivered by IFM or the Stockholders to CryoLife in
connection herewith have been complete originals, or exact copies thereof.
5.30. DISCLOSURE. No representation or warranty by IFM, ▇▇. ▇▇▇▇▇▇, Sr., or
▇▇. ▇▇▇▇▇▇▇▇▇▇ contained in this Agreement and no statement contained in any
certificate or schedule furnished to CryoLife pursuant to the provisions hereof
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein not misleading. To the
best knowledge of IFM, ▇▇. ▇▇▇▇▇▇, Sr., and ▇▇. ▇▇▇▇▇▇▇▇▇▇, there is no current
event or condition of any kind or character pertaining to IFM that may
reasonably be expected to have a Material Adverse Effect, except as disclosed
herein.
-25-
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF
CRYOLIFE AND NEWCO
In order to induce IFM and the Stockholders to enter into this Agreement
and consummate the Transactions, CryoLife and Newco jointly and severally
represent and warrant to IFM and the Stockholders as follows, each of which
representations and warranties is material to and relied upon by IFM and the
Stockholders:
6.1. ORGANIZATION OF CRYOLIFE AND NEWCO. Each of CryoLife and Newco is a
corporation duly organized and validly existing under the laws of the State of
Florida and has the corporate power to own its property and to carry on its
business as now being conducted by it.
6.2. CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Each of CryoLife and
Newco has full corporate power and authority to execute and deliver this
Agreement and each of the Closing Documents to which CryoLife or Newco is or
will be a party and to consummate the Transactions. The Board of Directors of
CryoLife and the Board of Directors and sole stockholder of Newco have duly
approved and authorized the execution and delivery of this Agreement and each of
the Closing Documents to which it is or will be a party and the consummation of
the Transactions, and no other corporate proceedings on the part of CryoLife or
Newco are necessary to approve and authorize the execution and delivery of this
Agreement and such Closing Documents and the consummation of the transactions
contemplated hereby and thereby. Assuming that this Agreement and each of the
Closing Documents to which CryoLife or Newco is a party constitutes a valid and
binding agreement of IFM and/or the Stockholders, as the case may be, this
Agreement and each of the Closing Documents to which CryoLife or Newco is a
party constitutes, or will constitute when executed and delivered, a valid and
binding agreement of CryoLife and/or Newco, as the case may be, in each case
enforceable against CryoLife and/or Newco in accordance with its terms, except
as the enforceability thereof may be limited by applicable bankruptcy,
insolvency or other similar laws relating to the enforcement of creditors'
rights generally and by the application of general principles of equity.
6.3. NO CONFLICT; CONSENTS. Except as set forth on Schedule 6.3 hereto, the
execution and delivery by each of CryoLife and Newco of this Agreement, the
Closing Documents to which it is or will be a party and the consummation by
CryoLife and Newco of the Transactions do not and will not (a) require the
consent, approval or action of, or any filing or notice to, any corporation,
firm, Person or other entity or any public, governmental or judicial authority;
(b) violate in any material respect the terms of any instrument, document or
agreement to which CryoLife or Newco is a party, or by which CryoLife or Newco
or the property of CryoLife or Newco is bound, or be in conflict in any material
respect with, result in a material breach of or constitute (upon the giving of
notice or lapse of time, or both) a material default under any such instrument,
document or agreement; (c) violate CryoLife's or Newco's Certificate of
Incorporation or Bylaws; or (d) violate any order, writ, injunction, decree,
judgment, ruling, law or regulation of any federal, state, county, municipal, or
foreign court or governmental authority applicable to CryoLife or Newco and
relating to the Merger.
-26-
6.4. BROKERS FEES AND EXPENSES. Except for the engagement of Principal
Financial Services, Inc., the costs of which shall be borne by CryoLife, neither
CryoLife nor Newco has retained or utilized the services of any broker, finder,
or intermediary, or paid or agreed to pay any fee or commission to any other
Person or entity for or on account of the transactions contemplated hereby, or
had any communications with any Person or entity which would obligate IFM or the
Stockholders to pay any such fees or commissions.
6.5. SHARES TO BE DELIVERED. The Merger Shares, when issued and delivered
to the Stockholders pursuant to terms of the Debenture, will be duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock of
CryoLife. Upon delivery to the Stockholders of the Merger Shares upon conversion
of the Debenture and assuming that the Stockholders are receiving the Merger
Shares in good faith without notice of any adverse claims, the Stockholders will
receive good and unencumbered title to the Merger Shares, free and clear of all
liens, restrictions, charges, encumbrances and other security interests of any
kind or nature whatsoever, except for claims arising out of acts of or claims
against the Stockholders or restrictions existing under applicable securities
laws.
6.6. ACCURACY OF SECURITIES FILINGS. CryoLife has furnished the Securities
Filings to IFM and the Stockholders or their representatives. The Securities
Filings comply in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, and, as of the dates thereof, to CryoLife's
knowledge, do not contain any untrue statement of any material fact or omit to
state a material fact required therein to be stated or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All financial
statements set forth in the Securities Filings present fairly the financial
condition of CryoLife as of (or for the period ending on) their respective
dates.
6.7. APPROVALS. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by CryoLife and Newco will
not require the consent, approval, order or authorization of any governmental
entity or regulatory authority or any other Person under any statute, law, rule,
regulation, permit, license, agreement, indenture or other instrument to which
CryoLife or Newco is a party or to which any of its properties are subject,
except for such consents, approvals, actions, filings or notices the failure of
which to make or obtain will not have a material adverse effect on the business,
assets, results of operation, properties, or financial condition of CryoLife,
and except for any federal or state filings required by applicable securities
laws, no declaration, filing or registration with any governmental entity or
regulatory authority is required by CryoLife or Newco in connection with the
execution and delivery of this Agreement, the consummation of the transaction
contemplated hereby, or the performance by CryoLife or Newco of their
obligations hereunder.
6.8. ACCURACY OF REPRESENTATIONS. No representation or warranty by CryoLife
or Newco contained in this Agreement and no statement contained in any
certificate or schedule furnished to the Stockholders pursuant to the provisions
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein not misleading.
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6.9. ACCESS TO INFORMATION. Cryolife and Newco acknowledge and agree that,
in connection with Cryolife's due diligence investigation, IFM has provided to
Cryolife certain documents and materials in response to Cryolife's due diligence
request dated November 18, 1996. Cryolife has reviewed such documents and
materials and has been given an opportunity to ask questions and receive answers
with respect thereto and with respect to any other matters Cryolife considers
relevant. Notwithstanding the foregoing, nothing contained herein, including,
without limitation, the supply of information to Cryolife pursuant to the
delivery of the documents and materials as described herein, shall be deemed to
limit, modify, or waive any representation or warranty or covenant of IFM or any
of the Stockholders under Section 5 of this Agreement.
6.10. DISCLOSURE. No representation or warranty by Cryolife or Newco
contained in this Agreement and no statement contained in any certificate or
schedule furnished by CryoLife pursuant to the provisions hereof to the best of
knowledge of CryoLife contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements therein not
misleading.
ARTICLE 7
INDEMNIFICATION
7.1. INDEMNIFICATION BY STOCKHOLDERS. ▇▇. ▇▇▇▇▇▇, Sr. and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, jointly and severally, hereby agree to indemnify and hold CryoLife
and the Surviving Corporation, and each of its respective affiliates, directors,
officers, employees and agents, harmless from and against all claims,
liabilities, lawsuits, costs, damages or expenses (including, without
limitation, reasonable attorneys' fees and expenses incurred in litigation or
otherwise) not covered, paid and indemnified under any applicable insurance
coverage, arising out of and sustained by any of them due to (a) any
misrepresentation or breach of any representation, warranty, covenant or
agreement of IFM or any Stockholder contained in this Agreement or any Closing
Document; or (b) any liability or obligation relating to the operation of IFM's
business, the Transactions or the ownership or use of the Assets, claimed or
demanded by third parties against CryoLife or the Surviving Corporation arising
out of the operation of IFM's business, the Transactions, or the ownership or
use of the Assets through the Closing Date not specifically disclosed herein or
in the Schedules attached hereto (collectively all claims described in this
Section 7.1, being "Section 7.1 Indemnified Claims").
7.2. INDEMNIFICATION BY CRYOLIFE. CryoLife hereby agrees to indemnify and
hold the Stockholders harmless from and against all claims, liabilities,
lawsuits, costs, damages or expenses (including without limitation reasonable
attorneys fees and expenses incurred in litigation or otherwise) not covered,
paid and indemnified under any applicable insurance coverage, arising out of and
sustained by any of them due to any misrepresentation or breach of any
representation, warranty, covenant or agreement of CryoLife, Newco or the
Surviving Corporation in this Agreement or any Closing Document.
7.3. PROVISIONS REGARDING INDEMNIFICATION. The indemnified party (or
parties) shall promptly notify (in accordance with Section 12.6) the
indemnifying party (or parties) of any
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claim, demand, action or proceeding for which indemnification will or may be
sought under Section 7.1 or 7.2 of this Agreement and, if such claim, demand,
action or proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right, at its expense, to assume the defense
thereof using counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate in (at its own expense),
but not control, the defense of any such third party claim, demand, action or
proceeding. The indemnified party (or parties) shall promptly notify (in
accordance with Section 12.6) the indemnified party (or parties) of any tax
related audit requested or instituted by any local, state, or federal (IRS)
taxing authority in which event the indemnifying party will have the right, at
its sole expense, to assume the defense thereof using accountants reasonably
acceptable to the indemnified party, and legal counsel selected by the
indemnifying party. The indemnified party shall have the right to participate in
(at its own expense), but not control, the defense of any such third party
claim, demand, action or proceeding. In connection with any such third party
claim, demand, action or proceeding, the Stockholders, CryoLife and the
Surviving Corporation shall cooperate with each other. No such third party
claim, demand, action or proceeding shall be settled without the prior written
consent of the indemnified party provided, however, that if a firm, written
offer is made to settle any such third party claim, demand, action or proceeding
and the indemnifying party proposes to accept such settlement and the
indemnified party refuses to consent to such settlement, then: (i) the
indemnifying party shall be excused from, and the indemnified party shall be
solely responsible for, all further defense of such third party claim, demand,
action or proceeding; and (ii) the maximum liability of the indemnifying party
relating to such third party claim, demand, action or proceeding shall be the
amount of the proposed settlement if the amount thereafter recovered from the
indemnified party on such third party claim, demand, action or proceeding is
greater than the amount of the proposed settlement.
7.4. SURVIVAL. The representations and warranties contained in this
Agreement and in the Closing Documents delivered at the Closing shall survive
the Closing for a period ending on the first anniversary date of the Closing and
shall thereafter cease to be of any force and effect, except for (a) claims as
to which notice has been given in accordance with Section 7.3 hereof prior to
such date and which are pending on such date, and (b) representations and
warranties relating to: (i) title to IFM's Assets (Section 5.12), (ii) ownership
of stock of IFM by the Stockholders (Section 5.5), (iii) taxes (Section 5.11),
(iv) employee benefits (Section 5.21), (v) hazardous substances (Section 5.24),
(vi) immigration matters (Section 5.23), or (vii) financial statements (Section
5.8), each of which shall survive until the end of the statute of limitations
applicable to the underlying claim for which indemnification is sought.
ARTICLE 8
CONDITIONS TO OBLIGATIONS
OF CRYOLIFE AND NEWCO TO CLOSE
Each and every obligation of CryoLife and Newco under this Agreement to be
performed on or prior to the Closing shall be subject to the fulfillment, on or
prior to the Closing, of each of the following conditions:
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8.1. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties made by IFM and the Stockholders in or pursuant to this Agreement
or given on their behalf hereunder shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given on and as of the Closing Date.
8.2. OBLIGATIONS PERFORMED. IFM and the Stockholders shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
8.3. CONSENTS. IFM shall have obtained and delivered to CryoLife written
consents of all Persons or entities whose consent is required to consummate the
Transactions, including, without limitation, the unanimous consent of the
Stockholders, and all of such consents shall remain in full force and effect at
and as of the Closing.
8.4. CLOSING DELIVERIES. IFM and/or the Stockholders shall have delivered
to CryoLife each of the following, together with any additional items which
CryoLife may reasonably request to effect the transactions contemplated herein:
(a) Stock Certificates representing all of the outstanding capital
stock of IFM;
(b) a certificate of the President of IFM certifying as to the matters
set forth in Sections 8.1, 8.2 and 8.3 hereof and as to the satisfaction of all
other conditions set forth in this Article 8;
(c) Articles of Merger duly executed by an officer of IFM, for filing
in accordance with the provisions of Section 2.2 hereof,
(d) certified copies of the corporate resolutions of IFM authorizing
the execution, delivery and performance of this Agreement by IFM, together with
incumbency certificates with respect to the respective officers of IFM executing
documents or instruments on behalf of IFM;
(e) the Independent Consulting Agreement duly executed by ▇▇. ▇▇▇▇▇▇,
Sr.;
(f) written consents from all parties to all leases and contracts
whose consent to the Merger is required;
(g) the corporate minute books, seals (if any) and stock transfer
books of IFM, certified by the corporate secretary of IFM (in form and substance
acceptable to CryoLife) as true, correct and complete;
(h) an opinion of counsel to IFM and the Stockholders substantially in
the form of Exhibit 8.4(g) attached hereto;
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(i) Non-Competition Agreements duly executed by each of the
Stockholders of IFM;
(j) the representation letters required by Section 10.1;
(k) the Closing Trade Payables and Accrued Expenses List;
(l) the New Facility Lease Agreement, duly executed by the Trust, in
form mutually acceptable to Newco and the Trust; and
(m) Confidentiality Agreements in the form of Schedule 5.19(b) for
each employee identified on list of employees attached to Schedule 5.19(b);
(n) any other documents or agreements contemplated hereby and/or
necessary or appropriate to consummate the Transactions.
8.5. NO CHALLENGE. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency or any pending action by any other Person, challenging, or
seeking material damages in connection with the Merger or the ability of
CryoLife or any of its affiliates to own and operate IFM or otherwise materially
adversely affecting the business, assets, prospects, financial condition or
results of operations of IFM.
8.6. NO INVESTIGATIONS OF IFM OR BUSINESS. As of the Closing Date there
shall be no, and neither IFM nor any Stockholder shall have any knowledge of any
pending or threatened investigation by any municipal, state or federal
government agency or regulatory body with respect to IFM, IFM's assets or IFM's
business.
8.7. NO MATERIAL ADVERSE EFFECT. Since December 31, 1996, there shall have
been no Material Adverse Effect.
8.8. SECURITIES LAWS. The parties shall have complied with all federal and
state securities laws applicable to the Transactions. All "Blue Sky" permits or
approvals required to carry out the Transactions shall have been received.
8.9. APPROVAL. CryoLife shall have received at Closing copies of minutes of
meetings of the Stockholders and the Board of Directors of IFM, certified by the
corporate secretary of IFM, unanimously approving and authorizing the Merger and
the Transactions.
8.10. REVISED SCHEDULES. IFM and the Stockholders shall have provided
CryoLife with revised Schedules dated as of the Closing Date (the "Revised
Schedules"), with all material changes through such date duly noted thereon, and
the Revised Schedules will not contain any disclosures which (i) should have
been but were not disclosed on the Schedules attached hereto or (ii) set forth
material changes which in the opinion of CryoLife, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect unless
such disclosures are approved in writing by CryoLife.
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8.11. LEGALITY. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has the
effect of making the Merger illegal or otherwise prohibiting the consummation of
the Merger.
8.12. REGULATORY MATTERS. All filings shall have been made and all
approvals shall have been obtained as may be legally required pursuant to
federal and state laws prior to the consummation of the Transactions and all
actions by or in respect of, or filings with, any governmental body, agency or
official or any other Person required to permit the consummation of the Merger
so that the Surviving Corporation shall be able to continue to carry on the
business of IFM substantially in the manner now conducted by IFM shall have been
taken or made.
8.13. REPAYMENT OF DEBTS. At the Closing, all officers, directors,
stockholders and employees of IFM shall repay to the Surviving Corporation in
full any outstanding indebtedness owed to IFM by them or their families.
8.14. TERMINATION OF STOCK RIGHTS. All Stock Rights of IFM, if any, shall
be terminated on or before the Closing.
8.15. RELEASES. Each of the Stockholders shall have executed releases in
favor of IFM in the form of Exhibit 8.15 attached hereto.
8.16. FACILITIES. IFM shall deliver to Cryolife documentation evidencing to
Cryolife's satisfaction that the leases for the existing facility currently used
by IFM at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and the lease
for the Present Facility have been extended by the lessors thereof through
December 31, 1997.
ARTICLE 9
CONDITIONS TO IFM'S
AND STOCKHOLDERS' OBLIGATIONS
Each and every obligation of IFM and the Stockholders under this Agreement
to be performed on or prior to the Closing, shall be subject to the fulfillment,
on or prior to the Closing, of each of the following conditions:
9.1. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties made by CryoLife and Newco in or pursuant to this Agreement or
given on its behalf hereunder shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
made or given on and as of the Closing Date.
9.2. OBLIGATIONS PERFORMED. CryoLife and Newco shall have performed and
complied with all of its obligations under this Agreement which are to be
performed or complied with by it prior to or at the Closing.
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9.3. CLOSING DELIVERIES. CryoLife and Newco shall have delivered to the
Stockholders each of the following, together with any additional items which the
Stockholders may reasonably request to effect the Transactions:
(a) the Aggregate Closing Cash Consideration;
(b) the Debenture;
(c) certified copies of the corporate resolutions of CryoLife and
Newco authorizing the execution, delivery and performance of this Agreement by
CryoLife and Newco, together with incumbency certificates with respect to the
respective officers of CryoLife executing documents or instruments on behalf of
CryoLife;
(d) a certificate of the President or Chief Executive Officer of
CryoLife certifying as to the matters set forth in Sections 9.1 and 9.2 hereof
and as to the satisfaction of all other conditions set forth in this Article 9;
(e) the Independent Consulting Agreement with ▇▇. ▇▇▇▇▇▇, Sr., duly
executed by CryoLife;
(f) opinion of counsel to CryoLife and Newco substantially in the form
of Exhibit 9.3(f);
(g) the New Facility Lease Agreement, duly executed by Newco, in form
mutually acceptable to Newco and the Trust;
(h) the New Facility Guaranty, duly executed by Cryolife; and
(i) any other documents or agreements contemplated hereby and/or
necessary or appropriate to consummate the Transactions.
9.4. NO CHALLENGE. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency or any pending action by any other Person, challenging or
seeking material damages in connection with the Merger or the ability of
CryoLife or any of its affiliates to own and operate IFM or otherwise materially
adversely affecting the business, assets, prospects, financial condition or
results of operations of IFM.
ARTICLE 10
PROVISIONS REGARDING THE DEBENTURE
10.1. REPRESENTATIONS BY THE DEBENTURE HOLDER. The Debenture Holder
represents and warrants to CryoLife that such Debenture Holder is acquiring the
Debenture for investment and not with a view to the distribution or resale
thereof, and will confirm such intention to
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CryoLife by letter simultaneously with the Closing. The issuance of the
Debenture hereunder has not been registered under the Securities Act or any
other state securities or Blue Sky law.
10.2. COVENANTS OF THE DEBENTURE HOLDER. The Debenture Holder covenants not
to offer, sell, transfer, assign, mortgage, pledge, or otherwise dispose of or
encumber the Debenture delivered to him pursuant to this Agreement unless in the
opinion of counsel acceptable to CryoLife given prior to such transaction, (a)
such transaction may be effected in compliance with the Securities Act, the
Florida Act and any other applicable state securities or Blue Sky law, and
without registration thereunder, or (b) if such registration is required, that
such registration has become effective and remains in effect.
10.3. LEGEND, ETC. The Debenture Holder agrees that CryoLife will endorse
on any certificate for the Debenture to be delivered to such Debenture Holder
pursuant to this Agreement an appropriate legend referring to the provisions of
Sections 10.1 and 10.2 hereof and the absence of registration thereof, and that
CryoLife may instruct its transfer agents not to transfer any such securities
unless advised by CryoLife that such provisions have been complied with.
10.4. DUE DILIGENCE. The Debenture Holder acknowledges that such Debenture
Holder has had full opportunity to investigate the business of CryoLife, and
that the investment in the Debenture is highly speculative. The Debenture Holder
represents that such Debenture Holder can bear the economic risks of such an
investment. The Debenture Holder also represents that such Debenture Holder has
such familiarity with the business of CryoLife that such Debenture Holder is
able to evaluate the advisability of such Debenture Holder's investment in the
Debenture based upon the information made available to such Debenture Holder
which includes, without limitation, the Securities Filings. The Debenture Holder
acknowledges and has carefully reviewed the "Risk Factors" discussion contained
in the Form S-3 of CryoLife filed with the Securities and Exchange Commission on
November 21, 1996.
10.5. REGISTRATION. Upon request by the holders of a majority of the
aggregate outstanding principal amount of the Debenture(s), and assuming Form
S-3 is available to CryoLife for such a transaction under the Securities Act of
1933, CryoLife will, upon no less than 45 days' notice, use its best efforts to
file a registration statement on Form S-3 (utilizing Rule 415 to the extent
available) to register up to one-third of the aggregate Merger Shares (the
"Annual Limit") subject to the Debenture(s) of such of the Debenture Holder(s)
as choose to participate. CryoLife shall be required to file no more than one
such registration statement during any consecutive eight-month period and no
more than three in the aggregate. In the event there is more than one Debenture
Holder and the number of Merger Shares requested to be registered exceeds the
Annual Limit, then those Debenture Holders requesting registration (the
"Participating Holders") shall be entitled to register up to such holder's
Proportionate Debenture Amount (as defined below) of the Annual Limit.
"Proportionate Debenture Amount" shall mean that number, expressed as a
percentage, that the principal amount of a Debenture Holder's Debenture bears to
the outstanding principal amount of all Debentures held by Participating
Holders.
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10.6. EXPENSES OF OFFERING. Without regard to whether the registration
statement relating to the proposed sale of the Merger Shares is made effective
or the proposed sale of such Merger Shares is carried out, CryoLife shall pay
the fees and expenses in connection with any such registration including,
without limitation, legal, accounting and printing fees and expenses in
connection with such registration statements, the registration filing and
examination fees paid under the Securities Act and state securities laws and the
filing fees paid to the National Association of Securities Dealers, Inc.
Notwithstanding the foregoing, the Debenture Holder shall be responsible for the
payment of underwriting discounts and commission, if any, applicable transfer
taxes and fees and charges of any attorneys or other advisers retained by such
Debenture Holder.
10.7. REGISTRATION PROCEDURES AND EXPENSES. If and whenever pursuant to the
provisions of this Article 10 CryoLife effects registration of Debenture(s)
under the Securities Act of 1933 and state securities laws, CryoLife shall:
(a) Prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for a period
not to exceed two months;
(b) Use its best efforts to register or qualify the securities covered
by such registration statement under the securities or blue sky laws of such
jurisdictions as the underwriters or the holder(s) of the Debenture(s)
pertaining to the Merger Shares subject to the registration, as applicable,
shall reasonably request, and do any and all other acts and things which may be
necessary or advisable (in the sole opinion of CryoLife) to enable the Debenture
Holder(s) offering such securities to consummate the disposition thereof;
provided, however, that in no event shall CryoLife be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by such
registration statement in any jurisdictions where it is not now so subject.
10.8. LIMITATION ON OBLIGATIONS TO REGISTER. Anything in this Article 10 to
the contrary notwithstanding:
(a) CryoLife shall not be obligated pursuant to Section 10.5 to effect
any registration after three years from the Closing Date, or such shorter period
as may hereafter be specified in Rule 144(k).
(b) CryoLife may defer the filing of any registration statement or
suspend the use of a prospectus under a currently effective registration
statement under Section 10.5 at its discretion for good cause. For example,
CryoLife may defer the filing ("Filing") if (i) CryoLife is engaged in active
negotiations with respect to an acquisition which would in the opinion of
counsel for CryoLife be required to be disclosed in the Filing; or (ii) in the
opinion of counsel for CryoLife, the Filing would require the inclusion therein
of certified financial statements other than those in respect of CryoLife's most
recently ended full fiscal year and any preceding full fiscal year, and CryoLife
may then, at its option, delay the imposition of its obligations pursuant to
Section 10.5 hereof until the earlier of (A) the conclusion or termination of
such negotiations,
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or the date of availability of such certified financial statements, whichever is
applicable, or (B) 120 days from the date of the registration request (which
period may be extended prior to the expiration of the deferred period by
CryoLife for up to one additional 90-day period with the consent of the
Debenture Holder(s), which consent will not be unreasonably withheld or
delayed).
In the event CryoLife has deferred a requested Filing, pursuant to the
preceding paragraph, such deferral period shall end if CryoLife registers shares
for resale by another stockholder of CryoLife on Form S-3. In the event CryoLife
undertakes an underwritten public offering for cash during any period in which a
requested Filing has been deferred, CryoLife shall provide the requesting
Debenture Holder(s) with customary "piggyback" rights, subject to (i) the right
of the managing underwriters to object to including such shares, (ii) any
currently existing piggyback rights, and (iii) the condition that such
requesting Debenture Holder(s) shall cooperate in the registration process in
all material respects, including execution by such Debenture Holder(s) of the
underwriting agreement agreed to by CryoLife and the underwriters.
(c) CryoLife may amend any registration statement to withdraw
registration of any selling Debenture Holder's Merger Shares if such Debenture
Holder shall fail or refuse to cooperate in full and in a timely manner with all
reasonable requests relating to such registration and the public offering
generally made by CryoLife, the underwriters (if any), their respective counsel
and CryoLife's auditors.
10.9. INDEMNIFICATION.
(a) Notwithstanding anything contained to the contrary in, and in
addition to, Article 7, with respect to any registration statement relating to
any Merger Shares sold by a Debenture Holder, such Debenture Holder will
indemnify CryoLife, its directors, each officer who signs the registration
statement and each person, if any, who controls CryoLife within the meaning of
the Securities Act, in writing, in form and substance acceptable to counsel for
CryoLife, against any and all expenses, claims, damages or liabilities to which
CryoLife may become subject under the Securities Act, Exchange Act, the Florida
Act, the Georgia Act, or otherwise, insofar as such expenses, claims, damages or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any preliminary prospectus,
registration statement, final prospectus or any amendment or supplement thereto,
or any filing made pursuant to the Exchange Act, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make statements contained therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
therein in reliance upon and in conformity with written information furnished to
CryoLife by such Debenture Holder expressly for use in the preparation thereof.
(b) With respect to any registration statement relating to any Merger
Shares held by the Debenture Holder(s), CryoLife will indemnify each Debenture
Holder, and each person, if any, who controls a Debenture Holder within the
meaning of the Securities Act,
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against all expenses, claims, damages or liabilities to which either Debenture
Holder, any such underwriter, or any such controlling person may become subject,
under the Securities Act, the Exchange Act, the Florida Act, the Georgia Act, or
otherwise, insofar as such expenses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any preliminary prospectus, registration statement,
final prospectus or any amendment or supplement thereto, or any filing under the
Exchange Act, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements contained therein not misleading; provided, however, that
CryoLife shall not be liable to a Debenture Holder or to any controlling person
of a Debenture Holder in any such case to the extent that such expenses, claims,
damages or liabilities arise out of or are based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to CryoLife
by a Debenture Holder expressly for use in the preparation thereof.
10.10. INVESTMENT REPRESENTATIONS. CryoLife may require any Debenture
Holder, as a condition of conversion of any portion of any Debenture, to give
written assurances in substance and form satisfactory to CryoLife to the effect
that such person is acquiring the Merger Shares subject to the Debenture for his
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effect as CryoLife deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
10.11. COMPLIANCE WITH SECURITIES LAWS. The Debenture shall be subject to
the requirement that, if at any time counsel to CryoLife shall determine that
the listing, registration, or qualification of the Merger Shares subject to such
Debenture upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such Debenture may not be converted in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained on conditions acceptable to CryoLife. Except as
specifically contained herein, CryoLife shall not be required to apply for or to
obtain such listing, registration, or qualification.
ARTICLE 11
TERMINATION
11.1. TERMINATION. This Agreement may be terminated at any time before the
Closing Date:
(a) by mutual written consent of CryoLife and IFM;
(b) by CryoLife if (i) there occurs a substantial loss, damage or
diminution of assets or other material adverse change in IFM or the business of
IFM or arising from any cause beyond the reasonable control of IFM or the
Stockholders including theft, fire, flood or act of God prior to Closing; (ii)
the revenues and earnings progress of IFM as shown on the
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books and records of IFM at the Closing has not continued within such ranges as
are consistent with prior performance of IFM; or (iii) IFM's entering into this
Agreement and consummating the Transactions are not approved by the
Stockholders;
(c) by any nonbreaching party hereto if there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of any nonterminating party hereto;
(d) by either CryoLife or IFM if the Closing is not consummated on or
before March 7, 1997, unless the failure to close by such date is attributable
to actions or omissions of the party seeking to terminate this Agreement under
this subsection; or
(e) in accordance with CryoLife's election under Section 12.1.
11.2. EFFECTS OF TERMINATION. In the event this Agreement is terminated
pursuant to Section 11.1(a), 11.1(b)(i), or 11.1(d) above, no party shall have
any obligations to the others hereunder. If this Agreement is terminated
pursuant to Section 11.1(b)(ii) or 11.1(c), each party hereto may exercise all
remedies available to it under this Agreement, at law or in equity. If this
Agreement is terminated, CryoLife and Newco shall promptly return to IFM all
copies of the due diligence materials previously provided by IFM to CryoLife and
Newco or their representatives and the obligations in respect of confidentiality
set forth herein shall remain in effect.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1. RISK OF LOSS. The risk of loss prior to the Closing Date shall be
with IFM. In the event that any of IFM's assets or the operations of the
business of IFM shall have been damaged or otherwise adversely affected as a
result of any strike, accident or other casualty or act of God or the public
enemy, or any judicial, administrative or governmental proceeding at such time
as IFM proposed to close, then CryoLife shall have the options of either (a)
proceeding to close with an assignment of any insurance proceeds which may be
paid to reflect such loss or damage or (b) terminating this Agreement without
further liability to IFM or the Stockholders.
12.2. SEVERABILITY. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and/or shall be modified
to conform with such laws, without invalidating the remaining provisions hereto.
12.3. MODIFICATION. This Agreement may not be changed or modified except in
writing specifically referring to this Agreement and signed by each of the
parties hereto.
12.4. ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. This Agreement and the
Closing Documents may not be assigned by CryoLife, except to an affiliate of
CryoLife, and
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may not be assigned by IFM or any Stockholder, without the prior written consent
of CryoLife. The terms and conditions hereof (including without limitation
Section 3.16) shall survive the Closing as provided herein and shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns.
12.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.6. NOTICES. All notices, demands, requests or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be (a) mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or (b) transmitted by hand delivery (including delivery by Federal
Express or similar reputable guaranteed overnight courier service), addressed as
follows:
If to IFM or the Stockholders: Ideas for Medicine, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to CryoLife or Newco: CryoLife, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief
Executive Officer
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Arnall Golden & ▇▇▇▇▇▇▇
2800 One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent, and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt or the affidavit of
messenger being deemed conclusive evidence of such delivery) or at such time as
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delivery is refused by the addressee upon presentation. All notices, requests,
demands, claims and other communications hereunder will be in writing. Any
notice, request, demand, claim, or other communication hereunder shall be deemed
duly given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid and addressed to the
intended recipient as set forth below.
12.7. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
together with the Exhibits and Schedules attached hereto, constitutes the entire
agreement and supersedes any and all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, is not
intended to confer upon any Person other than CryoLife, IFM, Newco and, after
the Closing Date, the Stockholders, any rights or remedies hereunder.
12.8. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Florida, excluding those relating to conflicts of laws.
12.9. MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel
have mutually contributed to its drafting. Consequently, no provision of this
Agreement shall be construed against any party on the ground that such party
drafted the provision or caused it to be drafted or the provision contains a
covenant of such party.
12.10. ATTORNEY'S FEES. In any action between the parties to enforce any of
the terms of this Agreement, the prevailing party shall be entitled to recover
reasonable expenses, including reasonable attorney's fees.
12.11. FURTHER ASSURANCES. The parties to this Agreement agree to execute
and or deliver, either before or after Closing, any further documents or
agreements contemplated hereby and/or necessary or appropriate to effectuate and
consummate the Transactions contemplated hereby, including, without limitation
the transfer of IFM's rights to the Intellectual Property. Each of the
Stockholders agrees to provide to CryoLife, both before and after closing, such
information as CryoLife may reasonably request in order to consummate the
Transactions contemplated hereby and to effect an orderly transition following
Closing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CRYOLIFE:
CRYOLIFE, INC.
By:_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive
Officer
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NEWCO:
CRYOLIFE ACQUISITION CORPORATION
By:_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive Officer
IFM:
IDEAS FOR MEDICINE, INC.
By:_______________________________
Name:_____________________________
Title:______________________________
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STOCKHOLDERS:
-----------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D.
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇▇▇▇▇
-----------------------------------
Natalie Judge
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D.
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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LIST OF SCHEDULES AND EXHIBITS
Schedule 3.2 Distribution of Closing Consideration
Schedule 3.4 Allocation of Closing Consideration
Schedule 4.1 IFM Consents
Schedule 4.9 Stock Rights
Schedule 5.2 IFM Stockholdings, Officers and Directors
Schedule 5.4 Exceptions to Required Consents
Schedule 5.7 Licenses and Permits
Schedule 5.8 Liabilities not disclosed on Historical Financials
Schedule 5.10 Changes Since 12/31/95
Schedule 5.11 Taxes
Schedule 5.12 Encumbrances
Schedule 5.13 Vehicles; Fixed Assets
Schedule 5.14 Inventory
Schedule 5.15(a) Trade Payables; Accrued Expenses
Schedule 5.15(c) Debts and Obligations
Schedule 5.16 Accounts Receivable
Schedule 5.17 Contracts and Commitments
Schedule 5.18 Leases
Schedule 5.19(a) Intellectual Property
Schedule 5.19(b) Form of Confidentiality Agreement
Schedule 5.20 Litigation
Schedule 5.21(a) Employee Benefit Plans
Schedule 5.21(c) IFM Employees Eligible for Continuation Coverage
Schedule 5.21(d) Noncompliance regarding Employee Benefit Plans
Schedule 5.21(e) Liability for Employee Benefits
Schedule 5.21(f) Benefits to Former Directors or Employees
Schedule 5.21(g) Changes in Employee Benefit Plans
Schedule 5.21(h) Sick Leave and Vacation Time
Schedule 5.23 Immigration Matters
Schedule 5.25 Insurance Policies
Schedule 5.26 Certain Contracts
Schedule 5.27 Bank Accounts
Schedule 5.28 Advisors Fees
Schedule 6.3 CryoLife Consents
Exhibit 2.2 Articles of Merger
Exhibit 3.1 Form of Convertible Subordinated Debenture
Exhibit 4.2 Form of Consulting Agreement with J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., M.D.
Exhibit 4.11(a) Form of Lease
Exhibit 4.11(b) Form of Guaranty
Exhibit 4.13 Form of Non-Competition Agreement
Exhibit 8.4(g) Form of IFM Counsel Opinion
Exhibit 8.15 Form of Release
Exhibit 9.3(f) Form of CryoLife and Newco Counsel Opinion
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