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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of June 26,
1994, among Siemens-Pacesetter, Inc., a Delaware corporation (the "Company"),
St. Jude Medical, Inc., a Minnesota corporation ("SJM"), SJM Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of SJM ("Acquisition
Subsidiary") and Siemens Medical Systems, Inc., a Delaware corporation
("Shareholder").
WHEREAS, the Company and the Subsidiaries are engaged in the
Business (each as defined herein);
WHEREAS, Shareholder is the sole shareholder of the Company;
and
WHEREAS, the Boards of Directors of SJM, Acquisition Subsidiary
and the Company have each determined that it is in their best interests and the
best interests of their respective shareholders that the Sellers sell, assign,
transfer, convey and deliver to SJM or its Affiliates all of the Assets, and
that SJM or its Affiliates purchase and acquire the same, subject to the
assumption by SJM or its Affiliates of the Assumed Liabilities (each such term
being used as defined herein), all upon the terms and subject to the conditions
set forth in this Agreement;
The parties hereto agree as follows:
ARTICLE 1
TRANSFER OF ASSETS
1.1 Assets to Be Sold. (a) On the terms and subject to the
conditions of this Agreement, the Company and the Subsidiaries shall, and
Shareholder shall cause Siemens Electric Limited, a company organized under the
laws of Canada (the "Shareholder Affiliate" and, together with the Company and
the Subsidiaries, the "Sellers"), on the Closing Date, to sell, assign,
transfer, convey and deliver to SJM, or to such Affiliate or Affiliates of SJM,
as SJM may designate in writing to Shareholder (collectively, "SJM Affiliates"),
and SJM shall purchase or shall cause one of the SJM Affiliates to purchase from
the Sellers on the Closing Date, all of the right, title and interest of the
Sellers in the assets, properties, rights and goodwill of every kind and
description and wherever located, whether tangible or intangible, real, personal
or mixed, owned by the Sellers which are used or held for use in the Business or
Prior Business, other than the Excluded Assets (the assets to be purchased by
SJM or the SJM Affiliates pursuant to this Section 1.1 being referred to as the
"Assets"), including, without limitation, the following:
(i) all furniture, fixtures, equipment, machinery
and other tangible personal property, used or held for use by a Seller
and used in the Business or otherwise owned or held by a Seller on the
Closing Date for use in the Business;
(ii) all vehicles used in the Business on the
Closing Date;
(iii) all inventories sold as part of the Business
and all merchandise, supplies or other personal property used in the
Business;
(iv) all third-party accounts and notes receivable
of the Sellers arising from the conduct of the Business or Prior
Business before the Closing Date;
(v) all books of account, general, financial and
personnel records, invoices, shipping records, supplier lists, device
history records, manufacturing records, traceability records,
regulatory documents, records, reports and correspondence, laboratory
notes, research records, correspondence and other documents, records,
data files and service manuals and any rights thereto (and copies of
tax records) used in, or relating to, the Business on the Closing Date;
(vi) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind (including rights
to insurance proceeds and rights under and pursuant to all warranties,
representations and guarantees made by suppliers of products, materials
or equipment, or components thereof), pertaining to, arising out of,
and enuring to the benefit, of any Seller and relating to the Business;
(vii) all sales and promotional literature, customer
lists and other sales-related materials owned, used, associated with or
employed by and used in the Business on the Closing Date;
(viii) all rights of each Seller under all contracts,
licenses, sublicenses, agreements, leases, commitments, and sales and
purchase orders, and under all bids and offers (to the extent such
offers are transferable) relating to the Business on the Closing Date;
(ix) all patents, trademarks, service marks, trade
names, copyrights, registrations and applications for registration with
respect to any of the foregoing, trade secrets, know-how and other
intellectual property owned by any Seller and used in the Business on
the Closing Date;
(x) all goodwill of the Sellers with respect to the
Business on the Closing Date;
(xi) all permits, licenses, agreements, waivers and
authorizations held or used by any Seller in connection with the
Business, to the extent transferable;
(xii) all product approvals, clearances,
registrations, permits, consents, waivers, certificates, listings and
exemptions submitted to or granted by a regulatory authority, foreign
or domestic, for the purpose of allowing the manufacture, sale or
distribution of a product of the Business, and all other permits,
orders, certificates, authorizations or approvals of any supranational,
national, federal, state, provincial or local, domestic or foreign,
governmental authority or regulatory agency held by a Seller in respect
of the Business;
(xiii) all advances, deposits, loans, prepaid
interest and other prepaid expenses of all kinds of the Business,
including but not limited to prepaid expenses;
(xiv) computer software and firmware used in the
Business, including, without limitation, software used in connection
with production, inventory tracking and work in process testing;
(xv) any and all interests in real property leases
(including leases for warehouse space) used or held for use in the
Business by each Seller and described in Schedule 4.19 attached hereto,
including, without limitation, the benefit of any prepaid rent,
security deposits and options to renew or purchase in connection
therewith;
(xvi) all real property owned by each Seller and
SI-Pace, Inc., a California corporation ("SI-Pace") and used in respect
of the Business, which is described in Schedule 4.19 attached hereto,
together with (a) all privileges, rights, easements and appurtenances
belonging to such real property, (b) all development rights, air
rights, mineral rights, water, water rights and water stock relating to
such real property, (c) all rights of Sellers and SI-Pace in and to any
streets, alleys, passages, other easements and other rights-of-way or
appurtenances included in, adjacent to or used in connection with such
real property, before or after the vacation thereof, (d) all buildings,
systems, facilities, fixtures, structures, fences, parking areas,
machinery, equipment, apparatuses and appliances used in connection
with the operation, maintenance, use or occupancy of the real property,
such as heating and air conditioning systems and facilities used to
provide any utility services, refrigeration, ventilation, garbage
disposal, recreation or other services on the real property, and (e)
all tangible personal property owned by Sellers and used in connection
with the operation, maintenance, use or occupancy of the real property
and located on the real property;
(xvii) all right, title and interest of the Sellers
in and to any stock, options, warrants, debentures or other securities
of Angeion, Inc.;
(xviii) all insurance contracts (other than worker's
compensation contracts) and other assets under the direction or control
of the Sellers maintained for the purpose of funding the liabilities
assumed by SJM or any SJM Affiliate that are assumed by SJM or any
designated SJM Affiliate pursuant to Section 7.1 or 7.3;
(xix) all patents, trademarks, service marks, trade
names, copyrights, registrations and applications for registration with
respect to any of the foregoing, trade secrets, know-how and other
intellectual property owned by any Seller and related to the Prior
Business;
(xx) copies of all device history records,
traceability records, manufacturing records, regulatory documents,
records, reports and correspondence, laboratory notebooks and research
records relating to the Prior Business;
(xxi) all product approvals, clearances,
registrations, permits, consents, waivers, certificates, listings and
exemptions submitted to or granted by a regulatory authority, foreign
or domestic, for the purpose of allowing the manufacture, sale or
distribution of a product of the Prior Business; and
(xxii) (A) all rights of the Sellers to any
insurance proceeds, or claims therefor, covering all damages to the
Business as a result of the January 17, 1994 earthquake (other than
proceeds for reimbursement of expenses paid prior to the Closing Date)
and (B) the reservation of any rights under any applicable insurance
policies relating to that earthquake.
(b) Notwithstanding any provision of Section 2.1(a) to the
contrary, the Assets shall exclude the following assets owned by one or more of
the Sellers (the "Excluded Assets"):
(i) all cash, cash equivalents and bank accounts
owned by each Seller at the Closing Date other than cash representing
insurance proceeds transferred to SJM pursuant to Section 1.1(a)(xxii);
(ii) all assets and properties of the Shareholder
Affiliate (other than copies of the portion of any customer list used
in the Business), whether tangible or intangible, that are not
predominantly used in the conduct of the Business;
(iii) the shares of capital stock of each Subsidiary
and the corporate books and records of each Subsidiary;
(iv) all rights of each Seller under this Agreement;
and
(v) any forward foreign exchange contract.
1.2 Assumption and Exclusion of Liabilities. (a) On the terms
and subject to the conditions of this Agreement, on the Closing Date, SJM shall,
or shall cause the appropriate SJM Affiliate to, assume and shall pay, perform
and discharge when due all Liabilities of each Seller arising out of the conduct
of the Business or relating to the Assets, whether accrued or arising before or
after the Closing, including, without limitation, (x) all third-party accounts
payable, Liabilities arising in connection with any contracts, licenses,
sublicenses, agreements, leases, commitments, and sales and purchase orders
included in the Assets and all Liabilities relating to employees, employee
benefits assumed by SJM or the appropriate SJM Affiliate pursuant to Sections
7.1 and 7.3, except for the Excluded Liabilities, and (y) all Post-Closing
Products Liability Losses and all Post-Closing Litigation Losses (the "Assumed
Liabilities").
(b) The Sellers shall retain, and shall be responsible for
paying, performing and discharging when due, and neither SJM nor the SJM
Affiliates shall assume or have any responsibility for, the following
Liabilities of the Sellers (the "Excluded Liabilities"):
(i) all Liabilities (as defined in Section 13.1)
relating to or arising out of the Excluded Assets;
(ii) Liabilities for contracts or Permits not
assigned because a consent or approval referred to in Section 6.1
cannot be obtained, except to the extent that a Seller or any of its
Affiliates provides SJM or an SJM Affiliate the rights and benefits of
any such contract or Permit;
(iii) Liabilities relating to employees, employee
benefits and Taxes retained by the Sellers under Sections 7.1, 7.2 and
7.3;
(iv) Liabilities to third parties for borrowed
monies;
(v) Liabilities for intercompany Tax-sharing
arrangements referred to in Schedule 4.6(viii) and indebtedness
referred to in Section 6.3;
(vi) Pre-Closing Products Liability Losses;
(vii) Pre-Closing Litigation Losses;
(viii) Liabilities arising from Retained Litigation;
and
(ix) Liabilities arising from Known Environmental
Conditions.
(c) Notwithstanding anything to the contrary in this Section
1.2, Liability and responsibility for Taxes shall be as set forth in Section
7.2.
1.3 Transfer Documentation and Possession. The parties hereto
agree that, in order to effect the transfer of the Assets and the assumption of
the Assumed Liabilities, the parties shall deliver the documents described in
Sections 3.2 and 3.3, and such other conveyance documents as are necessary to
convey (and as appropriate, record and perfect) title to the Assets to SJM or an
SJM Affiliate and for SJM or an SJM Affiliate to assume the Assumed Liabilities,
such other documents to be in form and substance mutually satisfactory to the
Sellers and SJM and as may be necessary under the laws of the jurisdiction where
such Assets and Assumed Liabilities are located to effect such transfer and
assumption. Coincident with the Closing, the Sellers shall deliver possession of
the Assets to SJM or the appropriate SJM Affiliate.
ARTICLE 2
CONSIDERATION
2.1 Consideration. Subject to Section 2.2, the consideration
paid for the Assets shall be $414,300,000 (the "Cash Consideration").
2.2 Cash Consideration Adjustment.
2.2.1 The Cash Consideration shall be subject to adjustment,
if any, after the Closing Date (as defined in Article 3) as specified in this
Section 2.2.
2.2.2 As soon as practicable (but in no event later than 90
calendar days following the Closing Date), Shareholder shall prepare and deliver
to SJM an audited balance sheet for the Business (the "Closing Balance Sheet"),
including the Company, the Subsidiaries and the Shareholder Affiliate, as of the
Closing Date, together with a supplementary statement adjusting the balance
sheet to exclude certain assets and liabilities which are not to be sold and to
include certain other assets and liabilities which are to be sold, all as set
forth on Schedule 2.2.2. In the preparation of the Closing Balance Sheet,
Shareholder shall in good faith consider all reasonable audit procedures
suggested by SJM, and to the extent such suggested procedures are acceptable to
Shareholder prepare the Closing Balance Sheet, in a manner consistent therewith.
The Deal Balance Sheet and the Closing Balance Sheet shall not include any
liability or reserve with respect to any future liabilities relating to or
arising out of the Settlement Agreement. The Closing Balance Sheet shall be
accompanied by the report thereon of Price Waterhouse, independent accountants
of Shareholder ("Shareholder's Accountants"), stating that the Closing Balance
Sheet fairly presents the financial position of the Business at the Closing Date
in conformity with Schedule 2.2.2 and otherwise in accordance with United States
generally accepted accounting principles (hereinafter referred to as "U.S.
GAAP"), which Schedule 2.2.2 and U.S. GAAP shall be applied on a basis
consistent with the preparation of the Deal Balance Sheet (as defined in Section
4.2). During the preparation of the Closing Balance Sheet by Shareholder and the
period of any dispute provided for in Section 2.2.4, SJM shall provide
Shareholder and Shareholder's Accountants reasonable access to the books,
records, facilities and employees of the Business, and SJM, the SJM Affiliates
and their respective successors, if any, shall cooperate fully with
Shareholder's Accountants, in each case to the extent required by Shareholder
and Shareholder's Accountants in order to prepare the Closing Balance Sheet and
to investigate the basis for any such dispute. SJM and its representatives shall
be given reasonable access to the books, records, facilities and employees of
Shareholder and the Shareholder Affiliate, including all supporting documents
and auditor's work papers used in the preparation of the Closing Balance Sheet,
as necessary for it to review the Closing Balance Sheet. SJM shall be permitted
to observe the physical count of inventory to be undertaken in preparation of
the Closing Balance Sheet.
2.2.3 Subject to the limitations set forth in Section 2.2.4,
within 30 Business Days after the date of receipt by SJM of the Closing Balance
Sheet:
(i) If the amount of Net Book Value shown on the
Closing Balance Sheet is less than $117,453,000 by at least $800,000
(the "Designated Amount"), Shareholder shall immediately pay to SJM, as
an adjustment to the Cash Consideration, in immediately available
funds, an amount equal to such excess over the Designated Amount; and
(ii) If the amount of Net Book Value shown on the
Closing Balance Sheet is greater than $117,453,000 by at least the
Designated Amount, SJM shall immediately pay, as an adjustment to the
Cash Consideration, in immediately available funds, to Shareholder an
amount equal to such excess over the Designated Amount.
2.2.4 If not disputed by SJM in accordance with this Section
2.2.4, the Closing Balance Sheet delivered by Shareholder to SJM shall be final,
binding and conclusive on the parties hereto. SJM may dispute any amounts
reflected on the Closing Balance Sheet to the extent that the net effect of such
disputed amounts in the aggregate would be to change the Net Book Value
reflected on the Closing Balance Sheet by more than the Designated Amount, but
only on the basis that the amounts reflected on the Closing Balance Sheet were
not arrived at in accordance with Schedule 2.2.2 and otherwise in accordance
with U.S. GAAP, or that the adjustments set forth in Schedule 2.2.2 or U.S. GAAP
were not applied on a basis consistent with the preparation of the Deal Balance
Sheet; provided, however, that SJM shall notify Shareholder and Shareholder's
Accountants in writing of each disputed item, specifying the amount thereof in
dispute and setting forth, in detail, the basis for such dispute, within 30
Business Days of SJM's receipt of the Closing Balance Sheet. In the event of
such a dispute, each of Shareholder and SJM shall negotiate in good faith to
reconcile their differences. If such dispute has not been resolved within 10
Business Days after the notice referred to in the preceding sentence has been
given, Ernst & Young ("SJM's Accountants") and Shareholder's Accountants shall
attempt to reconcile their differences, and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the parties hereto.
If any such resolution by SJM's Accountants and Shareholder's Accountants leaves
in dispute amounts the net effect of which in the aggregate (together with any
amounts originally disputed by SJM but no longer in dispute ("Non-Disputed
Amounts")) would not be to change the Net Book Value reflected on the Closing
Balance Sheet by at least the Designated Amount, all the amounts remaining in
dispute shall then be deemed to have been resolved in favor of the Closing
Balance Sheet, and such resolution shall be final, binding and conclusive on the
parties hereto. If SJM's Accountants and Shareholder's Accountants are unable to
reach a resolution, leaving in dispute amounts the net effect of which in the
aggregate (together with Non-Disputed Amounts) would change the Net Book Value
reflected in the Closing Balance Sheet by at least the Designated Amount, SJM's
Accountants and Shareholder's Accountants shall submit the items remaining in
dispute that SJM shall be entitled to dispute by the terms of this Section 2.2.4
for resolution to Deloitte & Touche or such other independent accounting firm of
international reputation as may be mutually acceptable to Shareholder and SJM
(the "Independent Accounting Firm"), which shall, within 30 Business Days of
such submission, determine and report to Shareholder and SJM upon such remaining
disputed items, and such report shall have the legal effect of an arbitral award
and shall be final, binding and conclusive on Shareholder and SJM. The fees and
disbursements of the Independent Accounting Firm shall be allocated between SJM
and Shareholder in the same proportion that the aggregate amount of such
remaining disputed items so submitted to the Independent Accounting Firm which
is unsuccessfully disputed by each such party (as finally determined by the
Independent Accounting Firm) bears to the total amount of such remaining
disputed items so submitted. No adjustment to any amount payable by SJM or
Shareholder pursuant to Section 2.2.3 shall be made with respect to amounts
disputed by SJM pursuant to this Section 2.2.4, unless the net effect of the
amounts successfully disputed by SJM in the aggregate (together with the
Non-Disputed Amounts) is to change the Net Book Value reflected on the Closing
Balance Sheet by at least the Designated Amount, in which case such adjustment
shall only be made in an amount equal to any excess over the Designated Amount.
Any amount that is payable under Section 2.2.3, including, without limitation,
any portion thereof that is subject to dispute under this Section 2.2.4 shall be
paid by Shareholder or SJM, as the case may be, in immediately available funds,
within five Business Days following the resolution of such dispute and in an
amount in accordance with such resolution.
2.2.5 In acting under this Agreement, Shareholder's
Accountants, SJM's Accountants and the Independent Accounting Firm shall be
entitled to the privileges and immunities of arbitrators.
2.2.6 Any payment required to be made by SJM or Shareholder
pursuant to Section 2.2.3 shall bear interest from the Closing Date through the
date of payment on the basis of the average of the daily rate of interest
publicly announced by Citibank, N.A. in New York, New York from time to time as
its base rate from the Closing Date to the date of such payment.
2.2.7 Within 15 Business Days of the date hereof, SJM and
Shareholder shall agree on a form of Escrow Agreement (the "Escrow Agreement")
with Citibank, N.A. (the "Escrow Agent"). On the Closing Date, SJM shall deposit
$13,000,000 of the Cash Consideration (the "Escrow Amount") into an account (the
Escrow Account") managed by the Escrow Agent. Pursuant to the terms of the
Escrow Agreement, the Escrow Agent shall release the Escrow Amount
simultaneously with a determination of a payment obligation by either SJM or
Shareholder, as the case may be, to the other in satisfaction of some or all of
the obligations due by one to the other under Section 2.2.3. If SJM is required
to make a payment to Shareholder under Section 2.2.3, some or all of the Escrow
Amount shall be released to Shareholder to the extent of the payment due to
Shareholder under Section 2.2.3 and credited against such payment. If
Shareholder is required to make a payment to SJM under Section 2.2.3, all of the
Escrow Amount shall be released to SJM. The fees and expenses of the Escrow
Agent shall be paid equally by SJM and Shareholder. Any interest earned on the
Escrow Amount while the Escrow Amount is held in the Escrow Account shall be
distributed to SJM and Shareholder, as the case may be, on the same pro rata
basis as SJM or Shareholder receives all or a portion of the Escrow Amount upon
the release thereof.
2.3 Allocation of Purchase Price. (a) As promptly as
practicable (but in no event later than 90 calendar days following the Closing
Date), SJM shall deliver to Shareholder a proposed allocation of the Cash
Consideration and the Assumed Liabilities among the Assets.
(b) SJM and Shareholder agree to negotiate in good faith
regarding the allocation referred to in subsection (a) above as promptly as
practicable. If SJM and Shareholder are unable (despite good faith negotiations)
to agree upon an allocation within 150 days after the Closing Date, SJM and
Shareholder shall each be individually responsible for performing its own
allocation.
ARTICLE 3
CLOSING
3.1 The Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Shearman & Sterling,
New York, New York, at 10:00 a.m. (New York City time) on the later of (i)
August 31, 1994 and (ii) the fifth Business Day after the satisfaction or waiver
of the conditions in Articles 8 and 9, or at such other time or place as the
parties may agree (the "Closing Date"). All matters at the Closing shall be
considered to take place simultaneously, and no delivery of any document shall
be deemed completed until all transactions and delivery of documents are
completed.
3.2 Deliveries of Shareholder and the Company. At the Closing,
Shareholder and the Company shall deliver or cause to be delivered to SJM or the
appropriate SJM Affiliates the following:
3.2.1 the Officers' Certificates from an executive officer of
each of Shareholder and the Company, in substantially the form of Exhibit 3.2.1
attached hereto;
3.2.2 the opinions of counsel for Shareholder and the Company,
in substantially the form of Exhibit 3.2.2 attached hereto;
3.2.3 copies of resolutions of the Company's Board of Directors
and of Shareholder's Board of Directors, each certified by the respective
Secretary (or other authorized officer) thereof as having been duly and validly
adopted and in full force and effect, authorizing execution and delivery of this
Agreement and performance respectively by the Company and Shareholder of the
transactions contemplated hereby;
3.2.4 an executed counterpart of the Medtronics Assignment and
Assumption Agreement, in substantially the form of Exhibit 3.2.4 attached hereto
(the "Medtronics Assignment");
3.2.5 a license agreement among St. Jude Medical
International, Inc., SJM and Siemens AG, in form and substance reasonably
satisfactory to each such party, whereby Siemens AG grants to SJM and its
Affiliates a non-exclusive short-term transition license to continue use of
those certain inventories of products and packaging and, for a certain period,
molds for production, bearing the trademark "SIEMENS" existing at the Closing
Date;
3.2.6 certificates evidencing securities of Angeion, Inc.
owned by the Company;
3.2.7 assignments necessary to assign the real property leases
being transferred hereunder to SJM;
3.2.8 the Bill of Sale and the Deeds;
3.2.9 an assignment of Proprietary Rights in form and
substance reasonably satisfactory to each of SJM and Shareholder;
3.2.10 an executed counterpart of the Canadian Transitional
Services Agreement in substantially the form of, and having substantially the
terms contained in, Exhibit 3.2.10 (the "Canadian Transitional Services
Agreement"); and.
3.2.11 an executed counterpart of the Escrow Agreement.
3.3 Deliveries of SJM. At the Closing, SJM shall deliver to
Shareholder, on behalf of the Sellers, the following:
3.3.1 the Cash Consideration by (x) wire transfer in
immediately available funds to a U.S. bank account designated by Shareholder to
SJM in writing at least two Business Days prior to the Closing Date and (y) to
the Escrow Agent pursuant to Section 2.2.7.;
3.3.2 the Officer's Certificate from an executive officer of
SJM, in substantially the form of Exhibit 3.3.2 attached hereto;
3.3.3 the opinion of counsel for SJM, in substantially the
form of Exhibit 3.3.3 attached hereto;
3.3.4 Certificates of Good Standing dated not more than thirty
(30) days prior to the Closing Date, with respect to SJM and Acquisition
Subsidiary issued by the Secretaries of State of Minnesota and Delaware,
respectively;
3.3.5 copies of resolutions of SJM's and Acquisition
Subsidiary's Boards of Directors, certified by the respective Secretaries
thereof as having been duly and validly adopted and in full force and effect,
authorizing execution and delivery of this Agreement and performance of the
transactions contemplated hereby;
3.3.6 an executed counterpart of the Medtronics Assignment;
3.3.7 an executed counterpart of the Assumption Agreement; and
3.3.8 an executed counterpart of the Canadian Transitional
Services Agreement; and
3.3.9 an executed counterpart of the Escrow Agreement.
3.4 Further Documents.
3.4.1 SJM, Shareholder and the Sellers shall execute and
deliver, or cause to be executed and delivered, such other powers of attorney,
instruments, documents or certificates as the other parties may reasonably
request to effect or evidence the consummation of the transactions contemplated
by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
AND THE COMPANY
Shareholder and the Company represent and warrant to SJM and
agree with SJM that:
4.1 Authority; Organization, Capitalization and Qualification;
Effect of Agreement.
4.1.1 Authority. Each of Shareholder and the Company has full
corporate power and authority to execute and deliver this Agreement, perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, the performance by Shareholder and
the Company of their obligations under this Agreement and the consummation by
Shareholder and the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Shareholder and
the Company, and no other corporate proceedings on the part of Shareholder or
the Company are necessary to authorize the execution and delivery of this
Agreement and to consummate the transactions so contemplated. This Agreement has
been duly executed and delivered by Shareholder and the Company and constitutes
the valid and binding obligation of Shareholder and the Company and is
enforceable against Shareholder and the Company in accordance with its terms,
except to the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (ii) is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.1.2 Organization and Qualification of the Company. Each of
the Company and the Shareholder Affiliate is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and Canada, respectively, and has full corporate power and authority to carry on
its business as it is now being conducted. Each of the Company and the
Shareholder Affiliate is duly qualified to do business as a foreign corporation
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect (as
defined in Section 13.1). Shareholder has heretofore delivered, or caused to be
delivered, to SJM true and complete copies of the Company's certificate of
incorporation and bylaws.
4.1.3 Subsidiaries. Except as set forth in Schedule 4.1.3, the
Company has no subsidiaries, does not own, directly or indirectly, any stock,
partnership interest, joint venture interest or other equity interest in any
other Person, and does not have the power to vote, or to exercise a controlling
influence with respect to, any securities of any class of any Person, the
holders of which class are entitled to vote for the election of directors (or
persons serving similar functions) of such Person. Schedule 4.1.3 lists each
Subsidiary, and with respect to each Subsidiary, lists the number of shares of
its authorized capital stock, the number and class of shares thereof duly issued
and outstanding, the names of all stockholders and the number of shares of stock
owned by each stockholder. For the purposes of Article 1 and the representations
and warranties in this Article 4, "Subsidiary" shall mean BDL Holdings, Inc. and
Bio-Devices Laboratories, Inc.
4.1.4 Title to Stock. Shareholder holds all of the outstanding
capital stock of the Company free and clear of any Liens.
4.1.5. Officers and Directors. Schedule 4.1.5 contains an
accurate and complete list of all of the current directors and officers of the
Company.
4.1.6 Consents. Except as disclosed in Schedule 4.1.6 or as
would not, individually or in the aggregate, have a Material Adverse Effect, no
consent, approval, waiver or other action by any Person under any contract,
agreement, indenture, lease, instrument or other document to which Shareholder,
the Company, the Shareholder Affiliate or any Subsidiary is a party or by which
any of them or their Assets is bound is required or necessary for the execution,
delivery and performance of this Agreement or the other documents contemplated
hereby by Shareholder, the Shareholder Affiliate, any Subsidiary or the Company,
as the case may be, or the consummation of the transactions contemplated hereby
or thereby.
4.1.7 No Default. Except as disclosed in Schedule 4.1.7, the
execution, delivery and performance by Shareholder, the Shareholder Affiliate,
any Subsidiary and the Company of this Agreement or the other documents
contemplated hereby and the consummation by them of the transactions
contemplated hereby and thereby do not and will not (a) except as would not have
individually, or in the aggregate, a Material Adverse Effect, contravene or
constitute a default under or give rise to a right of termination, cancellation
or acceleration of any right or obligation of Shareholder or to a loss of any
benefit to which the Company, the Shareholder Affiliate or any Subsidiary is
entitled under (i) any provision of applicable law or regulation (assuming the
governmental consents referred to in Section 4.9 have been obtained); (ii) the
certificate of incorporation or bylaws of Shareholder or the Company; (iii) any
Commitment (as defined in Section 4.6); or (iv) any judgment, injunction, order,
decree, administrative interpretation, award or other instrument binding upon
Shareholder, the Company, any Subsidiary or the Shareholder Affiliate in respect
of the Business or (b) except as would not have individually, or in the
aggregate, a Material Adverse Effect, result in the creation or imposition of
any Lien on any Asset.
4.2 Financial Statements. Shareholder has delivered to SJM
copies of the audited balance sheets of the Business as of September 30, 1993
(together with a supplementary statement adjusting such financial statements to
exclude certain assets and liabilities, including certain reserves, which are
not to be sold and assumed and to include certain assets and liabilities which
are to be sold and assumed, all as set forth on Schedule 2.2.2 (the "Deal
Balance Sheet")), as well as an audited income statement and cash flow statement
for the Business for the fiscal year ended September 30, 1993, together with the
related notes and schedules thereto (collectively, the "Financial Statements").
The Financial Statements are attached as Schedule 4.2. The Financial Statements
have been prepared from the books and records of the Business in accordance with
U.S. GAAP applied on a consistent basis, subject to normal year-end adjustments,
and fairly present the financial condition of the Business as at the date
thereof and results of its operations for the periods covered thereby (subject
to the adjustments contained on the supplementary statement). The supplementary
statement has been subjected to the auditing procedures applied in the audit of
the Financial Statements and is fairly stated in all material respects in
relation to the Financial Statements. Schedule 2.2.2.1 sets forth for each of
the Financial Statements the intercompany eliminations between the Financial
Statements and each of the corresponding "Non-U.S. Financial Statements" (as
defined in the Non-U.S. Asset Purchase Agreement) (which the Sellers are
assuming have been prepared in accordance with U.S. GAAP) that are necessary to
prepare in accordance with U.S. GAAP combined financial statements for the
Financial Statements and the Non-U.S. Financial Statements. Shareholder has also
delivered to SJM unaudited profit and loss information for the Business for the
period from October 1, 1993 through May 31, 1994, based on financial information
normally prepared by the Company for delivery to Shareholder.
4.3 Absence of Certain Developments. Except as set forth in
Schedule 4.3, since September 30, 1993, the Business has been operated only in
the ordinary course, and neither the Company, any Subsidiary nor the Shareholder
Affiliate in respect of the Business, alone or in the aggregate, has:
4.3.1 mortgaged, pledged or subjected to any Lien, any of its
property or assets, tangible or intangible, other than in the ordinary course of
business, Permitted Liens and Liens that will be released at or prior to
Closing;
4.3.2 except as contemplated by this Agreement, (i) sold,
leased, assigned, transferred or otherwise disposed of any of its assets, except
for inventory sold in the ordinary course of business, or (ii) cancelled or
compromised any debt or claim, or waived or released any right, in the case of
both (i) and (ii) above, having a value of more than $250,000 or an aggregate
value in excess of $750,000;
4.3.3 except as contemplated by this Agreement, made any
material direct or indirect payments, dividends, sales or transfers of assets,
other than normal compensation, or made or granted any bonus or any wage, salary
increase, severance or severance arrangement to any director, manager, officer,
salesperson, distributor, agent, employee or group of employees or made or
granted any increase in any employee compensation or benefit plan or arrangement
(except in accordance with past practice), or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan or
arrangement;
4.3.4 sold, assigned, transferred or licensed to any Person any
rights under any patents, trademarks, service marks, trade names, copyrights,
applications for registration with respect to any of the foregoing, trade
secrets or other intellectual property owned by, or licensed to, the Company,
any Subsidiary or the Shareholder Affiliate in respect of the Business;
4.3.5 entered into any settlement agreement regarding the
breach or infringement (or alleged breach or infringement) of any United States
or foreign intellectual property license, patent, copyright or trademark;
4.3.6 made any capital expenditures in excess of an aggregate
of $5,000,000;
4.3.7 suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or consistent
with past practice;
4.3.8 suffered any damage, destruction or loss of any assets
owned by the Company or used in the operation of the Business which in the
aggregate have a replacement cost of more than $1,500,000 whether or not covered
by insurance;
4.3.9 modified, amended or terminated any Commitment (as
defined in Section 4.6) in a manner materially adverse to the Business;
4.3.10 suffered any Material Adverse Effect;
4.3.11 been the subject of any action taken by the United
States Food and Drug Administration (the "FDA") or any foreign regulatory
authority having jurisdiction over similar matters, excluding observations of
inspectors which have not resulted in any action, claim or investigation by the
FDA or other regulatory authority;
4.3.12 declared, set aside or paid any dividend or other
distribution with respect to any shares of capital stock of the Company, or made
any repurchase, redemption or other acquisition by the Company of any
outstanding shares of capital stock or other ownership interests in or other
securities of the Company, except as contemplated by Section 6.9;
4.3.13 altered any material term of any outstanding security of
the Company;
4.3.14 made any change in any method of accounting or
accounting practice or guideline by the Company, the Shareholder Affiliate in
respect of the Business or any Subsidiary, except for any such change required
by U.S. GAAP or similar rules and except for changes to obtain uniformity of
accounting policies and classifications;
4.3.15 entered into any foreign exchange hedging contracts or
any other financial derivative contracts;
4.3.16 undertaken any (i) incurrence, assumption or guarantee
by the Company or any Subsidiary of any indebtedness for borrowed money other
than in the ordinary course of business in amounts and on terms consistent with
past practices, (ii) issuance or sale of any securities convertible into or
exchangeable for debt securities of the Company or any Subsidiary, or (iii)
issuance or sale of options or other rights to acquire from the Company or any
Subsidiary, directly or indirectly, debt securities of the Company or any
Subsidiary or any securities convertible into or exchangeable for any such debt
securities;
4.3.17 failed to maintain its inventory in a normal and
customary manner materially consistent with its prior practice, or made any
material change in its selling, pricing or advertising practices or credit
terms, limits or durations inconsistent with its prior practice;
4.3.18 discharged or satisfied accounts payable other than in
the ordinary course of business consistent with past practice; or
4.3.19 entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs 4.3.1 through 4.3.18
above.
4.4 Title to Personal Property and Assets. The Company, the
Shareholder Affiliate or a Subsidiary owns or has a valid leasehold interest in
all tangible personal property necessary for the conduct of the Business, and
owns or has a valid license or sublicense to use all computer software used
predominantly in the Business, free and clear of all Liens, except as set forth
in paragraph (a) of Schedule 4.4, Permitted Liens or as reflected on the
Financial Statements. Except as set forth in paragraph (b) of Schedule 4.4, the
equipment and fixed assets of the Business are in good condition and repair and
are usable in the ordinary course of business, ordinary wear and tear excepted.
Shareholder, the Shareholder Affiliate and the Company have furnished to SJM a
summary of tangible personal property, owned or leased by, in the possession of,
or used by the Company, the Shareholder Affiliate (but only to the extent used
in the Business) or the Subsidiaries. The Assets constitute all of the assets
and properties necessary for the conduct of the Business as currently conducted
in all material respects.
4.5 Patents, Trademarks and Copyrights. To the knowledge of
Shareholder, the Subsidiaries and the Company, (a) Schedule 4.5(a) lists all
patents, trademarks, service marks, trade names, copyrights, registrations and
and applications for registration with respect to any of the foregoing owned by
the Company or any Subsidiary; (b) Schedule 4.5(b) lists all license agreements
under which third party owned patents, trademarks, service marks, trade names,
copyrights, registrations and applications for registration of any of the
foregoing, know-how, technology or other intellectual property rights are
licensed to the Company, the Shareholder Affiliate or any Subsidiary; and (c)
Schedule 4.5(c) lists all claims and disputes pending or threatened (in writing)
with third parties alleging that the Company, the Shareholder Affiliate or any
Subsidiary, on the one hand, or such third party, on the other hand, infringes
on the other's patents, trademarks, service marks, trade names, copyrights,
trade secrets or other intellectual property rights. The Company has previously
furnished or made available to SJM all licenses listed on Schedules 4.5(a) and
4.5(b). On or before the Closing, the Company shall make available to SJM all
pending patent applications filed by the Company, the Shareholder Affiliate (in
respect of the Business) or any Subsidiary. Schedule 4.5(d) lists all
outstanding orders, judgments and decrees restricting the use by the Company,
the Shareholder Affiliate or any Subsidiary of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other intellectual property
rights owned or licensed by any of them. All of the license agreements listed on
Schedule 4.5(b) will be in full force and effect on the Closing Date, and
neither the Company, the Shareholder Affiliate nor any Subsidiary is in default
under any of them nor, to the knowledge of Shareholder or the Company, (i) is
any other party to any such license agreement in default thereunder, nor (ii)
does any condition exist that, with notice or lapse of time or both, would
constitute a default thereunder, except in each case for such failures to be in
full force and effect, defaults or conditions that would not have individually,
or in the aggregate, a Material Adverse Effect. The right, title and interest of
the Company, the Shareholder Affiliate and the Subsidiaries in and to the
Proprietary Rights and Proprietary Information are duly recorded (as applicable)
and free and clear of all Liens and rights of third parties other than Permitted
Liens and as otherwise described in Schedule 4.5(e). Each of the Company, the
Shareholder Affiliate and the Subsidiaries has established safeguards to
maintain the secrecy of its Proprietary Information that it considers to be
reasonable. To the knowledge of Shareholder and the Company, the information
which Shareholder, the Shareholder Affiliate, the Subsidiaries and the Company
believe is Proprietary Information has not been disclosed by the Company or any
of its Affiliates to any other person, entity or governmental agencies, except
pursuant to confidentiality agreements, protective orders or law and except as
would not have individually, or in the aggregate, a Material Adverse Effect. As
used herein, "Proprietary Information" means all know-how and technology owned
by the Company, the Shareholder Affiliate and the Subsidiaries and used in the
Business (except in the case of the Shareholder Affiliate, such term shall mean
know-how and technology used predominantly in the Business); and "Proprietary
Rights" means all patents, trademarks, service marks, copyrights, registrations
and applications therefor arising out of, and owned by the Company, the
Shareholder Affiliate and the Subsidiaries as part of, the Business. To the
knowledge of the Company, the Subsidiaries and the Shareholder Affiliate, no
interference actions are pending, and no notice has been received of an
intention to provoke an interference action or to otherwise challenge the
validity or priority of inventorship before the United States Patent and
Trademark Office or other similar authorities with respect to any patent or
application therefor included in the Assets.
4.6 Commitments. Paragraph (a) of Schedule 4.6 sets forth a
list of all of the following written contracts and other agreements to which the
Company or any Subsidiary, or the Shareholder Affiliate in respect of the
Business, is a party or by which the Company or any Subsidiary, or the
Shareholder Affiliate in respect of the Business or any Assets, bound or subject
(collectively, "Commitments"): (i) customer contracts and agreements for the
sale of materials or products which by their terms exceed one year or which are
in dollar amounts which equal or exceed $500,000 per annum; (ii) distributorship
agreements and manufacturer's representative agreements which provide for
payments in excess of $500,000 per annum; (iii) supply and vendor contracts for
sole source components or which provide for payments in excess of $350,000 per
annum; (iv) material research and development agreements; (v) employment,
consulting, independent contractor, severance, change in control, retention and
indemnification agreements, arrangements or understandings, and any other
agreements, arrangements or understandings, between the Company, any Subsidiary
or the Shareholder Affiliate in respect of the Business, and any current or
former stockholder, officer, director, employee, consultant, agent or other
representative, which provide for payments in excess of $100,000 per annum or
with respect to any such contract under which the total liability of the
Company, any Subsidiary or the Shareholder Affiliate in respect of the Business
equals or exceeds $500,000; (vi) contracts and other agreements with any labor
union or association representing any employee of the Company, any Subsidiary or
the Shareholder Affiliate in respect of the Business; (vii) joint venture
agreements; (viii) contracts or other agreements under which the Company agrees
to indemnify for or share Tax liability of any party; (ix) contracts and other
agreements relating to the borrowing of money; (x) any equipment leases
requiring payment of at least $100,000 within a given year which are not
cancelable without penalty upon 90 days' notice; (xi) agreements settling
pending or threatened Litigation which require continuing obligations after the
date hereof; (xii) any agreements between the Company, any Subsidiary or the
Shareholder Affiliate (in respect of the Business) and any of their Affiliates
(other than individuals); (xiii) agreements granting rights or options to
purchase the securities or assets (other than inventory in the ordinary course
of business) of other companies or entities; (xiv) agreements which limit the
Business from competing in any line of business or in any geographic area other
than distributorship or representation agreements which are exclusive as to
geographic area; or (xv) any other contract or other agreement (other than
contracts and agreements of the type specified in clauses (i) through (xiv)
above) that is material to the Business, whether or not made in the ordinary
course of business. There have been delivered or made available to SJM true and
complete copies of all such contracts and other agreements set forth in
paragraph (a) of Schedule 4.6. All of such Commitments are in full force and
effect, and none of the Company, any Subsidiary nor the Shareholder Affiliate is
in default under any of them, nor, to the knowledge of Shareholder or the
Company, (i) is any other party to any such contract or other agreement in
material default thereunder, nor (ii) does any condition exist that, with notice
or lapse of time or both, would constitute a default thereunder. The Company has
not received any notification of any change in its arrangements with customers
and suppliers that would individually, or in the aggregate, have a Material
Adverse Effect. Paragraph (b) of Schedule 4.6 indicates which of the Commitments
requires the consent of a third party to be transferred or to remain in full
force and effect following the consummation of the transactions contemplated by
this Agreement.
4.7 Litigation. Except as set forth in Schedule 4.7, there is
no Litigation pending or, to Shareholder's or the Company's knowledge,
threatened which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby. Schedule 4.7 lists any
Litigation and, to Shareholder's or the Company's knowledge, any investigation
by a governmental entity, in each case that (i) involves a claim, or to
Shareholder's or the Company's knowledge, potential claim, of liability, in
excess of $2,000,000, against or affecting the Company, any Subsidiary or the
Shareholder Affiliate in respect of the Business or (ii) enjoins, or seeks to
enjoin, the operation of a portion of the Business or seeks declaratory judgment
if such injunction or judgment would, or if entered would, constitute a Material
Adverse Effect.
4.8 Compliance with Laws; Permits. Except as set forth in
paragraph (a) of Schedule 4.8, the Company, a Subsidiary or the Shareholder
Affiliate currently holds all permits, licenses, clearances, registrations,
consents, waivers, listings, exemptions, orders, certificates, authorizations or
approvals of any international, federal, provincial, state or local, domestic or
foreign, governmental authorities or regulatory agencies, including, without
limitation, those regulating safety, effectiveness and market clearance of
medical devices (the "Permits"), necessary to carry on the Business as it is
currently being conducted, except for such Permits the absence of which would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in paragraph (b) of Schedule 4.8, no approval or consent of any Person
is needed in order that any Permit shall continue in full force and effect
following the consummation of the transactions contemplated by this Agreement
and to assign such Permits to SJM or one of its Affiliates, except where the
failure to obtain such approvals or consents would not have individually, or in
the aggregate, a Material Adverse Effect. Except as set forth in paragraph (c)
of Schedule 4.8, or as would not have a Material Adverse Effect, the Company,
the Subsidiaries and the Shareholder Affiliate in respect of the Business have
complied with all applicable laws, regulations, Permits and orders of foreign,
federal, state and local governments and all agencies thereof (including,
without limitation, the FDA or any foreign regulatory authority having
jurisdiction over similar matters) that affect the Business and to which the
Company, the Subsidiaries or the Shareholder Affiliate are subject, and no
claims have been filed against the Company, the Subsidiaries or the Shareholder
Affiliate in respect of the Business alleging a violation of any such laws,
regulations or orders. Except as set forth in paragraph (d) of Schedule 4.8, no
notice, warning or other communication from any governmental authority in
respect of any failure or alleged failure by the Company, the Subsidiaries or
the Shareholder Affiliate in respect of the Business to comply with any law,
regulation or order has been received by the Company, the Subsidiaries or the
Shareholder Affiliate.
4.9 Governmental Consents. Except for the filing under the HSR
Act and otherwise as set forth in Schedules 4.8 and 4.9, the execution, delivery
and performance by Shareholder, the Shareholder Affiliate, the Subsidiaries and
the Company of this Agreement and the other documents contemplated hereby and
the consummation by Shareholder, the Shareholder Affiliate, the Subsidiaries and
the Company of the transactions contemplated by this Agreement require no action
by, or in respect of, or filing with, any governmental body, agency, official or
authority.
4.10 Employee Benefit Plans.
4.10.1 Schedule 4.10.1 sets forth a true and complete list of
each material Employee Benefit Plan covering any Employee (each as defined in
Section 4.10.5). With respect to each Employee Benefit Plan set forth on
Schedule 4.10.1:
(a) Each Company Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all material respects with its terms, and
with all applicable laws, regulations, ordinances, codes or
other legally binding rules and other requirements of all tax,
labor and other governmental authorities having jurisdiction
over the Company, and all applicable collective bargaining
agreements and works council rules, including the requirements
of ERISA, the Code, and other applicable laws.
(b) All employer and Employee contributions with
respect to Employees which are due and owing as of the Closing
Date pursuant to Employee Benefit Plans and Employee Benefit
Plans of the Shareholder Affiliate with respect to Employees
have been or will be made in accordance with local law and past
practice. Any liabilities for amounts accrued with respect to
Employees under any Employee Benefit Plan set forth in Schedule
4.10.1 as of the Closing Date have been appropriately reflected
on the books and records of such Employee Benefit Plan sponsor
in accordance with local law, past practice and generally
accepted accounting principles in the local jurisdiction.
(c) The Company or Shareholder has delivered to SJM
correct and complete copies of all plan documents and summary
plan descriptions, all material communications to Employees,
all related trust agreements, insurance contracts, and other
funding agreements which implement each Company Employee
Benefit Plan, and, where a plan document for a Company Employee
Benefit Plan does not exist, a detailed description of such
Company Employee Benefit Plan.
(d) No Company Employee Benefit Plan is either (i) a
Multiemployer Plan, or (ii) except as disclosed on Schedule
4.10.1, an Employee Welfare Benefit Plan (as defined in Section
4.10.5) providing medical, health, life insurance, or other
welfare-type benefits for current or future retired or
terminated Employees, their spouses or their dependents (other
than in accordance with Code Section 4980B).
(e) Except as disclosed on Schedule 4.10.1, to the
knowledge of the Company and its Subsidiaries, there has been
no amendment to, written interpretation of, or announcement
(whether or not written) relating to, or any change in employee
participation or coverage under, any Employee Benefit Plan that
is not reflected in the text of such Employee Benefit Plan
which would materially increase the expense (whether or not
such expense is recognized under generally accepted accounting
principles) to the employer whose Employees are covered by such
Employee Benefit Plan, other than as a function of the number
of plan participants or as a result of a change in the
applicable law.
(f) Except as disclosed on Schedule 4.10.1, or as
otherwise expressly provided with respect to a Company Employee
Benefit Plan or as otherwise required by applicable law, to the
knowledge of the Company and its Subsidiaries, no condition
exists that would prevent the amendment or termination of any
Company Employee Benefit Plan with respect to any Employee.
4.10.2 With respect to each Company Employee Benefit Plan that
any of the Company or its Subsidiaries, or any member of the Controlled Group
(as defined in Section 4.10.5) which includes the Company and its Subsidiaries,
maintains or has ever maintained for Employees, or to which any of them
contributes, has ever contributed, or has ever been required to contribute for
Employees, except as set forth on Schedule 4.10.2:
(a) neither SJM nor any SJM Affiliate has any direct
or indirect material liability: (i) with respect to any
complete or partial termination of any such Company Employee
Benefit Plan (including any Multiemployer Plan (as defined in
Section 4.10.5)) or any Company Employee Benefit Plan that has
been the subject of a Reportable Event (as defined in Section
13.1) as to which notices would be required to be filed with
the Pension Benefit Guaranty Corporation ("PBGC"), (ii) for any
breach of fiduciary duty or any failure to act or comply in
connection with the administration or investment of the assets
of any such Company Employee Benefit Plan, (iii) for any
transaction or holding of any asset under or in connection with
any Company Employee Benefit Plan that would result in
liability under Title I of ERISA or liability for any tax
pursuant to Section 4975 of the Code, or any Canadian tax laws,
(iv) to the PBGC (other than for PBGC premium payments) or
otherwise under Title IV of ERISA or under the Code with
respect to any such Company Employee Benefit Plan which is an
Employee Pension Benefit Plan, (v) arising out of or in
connection with any Multiemployer Plan (including withdrawal
liability), or (vi) under any Company Employee Benefit Plan
which is an Employee Welfare Benefit Plan providing medical,
health, life insurance, or other welfare type benefits for
current or future retired or terminated employees, their
spouses or their dependents (other than required by applicable
U.S. federal or state law or Canadian federal or provincial
law);
(b) no proceeding by the PBGC to terminate any such
Employee Benefit Plan has been instituted or threatened; and
(c) no action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of the assets of any such Company Employee Benefit
Plan (other than routine claims for benefits) that could
reasonably be expected to result in a material liability to SJM
or an SJM Affiliate pending or threatened, and neither
Shareholder, the Company, nor any members of the Controlled
Group that includes the Company, has any knowledge of any basis
for any such action, suit, proceeding, hearing, or
investigation.
4.10.3 Except as set forth on Schedule 4.10.3:
(a) the consummation of the transactions contemplated
by this Agreement will not (i) entitle any Employee to
severance pay, supplementary unemployment compensation or any
similar payment, (ii) accelerate the time of payment or
vesting, or increase the amount of any compensation due to any
such Employee, or (iii) constitute or involve a prohibited
transaction that is not otherwise covered by a statutory or
administrative exemption; and
(b) no collective bargaining agreement, employment
agreement or other agreement contains any "change in control"
or similar provisions which may be triggered by any of the
transactions contemplated in this Agreement.
4.10.4 Except as disclosed in Schedule 4.10.4, there have been
no statements by authorized representatives of the Company or its Subsidiaries,
Shareholder or the Shareholder Affiliate (in respect of the Business), whether
oral or in writing, regarding the Employee Benefit Plans to be maintained (or
not to be maintained) by SJM or the designated SJM Affiliate after the Closing
Date, which will result in material liability to SJM or the designated SJM
Affiliate, whether direct or indirect.
4.10.5 For purposes of this Agreement:
(a) "Company Employee Benefit Plan" means any
Employee Benefit Plan that exists immediately prior to the
Closing Date, is sponsored solely by or is primarily
administered by the Company or its Subsidiaries and covering
solely Employees, and any such Company Employee Benefit Plan
shall be identified as such on Schedule 4.10.1.
(b) "Controlled Group" has the meaning set forth in
Code Sec. 414.
(c) "Employee" means a current employee, including
both active employees (including light duty employees),
inactive employees (including employees on a leave of absence,
sick leave, short term disability or worker's compensation
disability on the Closing Date), and former employees
(including retirees and employees on long term disability), of
the Company or its Subsidiaries or any active employee of the
Shareholder Affiliate who is 100% engaged in the Business.
(d) "Employee Benefit Plan" means any agreement,
plan, program, fund, policy, contract or arrangement (either
written or unwritten) providing compensation, benefits,
pension, retirement, profit sharing, stock bonus, stock option,
stock purchase, phantom or stock equivalent, bonus, incentive,
deferred compensation, hospitalization, medical, dental,
vision, vacation, insurance, sick pay, disability, severance,
or similar employee benefits covering any Employee, and the
beneficiaries and dependents of the Employee, including without
limitation, (i) any Employee Welfare Benefit Plan (the "Welfare
Plan"), whether or not terminated, including but not limited to
any severance agreement or plan, any material fringe benefit
plan or program, any medical plan, life insurance plan,
short-term or long-term disability plan, dental plan, personnel
policy, vacation time, holiday pay, bonus program, service
award, moving expense reimbursement program or sick leave; (ii)
any deferred compensation or retirement plan or arrangement
which is an Employee Pension Benefit Plan, whether or not
terminated, including but not limited to any excess benefit
plan, top hat plan, or deferred compensation plan, any
Multiemployer Plan, defined contribution or defined benefit
arrangements which are Employee Pension Benefit Plans (the
"Pension Plans"); (iii) any other plan, program, policy,
contract or arrangement, including but not limited to any bonus
or incentive plan, stock options, restricted stock, stock
bonus, deferred bonus plan, salary reduction agreement,
change-of-control agreement, retention agreement, employment
agreement, or consulting agreement with former Employees.
(e) "Employee Pension Benefit Plan" has the meaning
set forth in ERISA Sec. 3(2).
(f) "Employee Welfare Benefit Plan" has the meaning
set forth in ERISA Sec. 3(1).
(g) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(h) "Multiemployer Plan" has the meaning set forth in
ERISA Sec. 3(37).
4.11 Employees. Paragraph (a) of Schedule 4.11 sets forth a
true and complete list of all Employees (other than former employees),
indicating their position and base salary as of March 16, 1994. Except as
described in paragraph (b) of Schedule 4.11, none of the Employees is
represented by a union or other labor organization, nor are they covered by a
collective bargaining agreement, and no union organizing efforts have been
conducted within the last three years, or to the knowledge of Shareholder, the
Company and its Subsidiaries, are now being conducted with respect to the
Employees. The Company and its Subsidiaries are in material compliance with all
U.S. laws, regulations, ordinances, codes or other legally binding rules
applicable to the Business with respect to the Employees and its own policies
respecting employment and employment practices, terms and conditions of
employment, wages and hours, equal opportunity, civil rights, labor relations,
occupational health and safety and payroll taxes with respect to the Employees,
including, without limitation, the Immigration and Reform Control Act, Title VII
of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Federal Age Discrimination in Employment Act and any
federal, state or local law. None of the Company is in receipt of a complaint,
demand letter or charge issued by a U.S. or Canadian federal, state, provincial
or local agency which alleges a violation by the Company of any applicable law
or regulation respecting employment and employment practices, terms and
conditions of employment, wages and hours, equal opportunity, civil rights,
labor relations, occupational health and safety or payroll taxes with respect to
the Employees. Neither the Company nor its Subsidiaries has engaged in any plant
closing, work force reduction or other action which has resulted or would result
in material liability under the Workers Adjustment and Retraining Notification
Act or any other applicable U.S. or Canadian law or regulation with respect to
the Employees, has been issued any notice that any such action is to occur in
the future with respect to the Employees, and are in material compliance with
all applicable requirements of the Immigration Reform and Control Act and the
Consolidated Omnibus Budget Reconciliation Act of 1987 with respect to the
Employees. Paragraph (c) of Schedule 4.11 (which shall be delivered to SJM
within 20 days of the date hereof) shall set forth a true and complete list of
all inactive Employees and Employees who are receiving long-term disability,
including the expected duration of their disability or leave and the nature and
amount of any benefits provided by or through the Company, its Subsidiaries,
Shareholder or the Shareholder Affiliate during such period. Paragraph (d) of
Schedule 4.11 sets forth a true and complete list of all of the current
independent contractors of the Company and its Subsidiaries who in the past year
received aggregate payments in excess of $100,000.
4.12 Environmental Matters; OSHA.
4.12.1 The following terms used in this section are defined as
follows:
(a) "Environmental Laws" is defined as any and all
applicable federal, state and local treaties, laws, regulations,
ordinances, codes, standards or criteria, orders or decrees of any
court, agency, entity, organization or authority, or of any
jurisdiction where the Company or any Subsidiary is located or conducts
business pertaining to the public health and safety, workers, health
and safety and the pollution of or protection of the environment,
including but not limited to those related to air, water, noise, odor,
land, soil, pesticide, hazardous or toxic substances and wastes, in
effect at the Closing Date.
(b) "Regulated Substances" is defined as toxic,
radioactive or hazardous substances or wastes, pollutants or
contaminants, including but not limited to: asbestos; urea
formaldehyde; the group of organic compounds known as polychlorinated
biphenyls; petroleum products including gasoline, fuel oil, crude oil
and the various constituents of such products; and any substance or
material the generation, storage, handling, release, disposal or
cleanup of which is regulated by any Environmental Law.
(c) "Property" is defined as all real estate and
property now or formerly owned or leased by the Company or any
Subsidiary, including without limitation, as of the Closing, the real
property to be transferred to the Company pursuant to Section 6.8. For
purposes of this definition only, "Property" includes groundwater
underlying the surface.
4.12.2 Schedule 4.12.2 lists all environmental conditions known
to Shareholder, the Subsidiaries or the Company existing on or prior to the date
hereof and arising or resulting from (i) the noncompliance by the Company or any
Subsidiary with any applicable Environmental Law or (ii) the release of a
Regulated Substance into the environment at or from the Property and, in either
case, for which the Company or any Subsidiary would, or would reasonably be
expected to, be required to expend in excess of $100,000 in order to clean up
any such Regulated Substance or in order to bring the Company or any Subsidiary
into compliance with any such Environmental Law (collectively "Known
Environmental Conditions"). Prior to the Closing, Shareholder or the Company
may, from time to time, deliver to SJM a revised Schedule 4.12.2. Any
environmental conditions listed on any such revised Schedule 4.12.2 shall be
deemed to be included in the definition of "Known Environmental Conditions".
4.12.3 Except as disclosed on Schedule 4.12.3, to the knowledge
of Shareholder, the Subsidiaries and the Company, the Business has been operated
at all times in compliance with any and all applicable Environmental Laws,
except as would not have a Material Adverse Effect.
4.12.4 Except as disclosed on Schedule 4.12.4, to the knowledge
of Shareholder, the Subsidiaries and the Company, the Company or a Subsidiary
has all governmental licenses, permits and other authorizations required by any
and all Environmental Laws necessary to conduct and operate the Business as
currently conducted or operated, and none of the Company or any Subsidiary is in
violation of any terms or conditions of such licenses, permits or authorizations
as of the Closing Date, except as would not have a Material Adverse Effect.
4.12.5 Except as disclosed on Schedule 4.12.5, to the knowledge
of Shareholder, the Subsidiaries and the Company, none of the Company or a
Subsidiary is presently disposing of any Regulated Substance on the Property,
and none of the Company or a Subsidiary has in the past disposed of any
Regulated Substance on the Property.
4.12.6 Except as disclosed on Schedule 4.12.6, to the knowledge
of Shareholder, the Subsidiaries and the Company, the Property has not been
subject to any release or threatened release of any Regulated Substance, except
as individually or in the aggregate would not have a Material Adverse Effect.
4.12.7 Except as disclosed on Schedule 4.12.7, to the knowledge
of Shareholder, the Subsidiaries and the Company, there are and have been no
above-ground or underground storage tanks, sumps or clarifiers located on the
Property.
4.12.8 To the knowledge of Shareholder, the Subsidiaries and
the Company, the Business is not being operated in material violation of the
Occupational Safety and Health Act of 1970, or the regulations promulgated
thereunder or any similar laws or regulations of any other country.
4.13 Company Products; Regulation.
4.13.1 Except as disclosed in paragraph (a) of Schedule 4.13.1
and except as would not have a Material Adverse Effect, to the knowledge of the
Company and Shareholder, since January 1, 1992 there have been no written
notices, citations or decisions by any governmental or regulatory body that any
product produced, manufactured, marketed or distributed at any time by the
Business (the "Products") is defective or fails to meet any applicable standards
promulgated by any such governmental or regulatory body. To the knowledge of
Shareholder and the Company, the Business has complied in all material respects
with its policies, procedures and specifications with respect to design,
manufacture, labelling, testing and inspection of Products. Except as disclosed
in paragraph (b) of Schedule 4.13.1, since January 1, 1992 there have been no
recalls, field notifications or seizures ordered or, to the knowledge of the
Company or Shareholder, threatened by any such governmental or regulatory body
with respect to any of the Products. Except as has been disclosed to SJM, since
January 1, 1992, the Company, the Shareholder Affiliate and the Subsidiaries
have not received, and the Company and Shareholder do not have knowledge of any
reasonable basis for, any warning letter, or Section 305 notices from the FDA.
4.13.2 Except as would not have a Material Adverse Effect, the
Company, the Shareholder Affiliate and the Subsidiaries are in possession of and
will, upon SJM's request, make available to SJM, all supportive materials and
data substantiating representations made to the FDA or other domestic
governmental regulatory authority in its filings therewith, including any and
all testing data in the possession, or under the control, of the Company, the
Shareholder Affiliate (but only to the extent used in the Business) or any
Subsidiary, whether or not submitted to the FDA or other domestic or foreign
governmental regulatory authority. In addition, the Company, the Shareholder
Affiliate (but only to the extent used in the Business), has identified or will,
upon SJM's request, identify to SJM, to the knowledge of Shareholder and the
Company, all international locations where regulatory information and documents
are kept, except where the failure to identify any such locations would not have
a Material Adverse Effect. The Products perform in all material respects in
compliance with the representations and performance specifications as contained
in said filings.
4.14 Tax Matters.
4.14.1 United States Person. Each of the Sellers, except the
Shareholder Affiliate, is a United States person within the meaning of the Code.
4.14.2 Canadian Person. The Shareholder Affiliate is a Canadian
corporation and is a tax resident of Canada.
4.14.3 Permanent Establishment or Business Activity. Except as
set forth in Schedule 4.14.3, (i) neither the Company nor any Subsidiary has, or
has had, either a permanent establishment in any foreign country, as defined in
any applicable tax treaty or convention between the United States and such
foreign country, or business activity in any country other than the United
States that would subject it to a Tax in such country that would not apply to a
United States Person without a business activity in such country; and (ii) the
Shareholder Affiliate has no permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between Canada and such
foreign country and has no business activity in any country other than Canada
that would subject it to a Tax in such country that would not apply to a
Canadian corporation without business activity in such country.
4.14.4 Security for Tax-Exempt Obligations. None of the Assets
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.
4.14.5 Tax-Exempt Use Property. None of the Assets is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
4.14.6 U.S. Real Property. None of the Assets being sold by the
Shareholder Affiliate constitutes an interest in real property located in the
United States or property that would constitute an investment in United States
property (as defined in Section 956(b) of the Code) if held by a controlled
foreign corporation (as defined in Section 957 of the Code).
4.15 Material Obligations. Except as would not have a Material
Adverse Effect individually or in the aggregate, neither the Company, the
Shareholder Affiliate in respect of the Business nor any Subsidiary has any
debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise and
whether due or to become due) arising out of transactions entered into at or
prior to the Closing, or any transaction, series of transactions, action or
inaction at or prior to the Closing, or any state of facts or condition existing
at or prior to the Closing (regardless of when such liability or obligation is
asserted) including, without limitation, any Liabilities arising from or
relating to the Prior Business, except (a) to the extent specifically reflected
and accrued for or reserved against in the Financial Statements, (b) for
liabilities set forth on Schedule 4.15 or (c) for liabilities and obligations
which have arisen after the date of the Deal Balance Sheet in the ordinary
course of business consistent with past practice.
4.16 Brokerage. Other than the fee payable by Shareholder to
Gleacher & Co., its investment banker, there are no claims for brokerage
commissions, finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by Shareholder or the Company.
4.17 Affiliated Transactions. Except as listed and described in
paragraph (a) of Schedule 4.6 or in Schedule 4.17 hereto, neither the Company
nor any Subsidiary is a party to any transaction or Commitment with any of their
respective Affiliates, and has no obligation or liability owing thereunder in
respect of the Business in excess of $50,000 or which is not cancelable by the
Company or a Subsidiary on at least 60 days' notice without penalty.
4.18 Insurance. Schedule 4.18 constitutes a true and complete
description of all of the policies in force and effect and a description of
their respective coverage and limits presently applicable to or including the
operations and property of the Business. All such policies will terminate at the
Closing. Neither Shareholder, the Company nor the Shareholder Affiliate has
received any notice of cancellation in respect of insurance coverage for
operations, assets and properties relating to the Business. All premiums due and
payable in respect of such insurance have been paid. There are no pending or, to
Shareholder's or the Company's knowledge, threatened terminations or premium
increases with respect to any such policies and the Company, the Subsidiaries
and the Shareholder Affiliate are in compliance with all material conditions
contained therein.
4.19 Real Property.
4.19.1 Title to Owned Real Property and Interests as Tenant
Under Leased Real Property. One or more of the Sellers or SI-Pace Inc., a
California corporation, hold:
(a) fee simple title to all of the real property listed in
Paragraph A of Schedule 4.19 attached hereto (collectively, the "Owned
Real Property"), and
(b) valid leasehold interests under each of the leases described
in Paragraph B of Schedule 4.19 (collectively, the "Leased Real
Property") attached hereto and all of such leases are in full force and
effect,
in each case free and clear of all Liens except, in each case,
(i) liens for current property taxes (including supplemental
taxes) and assessments for the 1994-95 fiscal year not yet due and
payable,
(ii) as to the Owned Real Property referred to in Paragraph A.1
of Schedule 4.19, the title exceptions referred to in Exception Nos. 2
through 31, inclusive, appearing in that certain Preliminary Report No.
9410439-21 dated April 12, 1994 (a copy of which preliminary report is
attached hereto as part of Schedule 4.19), issued by First American
Title Company of Los Angeles, none of which title exceptions are
easements which could have a Material Adverse Effect on the operation of
the Business,
(iii) as to the Owned Real Property referred to in Paragraph A.2
of Schedule 4.19, the title exceptions referred to in Exception Nos. 2
through 10, and 13 appearing in that certain Preliminary Report No.
9410437-21 dated April 12, 1994 (a copy of which preliminary report is
attached hereto as Paragraph A.3 of Schedule 4.19), issued by First
American Title Company of Los Angeles, none of which title exceptions
are easements which could have a Material Adverse Effect on the
operation of the Business,
(iv) as to the Owned Real Property referred to in Paragraph A.3
of Schedule 4.19, the title exceptions referred to in Exception Nos. 3,
4 and 5 appearing in that certain Preliminary Report No. 9433648 dated
April 22, 1994 (a copy of which preliminary report is attached hereto as
part of Schedule 4.19), issued by First American Title Company of Los
Angeles, none of which title exceptions are easements which could have a
Material Adverse Effect on the operation of the Business,
(v) as to the Leased Real Property, minor imperfections of
title, if any,
(vi) zoning laws or other land use restrictions, and
(vii) Liens which are reflected on the Financial Statements.
4.19.2 Complete List and Description of all Owned Real Property
and Leased Real Property. The Owned Real Property and the Leased Real Property
(hereinafter collectively referred to as the "Real Property") together
constitute all real properties used or occupied in connection with the Business
or reflected on the Financial Statements. The Owned Real Property listed in
Paragraph A of Schedule 4.19 is all of the real property in which the Sellers
have an ownership interest in respect of the Business. The Leased Real Property
listed in Paragraph B of Schedule 4.19 is all of the real property leased by any
of the Sellers as tenant and which is used or occupied for the Business.
4.19.3 Delivery of all Title Insurance Policies, Surveys, Title
Reports, Leases and Property Reports. Copies of all title insurance policies,
title reports, surveys, leases, architectural or engineering reports, soils
tests and reports, seismic tests and reports and environmental tests and reports
in the possession or control of the Sellers and which relate to the Owned Real
Property have been delivered to SJM; and true, correct and complete copies of
all the leases relating to the Leased Real Property have been delivered to SJM.
4.19.4 Condemnation. To Sellers' Knowledge, Sellers have not
received written notice or any other notice of any pending or threatened
condemnation proceeding or other similar proceeding by any public authority with
respect to any of the Owned Real Property.
4.19.5 Violation of Ordinances. To Sellers' Knowledge, Sellers
have not received any written notice or any other notice of any claimed
violation of zoning, building, health, or similar ordinances, codes or
regulations.
4.19.6 Assessed Value. To Sellers' Knowledge, no written notice
or any other notice of any increase in the assessed valuation or of any
contemplated special assessment has been received by Sellers with respect to the
Owned Real Property.
4.19.7 Government Licenses. To Sellers' Knowledge, all
facilities situated on the Owned Real Property have received all material
approvals of government authorities (including licenses and permits) required in
connection with the ownership or operation thereof and, to Sellers' knowledge,
Sellers have not received written notice or any other notice of any violation of
applicable laws, rules and regulations with respect to the operation of the
same.
4.19.8 Subleases. There are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of any parcel of Real
Property, except for the subleases described in Paragraph C of Schedule 4.19.
4.19.9 Options. There are no outstanding options or rights of
first refusal to purchase any parcel of Owned Real Property, or any portion
thereof or interest therein.
4.19.10 Possession. There are no parties (other than Sellers) in
possession of any parcel of Real Property, other than tenants under leases of
the Real Property who are in possession of space pursuant to those subleases
listed in Paragraph C of Schedule 4.19.
4.19.11 Utilities. To Sellers' Knowledge, all facilities
located on each parcel of Owned Real Property are supplied with utilities and
other services necessary for the operation of such facilities including gas,
electricity, water, telephone, sanitary sewer and storm sewer, all of which
services are adequate for the operation of such facility as presently conducted
for the operation of the Business in all material respects.
4.19.12 Proceedings. To Sellers' Knowledge, Sellers have not
received notice of any pending or contemplated condemnation, assessments or
other proceeding or charge affecting the Real Property that would have a
Material Adverse Effect on the operation of the Business.
4.19.13 Knowledge. For purposes of this Section 4.19, the term
"Sellers' Knowledge" shall have the meaning set forth in Section 13.1.
4.20 Inventory. The Company has previously disclosed to SJM by a
letter dated June 22, 1994 the accounting guidelines used by the Company, the
Shareholder Affiliate (in respect of the Business) and the Subsidiaries (and
used in the preparation of the Deal Balance Sheet) for valuing Inventory (as
defined below), including, without limitation, the guidelines used to determine
whether Inventory is obsolete or damaged, or will be slow-moving or defective.
4.21 Accounts and Notes Receivable. The Company has previously
disclosed to SJM by a letter dated June 22, 1994 the accounting guidelines used
by the Company the Shareholder Affiliate (in respect of the Business) and the
Subsidiaries (and used in the preparation of the Deal Balance Sheet) for valuing
accounts receivable.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SJM
SJM represents and warrants to Shareholder and the Company and
agrees with Shareholder and the Company as follows:
5.1 Corporate Power and Authority; Effect of Agreement.
5.1.1 Each of SJM and Acquisition Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of
Minnesota and Delaware, respectively, and has full corporate power and authority
to carry on its business as it is now being conducted. All of the issued and
outstanding capital stock of Acquisition Subsidiary is owned by SJM.
5.1.2 Each of SJM and Acquisition Subsidiary has full corporate
power and authority to execute and deliver this Agreement, perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, the performance by SJM and
Acquisition Subsidiary of its obligations hereunder and the consummation by SJM
and Acquisition Subsidiary of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of SJM and
Acquisition Subsidiary, and no other corporate proceedings on the part of SJM or
Acquisition Subsidiary are necessary to authorize the execution and delivery of
this Agreement, or to consummate the transactions so contemplated.
5.1.3 This Agreement has been duly executed and delivered by
SJM and Acquisition Subsidiary and constitutes the legal, valid and binding
obligation of SJM and Acquisition Subsidiary, enforceable against each such
party in accordance with its terms, except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally, and
(b) is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.1.4 The execution, delivery and performance by SJM and
Acquisition Subsidiary of this Agreement or the other documents contemplated
hereby and the consummation by them of the transactions contemplated hereby and
thereby do not and will not contravene or constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of SJM or Acquisition Subsidiary or to a loss of any benefit to which
SJM or Acquisition Subsidiary is entitled under (i) except as would not be
materially adverse to the operations, results of operations, assets or financial
condition of SJM and the SJM Affiliates, taken as a whole, or have a material
adverse effect on the ability of SJM or Acquisition Subsidiary to consummate the
transactions contemplated by this Agreement, any provision of applicable law or
regulation (assuming the governmental consents referred to in Section 5.2 have
been obtained); (ii) the articles of incorporation or bylaws of SJM and
Acquisition Subsidiary; (iii) any judgment, injunction, order, decree,
administrative interpretation, award or other instrument binding upon SJM or
Acquisition Subsidiary; or (iv) result in the creation or imposition of any Lien
on any asset of SJM or Acquisition Subsidiary which would have a material
adverse effect on their ability to consummate the transactions contemplated
hereby.
5.2 Consents. Except for the filing under the HSR Act and
otherwise as set forth in Schedule 5.2, no consent, approval or authorization
of, or exemption by, or filing with, any governmental or regulatory authority or
any other third party is required in connection with the execution, delivery or
performance by SJM or Acquisition Subsidiary of this Agreement or the taking by
SJM or Acquisition Subsidiary of any other action contemplated hereby,
excluding, however, consents, approvals, authorizations, exemptions and filings,
if any, which any of Shareholder, the Shareholder Affiliate, any Subsidiary or
the Company is required to obtain or make.
5.3 Availability of Funds. SJM has available, or will have
available on the Closing Date, sufficient funds to enable it to consummate the
transactions contemplated by this Agreement.
5.4 Litigation. There is no Litigation pending or, to SJM's
knowledge, threatened, which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
5.5 Brokerage. Other than the fee payable by SJM to CS First
Boston Corporation, its investment banker, there are no claims for brokerage
commissions, finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement by SJM.
5.6 Certain Ownership Interests. SJM is not directly or
indirectly "significantly funded" (as that phrase is defined in Section
12(B)(c)(i) of the Settlement Agreement and Section 9.02(c)(i) of the License
Agreement), nor is there, directly or indirectly "significant voting common
stock or other voting equity ownership" (as that phrase is defined in Section
12(B)(c)(i) of the Settlement Agreement) in SJM, by the Japanese government or
investors of Japanese nationality; and (ii) it is not directly or indirectly
"significantly funded" (as that term is defined in Section 12(B)(c)(ii) of the
Settlement Agreement and Section 9.02(c)(ii) of the License Agreement), nor is
there, directly or indirectly "significant voting common stock or other voting
equity ownership" (as that phrase is defined in Section 12(B)(c)(ii) of the
Settlement Agreement and 9.02 (c)(ii) of the License Agreement) in SJM, by a
national government other than Japan.
ARTICLE 6
COVENANTS
6.1 Cooperation. Each of the parties hereto will use its
reasonable best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof and
applicable law. Each of the parties hereto will use its reasonable best efforts
to obtain all governmental consents and approvals necessary to consummate the
transactions contemplated by this Agreement and to cause the Closing to occur.
Each of Shareholder, the Company and the Shareholder Affiliate shall use its
reasonable best efforts to obtain the consent or approval of third Persons to
the transactions contemplated hereby with respect to the Commitments identified
on Schedule 4.6 and the Permits, if any, identified on paragraph (b) of Schedule
4.8 as requiring such consent or approval. The Company, Shareholder and SJM
agree that, in the event any consent or approval of any such third Person
necessary or desirable to preserve for the Business any right or benefit under
any such Commitment or Permit is not obtained prior to the Closing (and provided
that SJM waives any resulting failure of a condition under Article 8),
Shareholder will, subsequent to the Closing, cooperate with SJM and any SJM
Affiliate in attempting to obtain such consent or approval as promptly
thereafter as practicable. If such consent or approval cannot be obtained,
Shareholder shall use its reasonable best efforts, and cause the other Sellers
to use their reasonable best efforts, to provide SJM and any SJM Affiliate with
the rights and benefits of the affected Commitment or Permit for the term of
such Commitment or Permit and, if and to the extent that Shareholder or another
Seller provides the rights and benefits under any such Commitment or Permit or
any other contract for which consent or approval cannot be obtained, SJM shall
assume the obligations and burdens thereunder to such extent. After the Closing,
Shareholder and the other Sellers shall cooperate with SJM in the preparation of
any financial statements required to be filed by SJM with respect to the
Business pursuant to U.S. federal securities laws.
6.2 Conduct of Business. From the date hereof until the
Closing, the Company and the Shareholder Affiliate shall cause the Business to
be conducted in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, from the date hereof until the
Closing:
6.2.1 Each of Shareholder and the Company will use and will
cause the Shareholder Affiliate and the Subsidiaries to use all reasonable
efforts to:
(a) preserve the Business as a whole intact;
(b) keep available the services of the present officers,
employees and agents of the Business such that the Business will not
suffer a Material Adverse Effect;
(c) preserve the relationships with suppliers, customers,
distributors, licensors and licensees and others having business
dealings with it such that the Business will not suffer a Material
Adverse Effect;
(d) collect the receivables of the Business in a manner
consistent with past practice;
(e) maintain the assets, properties and interests of the
Business in customary repair, order and condition or, with respect to
the casualty, loss or damage of any assets of the Business that are
covered by insurance, transfer, at the Closing, to SJM the proceeds of
any insurance recovery with respect thereto (provided that SJM has
waived any failure of a condition under Article 8 resulting from the
casualty, loss or damage);
(f) continue to compensate the employees of the Business in a
manner consistent with past practice;
(g) maintain the books, accounts and records relating to the
Business in accordance with past practice as used in the preparation of
the Financial Statements described in Section 4.2 hereof; and
(h) promptly inform SJM in writing of any material variances
from the representations and warranties contained in Article 4 hereof.
6.2.2 Prior to the Closing, without the prior written consent
of SJM or unless otherwise contemplated or permitted by this Agreement, neither
the Company, the Shareholder Affiliate (in respect of the Business) nor the
Subsidiaries will:
(a) take any action described in Section 4.3 of this Agreement;
(b) except for the Shareholder Affiliate, amend its certificate
of incorporation or bylaws;
(c) except for the Shareholder Affiliate, merge or consolidate
with any person, acquire any stock or other ownership interest in any
Person or substantially all of the assets of any business as an entity
or liquidate, dissolve or otherwise reorganize or seek protection from
creditors;
(d) except as set forth in Schedule 6.2.2, enter into any other
agreements, commitments or contracts (including without limitation joint
venture agreements or material license agreements) which are material to
the Business, except agreements, commitments or contracts entered into
in the ordinary course for the purchase, sale or lease of goods or
services, consistent with past practice; or
(e) make any investment of a capital nature either by purchase
of stock or securities, contributions to capital, property transfers or
otherwise, or by the purchase of any property or assets of any other
individual, firm or corporation.
6.3 Intercompany Indebtedness. Prior to the Closing Date, all
intercompany indebtedness, liabilities and obligations owed by Shareholder or
any Affiliate of Shareholder (other than the Company, any Subsidiary or any
other Affiliate of Shareholder (in respect of the Cardiac Stimulation Device
business conducted by such Affiliate)) on the one hand, and the Company, the
Shareholder Affiliate (in respect of the Business) or any Subsidiary, on the
other hand, shall be netted, and if the Company, the Shareholder Affiliate or
any Subsidiary still has amounts owing, such amounts shall be dividended to
their respective shareholders and if Shareholder or any such Affiliate still has
amounts owing, such amounts shall be forgiven.
6.4 Access.
6.4.1 Shareholder and the Company shall provide, and shall
cause each of the Subsidiaries and the Shareholder Affiliate to provide, SJM,
its counsel, financial advisors, auditors and other authorized representatives,
with such information as SJM from time to time reasonably may request with
respect to the Company, the Assets, the Shareholder Affiliate (but only with
respect to the Business) and the Subsidiaries, and shall permit, and shall cause
each of the other Sellers to permit, SJM and its representatives reasonable
access, during regular business hours and upon reasonable notice, to the
offices, properties, books and records of the Company, the Shareholder Affiliate
(but only with respect to the Business), and the Subsidiaries, as SJM from time
to time reasonably may request, and will instruct the employees, counsel and
financial advisors of Shareholder, the Company, the Subsidiaries and the
Shareholder Affiliate to cooperate with the investigation of the Business;
provided that no investigation shall affect any warranties or representations
given by Shareholder or the Company to SJM in this Agreement and provided
further, however, that any such investigation shall be conducted in such a
manner so as not to interfere with the operations of the Business consistent
with past practice. This will include, without limitation, access promptly
following execution of this Agreement to information, books, records, and
personnel regarding product pricing, supplier costs, specifications for products
in development and U.S. patent applications. In addition, to the extent not
previously delivered or made available to SJM, Shareholder and the Company shall
cause to be delivered or made available to SJM all internal or third party
environmental and health and safety studies and reports with respect to the
Business, including without limitation, the audit report of Stat-a-matrix
supporting the certificate of compliance submitted to the FDA as well as any
other audit reports from Stat-a-matrix and correspondence between Stat-a-matrix
and the Company, in each case after January 1, 1992. If, in the course of SJM's
investigation of the Business, SJM learns of any fact or circumstance that may
make any of Shareholder's or the Company's representations or warranties in this
Agreement untrue in any material respect, SJM shall promptly inform Shareholder
of such fact or circumstance.
6.4.2 In order to facilitate the resolution of any claims made
by or against or incurred by Shareholder or Shareholder Affiliate with respect
to third parties prior to or after the Closing, upon reasonable notice, SJM
shall and shall cause its Affiliates to, after the Closing: (i) afford the
officers, employees and authorized agents and representatives of Shareholder
reasonable access, during regular business hours, to the offices, properties,
books and records of Acquisition Subsidiary (and any successor thereto) and its
Affiliates relating to the Business, (ii) furnish to the officers, employees and
authorized agents and representatives of Shareholder such additional financial
and other information regarding the Business as Shareholder may from time to
time reasonably request and (iii) make available to Shareholder, the employees
of Acquisition Subsidiary (and any successor thereto) and its Affiliates whose
assistance, testimony or presence is necessary to assist Shareholder in
evaluating any such claims and in defending such claims, including the presence
of such persons as witnesses in hearings or trials for such purposes; provided,
however, that such investigation shall not unreasonably interfere with the
businesses or operations of SJM, Acquisition Subsidiary or any of their
Affiliates; provided further, however, that neither SJM nor any of its
Affiliates shall be obligated to disclose any information which it holds under a
legally binding obligation of confidentiality or which is protected by any
privilege.
6.4.3 In order to facilitate the resolution of any claims made
by or against or incurred by SJM or any of its Affiliates with respect to third
parties after the Closing, upon reasonable notice, Shareholder and the
Shareholder Affiliate in respect of the Business shall, after the Closing: (i)
afford the officers, employees and authorized agents and representatives of SJM
reasonable access, during regular business hours, to the offices, properties,
books and records of the Seller with respect to the Business, (ii) furnish to
the officers, employees and authorized agents and representatives of SJM such
additional financial and other information regarding the Business for the period
prior to the Closing as SJM may from time to time reasonably request and (iii)
make available to SJM, the employees of the Sellers whose assistance, testimony
or presence is necessary to assist SJM in evaluating any such claims and in
defending such claims, including the presence of such persons as witnesses in
hearings or trials for such purposes; provided, however, that such investigation
shall not unreasonably interfere with the business or operations of Shareholder
or its Affiliates; provided further, however, that neither Shareholder nor any
of its Affiliates shall be obligated to disclose any information which they hold
under a legally binding obligation of confidentiality or which is protected by
any privilege.
6.5 Non-Disclosure Agreement. The terms of the Bilateral
Non-Disclosure Agreement (the "Non-Disclosure Agreement"), dated as of October
27, 1993, between the Company and SJM are hereby incorporated by reference,
except that Section 10 thereof shall be deemed amended to provide that New York
law shall govern the Non-Disclosure Agreement and that any disputes relating
thereto shall be brought before a federal court sitting in New York, New York.
Each of the parties hereto agrees to be bound by the terms of the Non-Disclosure
Agreement which is incorporated herein by reference. The NonDisclosure Agreement
shall remain in full force and effect until the Closing.
6.6 Antitrust, Competition Law Filings. As promptly as
practicable after the execution of this Agreement, each party to this Agreement
shall file or cause its Affiliates to file any reports or notifications that may
be required to be filed under the HSR Act and such other competition,
investment, foreign exchange, tax or other laws of such other jurisdictions as
may be necessary to effect the transactions contemplated by this Agreement.
6.7 Non-Foreign Person Affidavit. Shareholder and the Sellers
(other than the Shareholder Affiliate) shall furnish to SJM at or before the
Closing a non-foreign person affidavit, as provided for in Section 1445(b)(2) of
the Code.
6.8 Transfer of Real Property. Sellers shall take such actions
as are necessary to transfer, or cause to be transferred, to SJM (or such
Affiliates of SJM that SJM shall designate) on the Closing Date, all of the
Owned Real Property and the Leased Real Property, subject only to the title
exceptions referred to in Section 4.19.1 above.
6.9 Certain Dividends. From the date hereof until the Closing,
each of the Company and the Subsidiaries may declare and pay dividends to their
respective shareholders to reflect estimated pre-Tax earnings of the Company and
the Subsidiaries for the period from September 30, 1993 to the Closing Date.
6.10 Certain Actions Prior to the Closing Date. Prior to the
Closing Date, Shareholder shall cause the Company to transfer, whether in the
form of a dividend or otherwise, those assets listed on Schedule 6.10 out of the
Company. Shareholder shall not transfer to the Company or the Subsidiaries any
material assets, except as provided in Section 6.8.
6.11 Claims History. Without limiting the generality of Section
6.4, Shareholder, the Shareholder Affiliate and the Company shall promptly make
available and furnish access to SJM a products claims history with respect to
the Company, the Shareholder Affiliate (but only with respect to the Business)
and the Subsidiaries.
6.12 FDA Recertification. Without limiting the generality of
Section 6.4, Shareholder and the Company shall promptly furnish to SJM copies of
written communications with the FDA in respect of the Business made or received
by the Company pursuant to or in connection with the terms of that certain
Consent Decree of Permanent Injunction (captioned U.S. v. Siemens Medical
Systems, Inc. and dated March 23, 1994) (the "Consent Decree") including without
limitation certificates of compliance made to the FDA by or on behalf of the
Company or the Subsidiaries, and the responses, if any, by the FDA of such
certificates. Shareholder and the Company shall promptly furnish or make
available such other information as SJM may reasonably request regarding
compliance by the Company and the Subsidiaries with the applicable terms of the
Consent Decree.
6.13 Grant of License. SJM and the SJM Affiliates hereby grant
to Siemens Aktiengesellschaft ("Siemens AG"), effective at the Closing, a
worldwide, irrevocable, non-exclusive, perpetual, royalty free, paid up right
and license to use the patents, copyrights, trade secrets, designs, drawings,
software, know-how, technology and other intellectual property and proprietary
matters owned or used by the Company or any of its Subsidiaries or assigned or
transferred to SJM or one of its Affiliates, to make, have made, sell, have
sold, use, lease, license, or otherwise dispose of products intended for use in
or as products, other than Cardiac Stimulation Devices (including, without
limitation, the right and license to make, have made, sell, have sold, use,
lease, license or otherwise dispose of Cardiac Stimulation Devices or parts,
components, modules, subsystems or subassemblies thereof, in or as parts,
components, modules, subsystems or subassemblies of or for, products intended
for use other than as Cardiac Stimulation Devices), and to render services with
respect to any such products used or intended for use or uses other than as
Cardiac Stimulation Devices. The rights and licenses granted under this Section
6.13 may be freely sublicensed, assigned, transferred or disposed of, in whole
or in part, without the prior written consent of SJM, any of its Affiliates or
any of the successors in interest of any of the foregoing; any license,
assignment, transfer or other disposition by SJM, any of its Affiliates, the
Company, any of its Subsidiaries and any of the successors in interest of any of
the foregoing shall be subject to such rights and licenses granted to Siemens
AG.
6.14 Other Financial Statements. On or before the earlier of
(i) the date which is 30 days from the date hereof and (ii) the Closing Date,
the Company and Shareholder shall deliver to SJM an audited balance sheet for
the Business as of September 30, 1992, as well as an audited income statement
and cash flow statement for the fiscal year then ended, together with related
notes and schedules thereto, prepared from the books and records of the Business
in accordance with U.S. GAAP on a consistent basis. Upon the delivery by the
Company and Shareholder to SJM of the Closing Balance Sheet, the Company and
Shareholder shall also deliver to SJM an audited income statement and cash flow
statement for the Business for the period beginning October 1, 1993 and ending
on the Closing Date, together with related notes and schedules thereto. Within
30 calendar days after the end of June, 1994, and each calendar month
thereafter, Shareholder and the Company shall deliver to SJM unaudited profit
and loss information for the Business based on financial information normally
prepared by the Company for delivery to Shareholder. To the extent necessary to
permit SJM to comply with the rules and regulations of the Securities and
Exchange Commission, Shareholder shall provide to SJM financial information
prepared in accordance with U.S. GAAP consisting of an unaudited interim balance
sheet, dated as of the last day of, and an income statement and statement of
cash flow, for the period beginning January 1, 1994 and ending on the last day
of, such calendar quarter as required by the applicable rules and regulations of
the Securities and Exchange Commission. If the last day of such calendar quarter
is after the Closing Date, Shareholder shall cooperate in the preparation of
such interim unaudited financial statements.
ARTICLE 7
ADDITIONAL COVENANTS
7.