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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: July 1, 1996
UROHEALTH SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation)
1-11150 98-0122944
(Commission (IRS Employer
file number) Identification Number)
5 CIVIC PLAZA, SUITE 100
NEWPORT BEACH, CALIFORNIA
92660
(Address of principal executive offices) (Zip code)
(714) 668-5858
(Registrant's telephone number, including area code)
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ITEM 2
ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF CERTAIN ASSETS OF O.R. CONCEPTS, INC.
On June 5, 1996, Urohealth Systems, Inc. ("Urohealth") acquired certain assets
of O.R. Concepts, Inc. pursuant to an Asset Purchase Agreement dated June 5,
1996 among Urohealth, O.R. Concepts, Inc., a Texas Corporation, and Vital Signs,
Inc., a New Jersey Corporation. The acquired assets are used in the development,
manufacture, and marketing of laparoscopic surgery products and accessories.
The purchase price for the acquired assets was $2,786,000, payable in cash upon
the closing of the transaction. The purchase price was funded using a portion of
the proceeds from the sale of Urohealth's 8.75% Convertible Subordinated
Debentures issued May 3, 1996.
ACQUISITION OF THE INTERMED GROUP, INC.
On July 1, 1996, Urohealth acquired The Intermed Group, Inc., a Delaware
Corporation ("Intermed"), pursuant to the terms of the Agreement and Plan of
Merger dated as of June 1, 1996 between Urohealth, Urohealth, Inc. (California),
and Intermed. Intermed is engaged in the development, manufacture and marketing
of disposable medical products.
Under the terms of the agreement, Intermed was merged into Urohealth, Inc.
(California), and Urohealth will issue approximately 149,306 shares of its
Common Stock and pay cash of $1,712,412 to the sole shareholder of Intermed in
exchange for all of the outstanding shares of Intermed common stock. The cash
portion of the purchase price was funded using a portion of the proceeds from
the sale of Urohealth's 8.75% Convertible Subordinated Debentures issued May 3,
1996.
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ITEM 7
FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1996 (A)
Unaudited Pro Forma Condensed Combined Statement of Operations
for the nine months ended March 31, 1996 (A)
Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended June 30, 1995 (A)
Notes to Unaudited Pro Forma Combined Consolidated Financial
Statements (A)
(A) To be filed by amendment.
(c) Exhibits
The following exhibits are filed as a part of this report:
Exhibit
Number Description
- ------- -----------------------------------------------------------------------
2.1 Asset Purchase Agreement dated June 5, 1996, by and between Urohealth
Systems, Inc., O.R. Concepts, Inc., and Vital Signs, Inc.
2.2 Agreement and Plan of Merger dated as of June 1, 1996 between Urohealth
Systems, Inc., Urohealth, Inc. (California), and The Intermed Group
Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UROHEALTH SYSTEMS, INC.
(Registrant)
July 15, 1996 By /s/Charles A. Laverty
- ---------------------- ----------------------------------------
Date Charles A. Laverty
President and Chief Executive Officer
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and among
UROHEALTH SYSTEMS, INC.,
a Delaware corporation
and
O.R. CONCEPTS, INC.,
a Texas corporation
VITAL SIGNS, INC.,
a New Jersey corporation
June 5, 1996
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of June 5, 1996, by and between Urohealth Systems, Inc., a Delaware
corporation ("BUYER"), and O.R. Concepts, Inc., a Texas corporation ("SELLER"),
and Vital Signs, Inc., a New Jersey corporation ("PARENT"), with reference to
the following:
RECITALS
A. O.R. Concepts, Inc. is a wholly owned subsidiary of Parent.
B. Seller is the owner of certain assets (as defined herein, the
"ASSETS") used in the business of developing, manufacturing and marketing
laparoscopic surgical products and accessories as more fully described herein.
C. Buyer wishes to purchase the Assets and Seller is willing to
sell the Assets, on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, based on the above premises and in consideration of
the mutual covenants and agreements contained herein, the parties agree as
follows:
1. Certain Definitions. Whenever used herein, the following terms shall
have the meanings set forth below:
1.1 "Affiliate" means any person which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, a specified person.
1.2 "Assets" means the Technology, Trademarks, Inventory,
Equipment, Assigned Contracts and Files, together with the goodwill associated
with the Business.
1.3 "Assigned Contracts" means all agreements to which Seller is a
party relating to the Business, including, without limitation, the Supply
Contracts, the Distribution Contracts, the Employee Patent and Confidentiality
Agreements and the Assigned Contracts listed on Schedule 3.7. Assigned
Contracts shall not include any employment or consulting agreements or any
agreements relating to the lease or purchase of real property.
1.4 "Assumed Obligations" means all obligations of Seller accruing
after the date hereof under the Assigned Contracts listed on Schedule 3.7,
except the obligations, debts and liabilities of Seller under the Employee
Patent and Confidentiality Agreements, if any.
1.5 "Business" means the business of developing, manufacturing and
marketing laparoscopic surgery products and accessories as presently conducted
by Seller, including the
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FloGun Irrigation/Aspiration System, IrrigaTORR Fluid pump and irrigation
system, Dr. Fog, defogging agents, Kittner blunt dissection instrument and a
line of single use and reusable surgical probes. The Business shall exclude
the products listed on Schedule 1.5 hereto.
1.6 "Buyer Financial Statements" shall have the meaning set forth
in Section 4.4.
1.7 "Buyer's SEC Reports" means the (i) Urohealth Annual Report on
Form 10-K for the year ended June 30, 1995; and (ii) Urohealth's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1995 in each case
excluding the exhibits thereto.
1.8 "Customer Lists" means all lists of, and information
concerning, the end users of the products of the Business, wherever located and
regardless of the form in which it is stored.
1.9 "Distribution Contracts" means all agreements to which Seller
is a party relating to the marketing or distribution of the Products,
including, without limitation, those listed on Schedule 3.7.
1.10 "Employee Patent and Confidentiality Agreements" means any and
all agreements executed by any present or former employee or consultant of
Seller for the purpose, in whole or in part, of protecting Seller's rights to,
or the confidentiality of, proprietary technology or information. In the event
that such agreements are contained in a more general employment or consulting
agreement, the term "Employee Patent and Confidentiality Agreement" means only
the provisions of such agreement relating to the protection of Seller's rights
to, or the confidentiality of, proprietary information or technology.
1.11 "Equipment" means all equipment, tools, machinery, molds,
tooling and similar tangible assets used by Seller primarily in the Business,
wherever located, including, without limitation, the Equipment listed on
Schedule 3.11, except for vehicles, computer hardware and computer software.
1.12 "FDA" shall have the meaning set forth in Section 3.6.
1.13 "Files" means all of Seller's files, documents, papers and
other records pertaining primarily to the Business or any of the Assets,
wherever located and regardless of the form in which they are stored.
1.14 "Financial Statements" shall have the meaning set forth in
Section 3.4.
1.15 "Inventory" means all Products and other tangible goods of
Seller held for future sale in the Business, including, without limitation, all
raw materials, work in progress, packaging, labels and artwork for the Business
and the Inventory listed on Schedule 3.10.
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1.16 "Losses" means any and all costs, expenses, damages and
losses, including, without limitation, reasonable attorneys' fees and expenses
and court costs.
1.17 "Patents" means all U.S. and foreign patents and pending
patents relating to the Business (together with any enhancements or
improvements thereto, whether or not registered with any governmental
authority), including, without limitation, those listed on Schedule 3.8.
1.18 "Products" means the laparoscopic surgery products and
accessories relating to the Business, consisting solely of those products
listed on Schedule 3.12, and excluding those products listed on Schedule 1.5.
1.19 "Purchase Price" shall have the meaning set forth in Section
2.2.
1.20 "Related Agreement" shall have the meaning set forth in
Section 5.1.
1.21 "Securities Act" means the Securities Act of 1933, as amended.
1.22 "Supply Contracts" means all agreements to which Seller is a
party for the purchase of Inventory or any components, raw materials or other
supplies used to create Inventory.
1.23 "Technology" means, to the extent related to or used in the
Business, all Patents, Customer Lists, copyrights, artwork (including, without
limitation, both artwork for circuit boards and artwork for labels), trade
secrets, data, methods, test results, procedures, processes, techniques,
systems, inventions, apparatus, information, manufacturing and engineering
drawings and prints, regulatory and manufacturing documentation and design
specifications, know-how and other proprietary information.
1.24 "Trademarks" means all trade names, trademarks and service
marks (together with any pending applications for any of the foregoing) used in
the Business, including, without limitation, those listed on Schedule 3.9.
1.25 "Transactions" means the transactions contemplated by this
Agreement and the Related Agreement.
1.26 "Transfer Documents" shall have the meaning set forth in
Section 5.2.
2. Agreement to Purchase and Sell.
2.1 Acquisition. Upon the terms of this Agreement, Seller hereby
sells to Buyer, and Buyer hereby purchases from Seller, the Assets in exchange
for the payment of the Purchase Price.
2.2 Payment of Purchase Price. Concurrently herewith, Buyer is
paying Seller $2.786 million dollars in cash by wire transfer to an account
previously designated in writing by Seller (the
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"PURCHASE PRICE"). The Purchase Price includes consideration for the
Non-Competition Agreement contained in Section 7.1.
2.3 Transfer of Assets. Subject to the last sentence of this
Section, Seller hereby transfers, assigns and delivers the Assets to Buyer free
and clear of any liens, encumbrances, adverse claims or security interests
other than the Assumed Obligations. The parties intend that Buyer have the
benefit of, and Seller's transfer and assignment to Buyer of the Assets
include, all of Seller's existing rights and remedies pursuant to any
representations, warranties, indemnifications, covenants or agreements made by
any other party pursuant to any of the Assigned Contracts. Notwithstanding the
foregoing, Seller's assignment to Buyer hereunder of the Employee Patent and
Confidentiality Agreements shall be limited to Seller's rights thereunder with
respect to the Business or the Technology.
2.4 Assumption of Liabilities. Buyer shall not assume nor be
liable for any obligations, debts, contracts or liabilities of Seller except
the Assumed Obligations. Buyer covenants to pay and perform the Assumed
Obligations as and when they become due or payable. Without limiting the
foregoing, Buyer shall not assume nor be liable for any personal property tax
assessed by any state or local governmental authority on any of the Assets to
the extent such assessment is proportionately allocable to any period prior to
the date hereof. Seller shall indemnify and hold harmless Buyer from and
against the full amount of any Losses incurred by Buyer with respect to claims
based on any alleged obligations, debts, contracts or liabilities of Seller not
expressly assumed by Buyer under this Section 2.4.
2.5 Allocation of Purchase Price. The Purchase Price shall be
allocated in the manner set forth in Schedule 2.5. Each of the parties agrees
to (i) report the sale of the Assets hereunder in accordance with this
allocation for federal and state income tax purposes, (ii) not take any
position inconsistent with such allocation on its tax returns without the
consent of the other and (iii) timely file federal tax Form 8594 (Asset
Acquisition Statement) with the applicable tax return.
3. Representations and Warranties of Seller.
As an inducement for Buyer to enter into this Agreement, Seller represents
and warrants that each of the following statements is true and correct:
3.1 Existence and Rights. Seller (i) is a corporation duly
organized and validly existing in good standing under the laws of the state of
its incorporation and (ii) has the corporate power and authority to own its
properties, to carry on its business as now conducted and to make and carry out
the Transactions.
3.2 Agreements Authorized. The execution, delivery and
performance by Seller of this Agreement and the Transfer Documents have been
duly authorized by all necessary corporate action and, except as set forth on
Schedule 3.2, do not require notice to, or the consent or approval of, any
governmental authority or other person. This Agreement and the Transfer
Documents have been
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duly executed and delivered by Seller and are legal, valid and binding
obligations of Seller enforceable in accordance with their terms subject to
bankruptcy, insolvency, moratorium and other similar laws affecting the rights
of creditors generally.
3.3 No Conflict. The execution, delivery and, subject to
obtaining the consents in Schedule 3.2, performance by Seller of this Agreement
and Transfer Documents will not (i) breach or constitute grounds for the
occurrence of a default under or allow another party a right to terminate any
material agreement, undertaking or other instrument (including any of the
Assigned Contracts, without regard to materiality) to which Seller is a party
or by which it or any of the Assets may be bound or affected, (ii) violate any
provision of law or any regulation or any order, judgment or decree of any
court or other agency of government; (iii) violate any provision of the
organizational documents of Seller, or (iv) result in the creation or
imposition of (or the obligation to create or impose) any lien or encumbrance,
or security interest in, any of the Assets.
3.4 Financial Statements. Seller has delivered to Buyer unaudited
financial statements for Seller's last three fiscal years and financial
statements for the six-months ended March 31, 1996 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements (i) are true and correct in
all material respects, (ii) fairly present the financial condition of Seller as
of the dates thereof and the results of operations of Seller for the periods
covered thereby and (iii) have been prepared in accordance with generally
accepted accounting principle applied on a consistent basis.
3.5 No Subsequent Changes. Since March 31, 1996, (i) there have
been no material adverse changes (including, without limitation, by way of
sale, encumbrance, destruction or damage) in the Business or the Assets, (ii)
Seller has not made any change in its accounting methods or practices or any
revaluations of any Assets or any reserves or liabilities associated therewith,
and (iii) Seller has conducted its business only in the ordinary course
consistent with past practices. Except as set forth on Schedule 3.5, there has
been no acquisition, disposition or transfer of Inventory, Equipment or other
Assets except in the ordinary course of business since March 31, 1996.
3.6 Contingencies. Except as set forth on Schedule 3.6, (i) there
are no express or implied product warranties relating to the Business, (ii)
there is no litigation, arbitration, administrative proceedings or, to the
knowledge of Seller, investigations pending against the Business or the Assets,
(iii) Seller's and Parent's senior executive officers do not know of any
threats of, or reasonable basis for, any such litigation, arbitration,
administrative proceedings or investigations, the results of which could have a
material adverse effect on the Business or the Assets, (iv) since January 1,
1994, Seller has received no complaints with respect to any product of the
Business, (v) neither the Food & Drug Administration ( "FDA") nor any
comparable state agency has within the past five years notified, nor to the
best knowledge of Seller intends to notify, Seller of any violation of the
Federal Food, Drug and Cosmetics Act, the regulations promulgated thereunder or
any comparable state law or regulation with respect to the manufacture or sale
of any product of the Business, (vi) Seller does not know of, and has never
received any notice of, any potential liability of Seller or the Business under
the Comprehensive Environmental Response,
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Compensation and Liability Act of 1980 or any comparable state law or
regulation. Seller is not subject to any order, writ, injunction or decree of
any court or other governmental or regulatory authority affecting the Assets or
the Business. To the extent due on or before the date hereof, Seller has paid
all sales and use taxes arising out of the operation of the Business. The
Financial Statements do not include and, under generally accepted accounting
principles applied on a consistent basis, are not required to include any
reserves for liabilities relating to product warranties on any product of the
Business, including, without limitation, the Products.
3.7 Assigned Contracts. Schedule 3.7 correctly lists all Supply
Contracts, Distributor Contracts and other Assigned Contracts and indicates
which, if any, of such contracts involve Affiliates of Seller. Seller has
previously delivered to Buyer true and correct copies of all Supply Contracts,
Distributor Contracts, Employee Patent and Confidentiality Agreements and other
Assigned Contracts (or, in the case of oral contracts, true and correct
summaries thereof), together with all amendments thereto. Each of the Supply
Contracts, Distributor Contracts, Employee Patent and Confidentiality
Agreements and other Assigned Contracts (a) is in full force and effect, (b) is
not subject to, and Seller has not received any written or oral notice
threatening or declaring, termination as a result of any alleged uncured breach
or default and (c) will not be breached by the assignment thereof to Buyer.
3.8 Technology. Seller is the exclusive owner of all the Patents
and Schedule 3.8 correctly lists all of the Patents. There are no licenses,
royalty agreements or encumbrances of any kind relating to the Technology other
than as set forth on Schedule 3.8. Schedule 3.8 correctly lists all past and
present litigation, arbitration or other disputes involving any of the
Technology (and the outcome or present status thereof). To the best of
Seller's knowledge, the use of the Technology in the operation of the Business
does not violate or infringe any patent (U. S. or foreign), copyright, trade
secrets or other proprietary interest of any other person. Further, to the
best of Seller's knowledge, no other person is contesting Seller's rights in or
to the Technology, nor, to the best of Seller's knowledge, is any other person
violating or infringing any of the Patents.
3.9 Trademarks. Seller is the exclusive owner of the Trademarks.
Schedule 3.9 correctly lists all of the Trademarks and all registrations
thereof. There are no licenses, royalty agreements or encumbrances of any kind
relating to the Trademarks. Schedule 3.9 correctly lists all past and present
litigation, arbitration or other disputes involving any of the Trademarks (and
the outcome or present status thereof). To the best of Seller's knowledge, the
use of the Trademarks in the operation of the Business does not violate or
infringe any trademark, service mark, trade name or any other proprietary
interest of any other person. No other person is contesting or, to the best of
Seller's knowledge, violating or infringing any of the Trademarks
3.10 Inventory. Schedule 3.10 correctly lists the Inventory at the
date set forth thereon. The Inventory is of a quality salable in the normal
course of Business.
3.11 Equipment. Schedule 3.11 correctly lists all of the Equipment
and, in the case of any Equipment not in Seller's possession, the location
thereof, the party in possession thereof, and any
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arrangements or understandings regarding the possession thereof. The Equipment
is in good operating condition, ordinary wear and tear excepted.
3.12 Files. Concurrently herewith, Seller has delivered to Buyer
the originals of all the Files. The Files include, among other things, (a) all
Customer Lists in Seller's possession or which were obtainable from its
distributors after reasonable efforts, (b) all documentation relating to all
other Technology, (c) all drawings and specifications for the Products, (d) all
documents relating to customer complaints and (e) all documentation relating to
quality assurance and quality control.
3.13 Title to Assets. Seller will convey to Buyer as of the date
hereof good and marketable title to all of the Assets free and clear of any
liens, encumbrances, adverse claims or security interests other than the
Assumed Obligations. None of Seller's Affiliates (including, without
limitation, subsidiaries) has, by contract or otherwise, any rights in or to
any of the Assets or the Business.
3.14 Insurance. Schedule 3.14 correctly lists information
concerning insurance policies providing general liability or product liability
coverage currently in effect for the Business. Such insurance policies are of
the kinds and in amounts not less than is customarily obtained by companies
engaged in a business the same as or similar to the Business. Seller has not
received a notice of cancellation or non- renewal for any such coverage.
3.15 Compliance with Law. Except for matters not material in the
aggregate to the Business or the Assets, Seller has conducted and is conducting
the Business in compliance with all applicable laws and regulations and has
obtained all necessary licenses, permits and other approvals of any
governmental authority, including, without limitation, the FDA.
3.16 Commissions. Neither Seller nor any of its shareholders,
officers, directors, agents or employees have employed or incurred any
liability to any broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to the Transactions. Seller agrees
to hold Buyer harmless from and against Losses incurred by reason of any
contrary assertions.
3.17 Accuracy of Information Furnished. To the best of Seller's
knowledge, no statement or information contained in any schedule, certificate
or other document or information furnished in writing by or on behalf of Seller
to Buyer when taken as a whole contains any untrue statement of a material
fact.
4. Representations and Warranties of Buyer.
As an inducement for Seller to enter into this Agreement, Buyer hereby
represents and warrants that each of the following statements is true and
correct.
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4.1 Existence and Rights. Buyer (i) is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware and (ii) has the corporate power and authority to own its properties,
to carry on its business as now conducted and to make and carry out the
Transactions.
4.2 Agreements Authorized. The execution, delivery and
performance by Buyer of this Agreement (including assumption of the Assumed
Obligations) have been duly authorized by all necessary corporate action and,
except as set forth in Schedule 4.2, do not require notice to, or the consent
or approval of, any governmental or other regulatory authority or any other
person. This Agreement has been duly executed and delivered by Buyer and is a
legal, valid and binding obligation of Buyer enforceable in accordance with its
terms subject to bankruptcy, insolvency, moratorium and other similar laws
affecting the rights of creditors generally.
4.3 No Conflict. The execution, delivery and, subject to
obtaining the consents in Schedule 4.2, performance by Buyer of this Agreement
(including assumption of the Assumed Obligations) will not (i) breach or
constitute grounds for the occurrence or declaration of a default under, or
allow another party a right to terminate any material agreement, indenture,
undertaking or other instrument to which Buyer is a party or by which it or any
of its properties may be bound or affected, (ii) violate any provision of law
or any regulation or any order, judgment, or decree of any court or other
agency of government or (iii) violate any provision of the Certificate of
Incorporation or Bylaws of Buyer.
4.4 Financial Condition. Buyer's SEC Reports contain true and
correct copies of the audited consolidated financial statements of Buyer for
its last three fiscal years and unaudited consolidated financial statements of
Buyer for the first two quarters of its current fiscal year (in each case,
together with the footnotes thereto); provided, that the financial statements
included in Buyer's Annual Report on Form 10-K for the year ended June 30, 1995
have not been restated to reflect the "pooled" results of Osbon Medical
Systems, Inc. and Advanced Surgical, Inc., which were acquired on December 29,
1995 (the "BUYER FINANCIAL STATEMENTS"). The Buyer Financial Statements (i)
fairly present the financial condition of Buyer, as of the dates thereof and
the results of the operations of Buyer for the periods covered thereby and (ii)
have been prepared in accordance with generally accepted accounting principles.
4.5 Commissions. Neither Buyer nor any of its shareholders,
officers, directors, agents or employees have employed or incurred any
liability to any broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to the Transactions. Buyer agrees to
hold Seller harmless from and against Losses incurred by reason of any contrary
assertions.
4.6 Purchasing Inventory for Resale. Buyer is purchasing the
Inventory for resale in the ordinary course of business.
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5. Closing Documents.
5.1 Related Agreement. Seller is causing Chemical Bank to execute
and deliver to Buyer concurrently herewith a Consent and Release consenting to
the transactions contemplated by this Agreement and releasing its security
interest in the Assets (the "RELATED AGREEMENT").
5.2 Transfer Documents. The following transfer documents (the
"TRANSFER DOCUMENTS") are being executed and delivered to Buyer concurrently
herewith:
5.2.1 a Bill of Sale;
5.2.2 a Patent Assignment;
5.2.3 a Trademark Assignment; and
5.2.4 Assignment and Assumption Agreement.
5.3 Assumptions Documents. Seller shall execute and deliver to
Buyer concurrently herewith an Assignment and Assumption Agreement with respect
to the Assigned Contracts.
5.4 Miscellaneous Documents. The following miscellaneous
documents are being delivered concurrently herewith:
5.4.1 to Buyer, copies of all permits, approvals, and
authorizations of governmental bodies and other regulatory authorities, if any,
required for Seller to consummate the Transactions;
5.4.2 to Seller, copies of all permits, approvals, and
authorizations of governmental bodies and other regulatory authorities, if any,
required for Buyer to consummate the Transactions;
5.4.3 to Buyer, originally signed consents of all other
third parties necessary for Seller to consummate the Transactions; and
5.4.4 to Buyer, an opinion of Eric J. Kaiser, counsel to
Seller, regarding (i) Seller's corporate status, (ii) Seller's corporate power
and authority to consummate the Transactions, (iii) the enforceability of this
Agreement, the Related Agreement and the Transfer Documents and (iv) the
absence of conflicts between the Transactions and Seller's other contractual
obligations.
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6. Indemnification.
6.1 Indemnification.
6.1.1 Right of Indemnification. Buyer and Seller each
agree to indemnify and hold the other harmless from and against the full amount
of all Losses arising out of or resulting from a breach of any representation,
warranty or covenant made by the indemnifying party in this Agreement.
6.1.2 Time Limit on Indemnification Claims. The
representations, warranties and covenants in this Agreement shall survive the
Closing, but neither party may seek indemnity under this Section 6 at any time
after two years from the date that the representation or warranty is made or a
covenant is breached; provided, however, that Buyer may seek indemnity under
this Section 6 at any time prior to the expiration of the applicable statute of
limitations for Losses related to or arising out of defective products.
6.1.3 Indemnification Procedure. Upon a party (the
"INDEMNIFIED PARTY") becoming aware of a fact, condition or event for which the
Indemnified Party intends to seek indemnification hereunder, the Indemnified
Party will with reasonable promptness notify the other party (the "INDEMNIFYING
PARTY") in writing of such fact, condition or event; provided that the
Indemnified Party's failure to give such notice shall not relieve the
Indemnifying Party from any obligation it may have to indemnify the Indemnified
Party, except to the extent that the Indemnifying Person has been prejudiced by
such failure. The Indemnifying Party shall undertake full responsibility for
the defense of any claim brought by any third-party which, if true, would
constitute a breach of the Indemnifying Party's representations, warranties or
covenants hereunder. In such case, the Indemnifying Party may contest or
settle such third-party claim on such terms as the Indemnifying Party may
choose; provided that the Indemnifying Party will not have the right, without
the Indemnified Party's written consent (which shall not be unreasonably
withheld), to settle any such claim if such settlement (i) arises from or is
part of any criminal actions, suit or proceeding, (ii) contains a stipulation
to, confession of judgment with respect to, or admission or acknowledgment of,
any liability or wrongdoing on the part of the Indemnified Party, or (iii)
provides for injunctive relief, or other relief or finding other than money
damages, which is binding on the Indemnified Party. Such defense or
prosecution will be conducted by reputable attorneys retained by the
Indemnifying Party at the Indemnifying Party's cost and expense, but the
Indemnified Party will have the right to participate in such proceedings and to
be separately represented by attorneys of its own choosing. The Indemnified
Party will be responsible for the costs of such separate representation unless
the interests of the Indemnified Party and the Indemnifying Party in the action
conflict in such a manner and to such an extent as to require, consistent with
applicable standards of professional responsibility, the retention of separate
counsel for the Indemnified Party, in which case the Indemnifying party will
pay for one separate counsel chosen by the Indemnified Party.
6.2 Cooperation. The Indemnifying Party and the Indemnified Party
shall cooperate in determining the validity of and defending against any claim
brought by any third party for any Loss for which a claim of indemnification
may be made hereunder.
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6.3 Parent Guaranty. Parent hereby guarantees for the benefit of
Buyer the indemnification obligations of Seller to Buyer hereunder.
6.4 Basket and Limitation. Notwithstanding the provisions of this
Section 6 to the contrary, Seller and Parent shall not be liable to Buyer for
any Losses related to any breach by Seller of any representation, warranty or
covenant set forth herein unless the aggregate amount of such Losses exceeds
$50,000; provided, that the $50,000 limitation shall not apply with respect to
(i) any claims asserted against Buyer with respect to obligations not assumed
by Buyer hereunder or (ii) any individual Loss the amount of which exceeds
$50,000. With respect to individual Losses the amount of which is $50,000 or
less, once the aggregate amount of claims has exceeded the $50,000 threshold,
Buyer shall be entitled to seek full recovery of all claims for Losses to the
extent that such claims exceed $50,000. In addition, the aggregate liability
of Seller and Parent for indemnification claims pursuant to this Section 6
shall not exceed the amount of the Purchase Price.
7. Other Covenants.
7.1 Non-Competition. Seller agrees that, for a period of two years
after the date of this Agreement, neither it nor any of its subsidiaries will
directly or indirectly engage in, own, manage, operate, assist, join, control
or participate in the ownership, management, operation or control of any
business which is developing, manufacturing or selling products which are the
same as, or substantially equivalent in purpose and function to, the Products.
Seller represents and warrants to Buyer (and Buyer so acknowledges) that Buyer
is purchasing substantially all of the operating assets of a division of Seller
together with the goodwill of such division.
7.2 Confidentiality. Seller shall not disclose or use any
confidential information about the Business, the Assets or the Technology
without the prior written consent of Buyer except to the extent (i) the
information is now in the public domain, (ii) the information is then in the
public domain by acts not attributable to Seller, (iii) the information is
hereafter received by Seller from a third party source on an unrestricted basis
or (iv) Seller is required to disclose such information by law, or applicable
regulation or under court or governmental order; provided, however, that Seller
shall provide Buyer with prior notice of such disclosure and a reasonable
opportunity to seek a protective order with respect thereto.
7.3 Consulting Services. During the first six months after the
Closing Date, Seller shall from time to time consult with Buyer during normal
business hours to the extent reasonably requested by Buyer for the purpose of
transferring the operation of the Business from Seller to Buyer. Such services
may include, without limitation, (i) advising Buyer with respect to Seller's
procedures for manufacturing any of the Products, (ii) introducing Buyer to the
suppliers and distributors for the Business and (iii) responding to questions
about the Business or the Assets. Seller acknowledges and agrees that title
and full ownership rights to any modifications, changes, derivative works and
enhancements made to the Technology by Seller in the course of providing such
consulting services under this Agreement shall vest in and remain the sole
property of Buyer.
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<PAGE> 13
7.4 Notification of Suppliers and Distributors. Seller shall
promptly notify all of Seller's suppliers and distributors that the Business
has been transferred to Buyer.
7.5 Notification of Employees. Seller shall promptly notify all
of Seller's employees of the assignment of the Employee Patent and
Confidentiality Agreements and shall inform such employees that the obligations
under such agreements will run to Buyer to the extent that such agreements
relate to the Business or the Technology.
7.6 Additional Acts. Seller shall promptly from time to time
execute and deliver any and all further documents and writings, and perform
such other reasonable actions which may be or become necessary or expedient to
effectuate and carry out the Transactions or vest, perfect or confirm title to
any Asset in Buyer.
7.7 Liability Insurance. Seller and Parent shall maintain
insurance coverage substantially similar to that described on Schedule 3.14 for
a period of not less than three (3) years following the date of this Agreement
insuring against claims arising from Seller's conduct of the Business,
including, without limitation, product liability claims arising from sales of
Products by Seller.
7.8 Post Closing Access and Assistance.
(a) After the Closing, upon request, Seller and its
representatives shall be permitted reasonable access, during normal business
hours, to the books and records of the Seller transferred to Buyer hereunder so
long as such records are maintained by the Buyer in accordance with its
customary records retention policy and Seller shall be permitted to make copies
thereof as is reasonably necessary to allow Seller to obtain information in
Buyer's possession (but excluding attorney work product or other privileged
communications). Seller shall pay Buyer out-of-pocket costs and expenses in
connection with satisfying such requests and all such information so made
available shall be subject to reasonable confidentiality obligations.
(b) After the Closing, upon request, Buyer and its
representatives shall be permitted reasonable access, during normal business
hours, to the books and records (if any) of Seller which may be retained by
Seller relating to the Business and the Assets and Buyer shall be permitted to
make copies thereof as is reasonably necessary to allow Buyer to obtain
information in Seller's possession (but excluding attorney work product or
other privileged communications). Buyer shall pay Seller's out-of-pocket costs
and expenses in connection with satisfying such requests.
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8. Miscellaneous.
8.1 Complete Agreement; Modifications. This Agreement, the
Related Agreement, the Transfer Documents, the Assignment and Assumption
Agreement and any other documents referred to herein or executed
contemporaneously herewith constitute the parties' entire agreement with
respect to the subject matter hereof and supersede all agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter hereof. This Agreement may
not be amended, altered or modified except by a writing signed by the parties.
8.2 Expenses. Except as set forth in Section 8.9 the companies
hereto will each pay all of their own expenses incurred in connection with the
authorization, preparation, execution and performance of this Agreement and the
Transactions, including, without limitation, all fees and expenses of their
respective agents, representatives, counsel and accountants. Buyer shall pay
any sales or use tax imposed as a result of the Transactions.
8.3 Notices. All notices under this Agreement will be in writing
and will be delivered by personal service, facsimile, telegram, certified mail
(postage prepaid), or overnight courier (by a nationally recognized service) to
such address as may be designated from time to time by the relevant party, and
which will initially be as set forth below. Any notice sent by certified mail
will be deemed to have been given three (3) days after the date on which it is
mailed. Any notice sent by a nationally recognized overnight courier will be
deemed to have been given one (1) day after the date on which it is mailed.
All other notices will be deemed given when received. No objection may be made
to the manner of delivery of any notice actually received in writing by an
authorized agent of a party. Notices will be addressed as follows or to such
other address as the party to whom the same is directed will have specified in
conformity with the foregoing:
(i) If to Buyer:
Urohealth Systems, Inc.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
Attention: Kevin M. Higgins, Esq.
General Counsel
Telephone: (714) 668-5858
Facsimile: (714) 668-5824
(ii) If to Seller or Parent:
O.R. Concepts, Inc.
12250 Nicollet Avenue South
Burnsville, Minnesota 55337
Attention: President
Telephone: (612) 804-7523
Facsimile: (612) 804-0546
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<PAGE> 15
(iii) With a Copy to:
Vital Signs, Inc.
20 Campus Road
Totowa, New Jersey 07512
Attention: Eric J. Kaiser, Esq.
General Counsel
Telephone: (201) 790-1330 x43
Facsimile: (201) 790-4227
8.4 Successors and Assigns. Except as provided herein to the
contrary, this Agreement will be binding upon and inure to the benefit of the
parties, their respective successors and permitted assigns. None of the
parties hereto may assign any of their rights or obligations under this
Agreement without the prior written consent of the other party hereto;
provided, however, that Buyer may assign its rights and obligations to its
successor in a merger or any subsequent purchaser of the Business.
8.5 Jurisdiction. Any and all disputes between the parties which
may arise pursuant to this Agreement not covered by arbitration shall be heard
and determined exclusively before in appropriate federal or state court located
in Orange County, California. The parties hereto acknowledge that such court
has the jurisdiction to interpret and enforce the provisions of this Agreement
and the parties waive any and all objections that they may have as to personal
jurisdiction or venue in any of the above courts.
8.6 Waivers Strictly Construed. With regard to any power, remedy
or right provided herein or otherwise available to any party hereunder (i) no
waiver or extension of time will be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alteration, modification or
impairment will be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or other indulgence
8.7 Survival of Representations, Warranties and Covenants. Except
as otherwise provided in this Agreement, all representations, warranties,
covenants and agreements of each party, made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby, shall survive the
execution of this Agreement regardless of any investigation made at any time by
or on behalf of either party or of any information either may have.
8.8 Attorneys' Fees. Should any litigation or arbitration be
commenced (including any proceedings in a bankruptcy court) between the parties
hereto, or their representatives concerning any provision of this Agreement or
the rights and duties of any person or entity hereunder, the party or parties
prevailing in such proceeding will be entitled to reasonable attorneys' fees
and expenses of counsel and costs incurred by reason of such proceeding.
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<PAGE> 16
8.9 Arbitration of Disputes.
8.9.1 Procedure. Except for actions seeking injunctive
relief, which may be brought before any court having jurisdiction under Section
8.5, any claim (regardless of the legal theory involved) arising out of or
relating to (i) this Agreement, any Related Agreement or any Transfer Documents
or (ii) the Transactions which is not settled by agreement between the parties,
shall be settled exclusively by arbitration in Denver, Colorado before a single
arbitrators, selected in accordance with the procedure of the American
Arbitration Association ("AAA"). The parties hereby (i) consent to the in
personam jurisdiction of the Superior Court of the State of Colorado for
purposes of confirming any such award and entering judgment hereon and (ii)
agree to use all reasonable efforts to keep all matters relating to any
arbitration hereunder confidential. Each party agrees that the arbitration
provisions of this Agreement are its exclusive damage remedy and expressly
waives any right to seek redress in another forum and that the results of the
arbitration shall be final, binding and not subject to judicial review. During
the arbitration, the fees of the arbitrator shall be borne equally by each
party, but the fees of all arbitrators shall ultimately be borne by the losing
party.
8.9 Injunction. Seller acknowledges that the remedy at law for
any breach, or threatened breach, of any of the provisions of Sections 7.1 or
7.2 will be inadequate and, accordingly, covenants and agrees that Buyer will,
in addition to any other rights or remedies that it may have and regardless of
whether such other rights or remedies have been previously exercised, be
entitled to seek equitable and injunctive relief.
8.10 Remedies Not Exclusive. Except to the extent that this
Agreement requires the resolution of claims by arbitration, no remedy conferred
by any of the specific provisions of this Agreement is intended to be exclusive
of any other remedy, and each and every remedy will be cumulative and will be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise. The election of any one or
more remedies will not constitute a waiver of the right to pursue other
available remedies.
8.11 Rules of Construction
8.11.1 Headings. The headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, or
extend or interpret the scope of this Agreement or of any particular Section.
8.11.2 Severability. The validity, legality or
enforceability of the remainder of this Agreement will not be affected even if
one or more of the provisions of this Agreement will be held to be invalid,
illegal or unenforceable in any respect. Further, if the period of time, the
extent of the geographic area, or the scope of the prescribed activities
covered by Section 7.1 (Non-Competition) should be deemed unenforceable, then
Section 7.1 shall be construed to cover the maximum period of time, geographic
area and scope of prescribed activities (not to exceed the maximum time,
geographic area or scope set forth herein) as may be valid under applicable
law.
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8.11.3 Agreement Negotiated. The parties hereto are
sophisticated and have been represented by lawyers throughout this transaction
who have carefully negotiated the provisions hereof. As a consequence, the
parties do not believe that any presumptions or rules relating to the
interpretation of contracts against the drafter of any particular clause should
be applied in this case and therefore waive its effects.
8.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8.14 Governing Law. This Agreement and the documents referred to
herein shall be governed by, and construed and enforced in accordance with, the
laws of the State of New Jersey, without giving effect to the conflicts
principles of such jurisdiction.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UROHEALTH SYSTEMS, INC., a Delaware
corporation
By: /s/ Kevin M. Higgins
------------------------------------------
Its: Senior Vice President and General Counsel
-----------------------------------------
O.R. CONCEPTS, INC., a Texas corporation
By: /s/ Anthony J. Dimun
------------------------------------------
Its: Executive Vice President
-----------------------------------------
With respect to the obligation of Seller
set forth in Section 6 only
VITAL SIGNS, INC., a New Jersey corporation
By: /s/ Anthony J. Dimun
------------------------------------------
Its: Executive Vice President
-----------------------------------------
17
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, is dated as of June 1, 1996, by and among
Urohealth Systems, Inc., a Delaware corporation ("UROHEALTH"), Urohealth, Inc.
(California), a California corporation and a wholly owned subsidiary of
Urohealth ("UROHEALTH SUB"), and The Intermed Group, Inc., a Delaware
corporation ("INTERMED"). Urohealth Sub and Intermed are sometimes hereinafter
referred to collectively as the "CONSTITUENT CORPORATIONS," or individually as
a "CONSTITUENT CORPORATION."
WHEREAS, the respective Boards of Directors of Urohealth Sub and
Intermed deem it advisable and in the best interests of their respective
stockholders that Urohealth acquire Intermed by the merger of Intermed with and
into Urohealth Sub upon the terms and subject to the conditions set forth
herein (the "MERGER");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3 hereof) of the
Merger, Intermed shall be merged with and into Urohealth Sub, with Urohealth
Sub being the surviving corporation in the Merger (the "SURVIVING CORPORATION")
and the separate existence of Intermed shall thereupon cease. The Merger shall
have the effects set forth in the California General Corporation Law (the
"CGCL") and the Delaware General Corporation Law (the "DGCL").
1.2 Closing. The closing of the Merger (the "CLOSING") shall take
place (i) at the offices of Morrison & Foerster LLP, 19900 MacArthur Boulevard,
Irvine, California 92715, at 9:00 a.m., Pacific daylight savings time, on the
second business day after the fulfillment or waiver of the conditions set forth
in Article VII hereof or (ii) at such other place and time and/or on such other
date as the parties may agree.
1.3 Effective Time of the Merger. As soon as practicable following
the Closing, and provided that this Agreement has not been terminated or
abandoned pursuant to Article VIII hereof (i) a Merger Agreement substantially
in the form attached hereto as Exhibit A (the "MERGER AGREEMENT"), shall be
prepared in accordance with the CGCL, and thereafter delivered to the Secretary
of State of the State of California for filing as provided in the CGCL and (ii)
a Certificate of Merger substantially in the form attached hereto as Exhibit B,
shall be
<PAGE> 2
prepared in accordance with the DGCL, and thereafter delivered to the Secretary
of State of the State of Delaware for filing as provided in the DGCL. The
Merger shall become effective upon the completion of the filing of a properly
executed Merger Agreement with the Secretary of State of the State of
California, which filing shall be made on the Closing Date. When used in this
Agreement, the term "EFFECTIVE TIME" with respect to the Merger shall mean the
date and time at which such Merger Agreement is successfully filed.
ARTICLE II
UROHEALTH AND THE SURVIVING CORPORATION
2.1 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of Urohealth Sub in effect at the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation of the
Merger.
2.2 Bylaws of the Surviving Corporation. The Bylaws of Urohealth Sub
as in effect at the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
2.3 Directors and Officers of the Surviving Corporation.
(a) The directors of Urohealth Sub at the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Articles of Incorporation and
Bylaws of the Surviving Corporation, or as otherwise provided by law.
(b) The officers of Urohealth Sub at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from the
Effective Time until removed or until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
ARTICLE III
CONVERSION OF SHARES
3.1 Exchange Ratio. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of shares of Intermed Common
Stock:
(a) Each share of Common Stock, $.01 par value, of Intermed ("INTERMED
SHARE") issued and outstanding immediately prior to the Effective Time (other
than Intermed Shares owned by Urohealth, Urohealth Sub or Intermed Shares which
are held by stockholders ("DISSENTING STOCKHOLDERS") duly exercising appraisal
rights pursuant to Section 262 of the DGCL) shall be converted at the Effective
Time into the right to receive (i)
2
<PAGE> 3
that number of shares of Urohealth Common Stock ("UROHEALTH SHARES"), equal to
149,306 (the "STOCK MERGER CONSIDERATION") divided by the number of outstanding
Intermed Shares (the "INTERMED OUTSTANDING SHARES") at the Effective Time (the
"EXCHANGE RATIO") and the right to receive $1,462,412 divided by the number of
Intermed Outstanding Shares (the "CASH MERGER CONSIDERATION," and together with
the "STOCK MERGER CONSIDERATION," the "MERGER CONSIDERATION").
(b) At the Effective Time, all Intermed Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any Intermed Shares shall
thereafter represent the right to receive the Merger Consideration.
Certificates representing Intermed Shares shall be exchanged for certificates
representing whole Urohealth Shares issued in consideration therefor upon the
surrender of such certificate in accordance with the provisions hereof. If,
prior to the Effective Time, Intermed or Urohealth should split or combine the
Intermed Shares or the Urohealth Shares, or pay a stock dividend or other stock
distribution in Intermed Shares or Urohealth Shares, then the Exchange Ratio
will be appropriately adjusted to reflect such split, combination, dividend or
other distribution.
(c) Each Intermed Share held in the treasury of Intermed or by any
subsidiary of Intermed or by Urohealth or any subsidiary of Urohealth shall be
canceled and retired and cease to exist, and no Urohealth Shares shall be
issued in exchange therefor. All Urohealth Shares owned by Intermed or any
subsidiary shall become treasury stock of Urohealth.
(d) At the Effective Time, each share of Common Stock, without par
value, of Urohealth Sub issued and outstanding immediately prior to the
Effective Time shall remain outstanding and each certificate therefor shall
continue to evidence one share of Common Stock of the Surviving Corporation.
3.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, (i) Intermed shall
deliver to Urohealth certificates representing all of the Intermed Outstanding
Shares together with the Representation Letters (as defined below) for each
Intermed stockholder, and (ii) Urohealth shall deliver to the Intermed
stockholders, certificates representing the Urohealth Shares (together with any
cash to be paid in lieu of fractional shares) in exchange for outstanding
Intermed Shares, together with a check in payment of the Cash Merger
Consideration due such stockholder.
(b) Representations by Holders of Intermed Common Stock. Each holder
of Intermed Common Stock which will receive Urohealth Shares in the Merger will
be required to execute and deliver a "REPRESENTATION LETTER" in the form of
Exhibit C hereto in order to receive merger consideration in exchange for such
holder's certificates representing Intermed Shares.
3
<PAGE> 4
3.3 No Further Ownership Rights in Intermed Common Stock. The Merger
Consideration issued upon conversion of shares of Intermed Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Intermed Common Stock.
3.4 No Fractional Shares.
(a) No certificates or scrip representing fractional Urohealth Shares
shall be issued upon the surrender for exchange of Intermed Shares and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Urohealth.
(b) Urohealth shall pay or cause to be paid to each holder of Intermed
Shares an amount in cash equal to the product obtained by multiplying the
fractional share interest to which such holder would otherwise be entitled to
by the closing price on the American Stock Exchange of a Urohealth Share on the
trading day immediately preceding the Closing Date.
3.5 Supplementary Action. If at any time after the Effective Time,
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either Constituent
Corporation, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered on behalf of the Constituent Corporations, in the name of and on
behalf of either Constituent Corporation as appropriate, to execute and deliver
any and all things necessary or proper to vest or to perfect or confirm title
to such property or rights in the Surviving Corporation, and otherwise to carry
out the purposes and provisions of this Agreement.
3.6 Appraisal Rights. If any Dissenting Stockholder shall be
entitled to require Intermed to purchase such stockholder's Intermed Shares for
their "fair value," as provided in Section 262 of the DGCL, Intermed shall give
Urohealth notice thereof and Urohealth shall have the right to participate in
all negotiations and proceedings with respect to any such demands. Neither
Intermed nor the Surviving Corporation shall, except with the prior written
consent of Urohealth, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Intermed Shares held by such stockholder shall thereafter be
entitled to be surrendered in exchange for the Merger Consideration.
3.7 Transfer of Shares After the Effective Time. No transfers of
Intermed Shares shall be made on the stock transfer books of the Surviving
Corporation at or after the Effective Time. If, after the Effective Time,
certificates representing Intermed Shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration.
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<PAGE> 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF UROHEALTH AND UROHEALTH SUB
Urohealth and Urohealth Sub represent and warrant to Intermed, except
as disclosed to Intermed in writing prior to the execution of this Agreement,
as follows:
4.1 Organization. Urohealth is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. Urohealth is duly
qualified as a foreign corporation to do business, and is in good standing (to
the extent the concept of good standing exists), in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified will not have a material adverse effect on the financial condition
of Urohealth and its subsidiaries taken as a whole (a "MATERIAL ADVERSE
EFFECT"). Urohealth Sub is a corporation duly organized, validly existing and
in good standing (to the extent the concept of good standing exists) under the
laws of its jurisdiction of incorporation or organization, has the corporate
power to carry on its business as it is now being conducted or presently
proposed to be conducted and is duly qualified to do business, and is in good
standing (to the extent the concept of good standing exists), in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so duly organized, validly existing and in good standing, to
have such corporate power or to be so qualified will not have a Material
Adverse Effect.
4.2 Authority Relative to this Agreement. Each of Urohealth and
Urohealth Sub has the corporate power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement by
Urohealth and Urohealth Sub and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action, and no other corporate proceedings on the part of either such
company are necessary to approve this Agreement or the transactions
contemplated hereby.
4.3 Reports and Financial Statements. Urohealth has filed all
reports required to be filed by it with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), since July 1, 1994, including, without limitation, an Annual
Report on Form 10-K for the year ended March 31, 1996 (collectively, the "SEC
REPORTS"), and has previously furnished or made available to Intermed true and
complete copies of all such SEC Reports. None of the SEC Reports, as of their
respective dates (as amended through the date hereof), contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the balance
sheets (including the related notes) included in the SEC Reports fairly
presents in all material respects the consolidated financial position of
Urohealth and its subsidiaries as of the respective dates thereof, and the
other related statements (including the
5
<PAGE> 6
related notes) included therein fairly present in all material respects the
results of operations and cash flows of Urohealth and its subsidiaries for the
respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described therein and the absence of any
notes thereto.
4.4 Compliance With Applicable Law. Urohealth holds all material
licenses, franchises, permits, variances, exemptions, orders, approvals and
authorizations necessary for the lawful conduct of its business under and
pursuant to, and the business of Urohealth is not being conducted in violation
of, any provision of any federal, state, local or foreign statute, law,
ordinance, rule, regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to Urohealth, except in each case were the failure to so hold, or
the violation of, would not constitute a Material Adverse Effect.
4.5 FDA Matters. Neither the Food and Drug Administration nor any
comparable state agency has within the past two years notified, nor to the best
knowledge of Urohealth intends to notify, Urohealth of any violation of the
Federal Food, Drug, and Cosmetic Act, the regulations promulgated thereunder or
any comparable state law or regulation with respect to the manufacture or sale
of Urohealth products, the likely result of which would be a Material Adverse
Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF INTERMED
Intermed represents and warrants to Urohealth and Urohealth Sub, except
as disclosed to Urohealth in writing prior to the execution of this Agreement,
as follows:
5.1 Corporate Organization. Except for Intermed Gauze Company, Inc.
("Intermed Gauze"), each of Intermed and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Intermed Gauze is currently an inactive
subsidiary of Intermed with assets of less than $1,000 which Intermed will
transfer to Norman T. Ruedt prior to the Closing Date. Each of Intermed and its
subsidiaries (except Intermed Gauze) has the corporate power and authority to
own and use its properties, to carry on its business as now conducted, holds all
franchises, licenses and permits necessary and required therefore, and is duly
qualified to do business as a foreign corporation in all other jurisdictions
where the conduct of its business or the ownership of its properties requires
such qualification. Schedule 5.1 correctly lists the current directors and
officers of Intermed and each of its subsidiaries.
5.2 Capitalization. The entire authorized capital stock of Intermed
consists of 10,000,000 shares of Common Stock, $.01 par value, 1,201,585 of
which shares are issued and outstanding, and 1,519,165 of which are held by
Intermed as treasury stock and 1,000,000 shares
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<PAGE> 7
of Preferred Stock, $.01 par value, none of which are issued and outstanding.
All issued and outstanding shares of capital stock of Intermed have been duly
authorized and validly issued and are fully paid and nonassessable. All issued
and outstanding shares of capital stock of Intermed have been issued in
compliance with applicable state and federal securities laws. There are no
outstanding options, warrants or other rights to subscribe for or purchase from
Intermed, or any plans, contracts or commitments providing for the issuance of,
or the granting of, rights to acquire (i) any capital stock or other ownership
interest of Intermed, (ii) any securities convertible into or exchangeable for
such capital stock or other ownership interests or (iii) any debt with voting
rights. There are no outstanding contractual obligations or plans of Intermed
to repurchase, redeem or otherwise acquire any outstanding shares of capital
stock or other ownership interests of Intermed.
5.3 Subsidiaries and Affiliates. Except as set forth on
Schedule 5.3 hereto, Intermed does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation,
partnership, joint venture or other entity.
5.4 Shareholders. Attached hereto as Schedule 5.4 is a list of
the shareholders of Intermed and, to the best of Intermed's knowledge, each
such shareholder owns beneficially and of record all of the Intermed Shares set
forth on Schedule 5.4 next to such shareholder's name, free and clear of all
encumbrances.
5.5 Authorization. Intermed has all requisite capacity, power
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement, assuming the execution and delivery
hereof by Urohealth and Urohealth Sub, is a valid and binding agreement of
Intermed, enforceable against Intermed in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws or equitable principles relating
to or limiting the rights of creditors' generally.
5.6 No Violations; Defaults. The execution, delivery and
performance of this Agreement by Intermed does not, and the consummation by
Intermed of the transactions contemplated hereby will not (with the passage of
time, notice or both): (i) violate, conflict with, or constitute a breach or
default under, the charter documents or bylaws of Intermed, (ii) violate,
conflict with, or constitute a default under, or permit the termination or
acceleration of the maturity or performance of, any indebtedness for borrowed
money or any agreement or other instrument to which Intermed is a party or by
which it bound, (iii) result in the creation or imposition of any encumbrance
on any properties or assets of Intermed, or (iv) violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
entity to which Intermed is subject.
5.7 Consents. All consents, approvals, waivers and
authorizations from third parties necessary with respect to Intermed for the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been obtained. All such consents, if
any, are listed on Schedule 5.7.
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5.8 Financial Statements. (i) The unaudited balance sheet of
Intermed as of April 30, 1996, together with the related statement of
operations for the eleven months then ended, and (ii) the unaudited balance
sheets of Intermed as of May 31, 1994 and 1995, together with the related
statements of operations, retained earnings and cash flows of Intermed for the
years then ended (collectively, the "Intermed Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and fairly present the financial position of Intermed as of
the respective dates thereof and the results of its operations and changes in
cash flows for the respective periods then ended. Except as set forth in the
Intermed Financial Statements, Intermed has no liabilities or obligations,
whether contingent or otherwise, other than those as set forth on Schedule 5.8.
5.9 Absence of Certain Changes or Events. Since April 30,
1996, Intermed has operated its business only in the ordinary course and there
has not been:
(a) any occurrence, event or condition which has had or
could have a Material Adverse Effect,
(b) any damage, destruction or loss in excess of
$10,000, whether or not covered by insurance, affecting its properties or
business,
(c) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to the Intermed Shares,
(d) any increase in compensation or benefits expense to
Intermed, any increase in the compensation or other benefits payable or to
become payable by Intermed to its directors, officers or key employees, any
increase in the payment or arrangement made to, for, or with any such officers
or key employees,
(e) any change in accounting principles or methods
followed by Intermed or any change in depreciation or amortization policies, or
(f) any pending or threatened labor difficulties
affecting Intermed or efforts to unionize Intermed's employees.
5.10 Title to Property; Encumbrances. Intermed owns all assets
and rights necessary to conduct the business of Intermed as presently
conducted. Intermed has good and marketable title to, or other full legal right
to use, all properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all such properties and assets that
it purports to own or has a legal right to use, as reflected on the balance
sheet of Intermed dated April 30, 1996 (the "Balance Sheet") or acquired after
April 30, 1996. Intermed does not own any real property. None of such
properties or assets reflected on the Balance Sheet or acquired after April 30,
1996, is subject to any encumbrance except: (i) encumbrances set forth on
Schedule 5.10, (ii) statutory encumbrances not yet delinquent, (iii)
encumbrances that do not individually or in the aggregate impair or materially
interfere with the conduct of Intermed's present business operations, and (iv)
encumbrances for taxes not yet delinquent or the validity of
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which are being contested in good faith by appropriate actions, which taxes, if
any, have been listed on Schedule 5.10. For purposes of this Agreement,
"encumbrance" means any claim, charge, encumbrance, security interest, lien,
option, pledge, rights of others or restriction (whether on voting, sale,
transfer, disposition or otherwise), whether imposed by agreement,
understanding, law, equity or otherwise, except those arising under any
applicable federal or state securities laws. Schedule 5.10 contains a true and
complete list and description of all items of equipment, furniture and
fixtures, computer hardware and software, and motor vehicles owned or leased by
Intermed (the "Equipment"), and indicates whether each such item of personal
property is owned or leased. The Equipment taken as a whole is in generally
good operating condition, except for ordinary wear and tear, currently usable
for its intended purposes and is not materially obsolete.
5.11 Litigation; No Violations of Law. There is no action,
suit, proceeding, investigation or arbitration at law or in equity or before or
by any governmental entity pending or, to the best of Intermed's knowledge,
threatened against or affecting Intermed or any of its properties or assets
that would have, individually or in the aggregate, a Material Adverse Effect or
that would affect Intermed's ability to perform its obligations hereunder.
Intermed is not in violation of: (i) any applicable law, rule, regulation or
order that individually or in the aggregate has or could have a Material
Adverse Effect, including, without limitation, the United States Food, Drug and
Cosmetic Act, or (ii) any judgment, writ, injunction or decree, of any
governmental entity. Intermed has not received notice that Intermed is in
violation of any such applicable law, rule, regulation, order, judgment, writ,
injunction or decree. Schedule 5.11 hereto identifies each action, suit,
proceeding, investigation or arbitration involving Intermed that involve claims
or potential damages in excess of $10,000, describing the proceeding and the
status thereof.
5.12 Taxes. Intermed has timely filed for all taxable periods
all tax returns due on or before the date hereof and has paid when due all
taxes required to be paid in respect of the periods covered by such tax returns
and filings. With respect to all periods prior to the date hereof, Intermed
has set up an adequate accrual for the payment of all taxes required to be paid
(but not yet due or paid) with respect to those periods. Since January 1,
1992, no federal or state income tax or state sales tax return of Intermed has
been audited by any taxing authority. No election under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), has been or shall
hereafter be made to treat Intermed as a consenting corporation (as defined in
Section 341(f) of the Code).
5.13 Employee Plans.
(a) General. Except as set forth in Schedule 5.13,
Intermed is not and never has been a party to, a participant in or a sponsor
of: (i) any profit sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, welfare or incentive plan
or agreement, (ii) any plan providing for "fringe benefits" to its employees,
including, but not limited to, vacation, sick leave, medical and insurance,
(iii) any employment agreement not terminable upon notice at the will of either
party with or without cause, (iv) any severance plans or severance agreements
providing for severance benefits in
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excess of $5,000, or (v) any other "employee benefit plan" (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")) (collectively, "Employee Plans"). True, correct and complete copies
of all Employee Plans listed in Schedule 5.13, and all related summary plan
descriptions, have been delivered to Urohealth.
(b) Employee Benefit Plans. With respect to the
Employee Plans listed on Schedule 5.13 which are "employee benefit plans"
(within the meaning of Section 3(3) of ERISA), Intermed is in compliance with
the applicable provisions of such plans and of ERISA (as amended through the
date of this Agreement). There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened against such plans or the
assets of such plans and, to the best of Intermed's knowledge, no facts exist
which Intermed believes will give rise to any actions, suits or claims (other
than routine claims for benefits) against such plans or the assets of such
plans. There are no actions, suits or claims pending or threatened against
Intermed regarding any employment agreement or alleged employment agreement
and, to the best of Intermed's knowledge, no facts exist which Intermed believe
will give rise to any such action, suit or claim.
(c) Pension and Profit Sharing Plans. No plan listed
in Schedule 5.13 is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA).
(d) Common Control Plans. There are no trades or
businesses (whether or not incorporated) which are members of a group of which
Intermed is a member and which are under common control within the meaning of
Section 414 of the Code and the regulations thereunder.
(e) No Multiemployer Plans. No plan listed in Schedule
5.13 is a "multiemployer plan" (within the meaning of Section 3(37) of ERISA).
Intermed has never contributed to or had an obligation to contribute to any
"multiemployer plan."
5.14 Material Contracts. Schedule 5.14 contains an accurate
and complete list of all executory contracts, licenses, instruments and
understandings (whether or not in writing) in effect as of the date hereof and
to which Intermed is a party or by which it is bound (each a "Material
Contract"):
(a) requiring performance over a period of more than
one year, with aggregate payment obligations in excess of $25,000,
(b) limiting the ability of Intermed to conduct its
business, including as to manner or place,
(c) providing for a guarantee or indemnity by Intermed,
(d) granting a power of attorney, agency or similar
authority to another person or entity,
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(e) with any affiliate of Intermed,
(f) providing for commissions or representative
agreements, practices or understandings, whether or not in writing or legally
binding,
(g) with any labor union or employees' association,
(h) or the employment or retention of any director,
officer, employee, agent, shareholder, consultant or advisor or any other
contract or understanding with any director, officer, employee, agent,
shareholder, consultant or advisor,
(i) in the nature of any indenture, mortgage,
promissory note, loan or credit agreement or other contract relating to the
borrowing of money or a line of credit by Intermed or to the direct or indirect
guaranty or assumption by Intermed of obligations of others,
(j) providing for any charitable contributions, or
(k) providing for capital expenditures for the
acquisition or construction of fixed assets, with aggregate payment obligations
in excess of $25,000.
True and correct copies of all items listed on Schedule 5.14 have been provided
to Urohealth.
Each of the Material Contracts is a valid and binding obligation of the parties
thereto, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws or equitable principles relating to or
limiting the rights of creditors generally. With respect to each of the items
listed on Schedule 5.14, there have been no defaults (or claims of default) by
Intermed or by the other party or parties, and there are no facts or conditions
that have occurred or that are anticipated to occur which, through the passage
of time or the giving of notice or both, would constitute a default by Intermed
or, to the knowledge of Intermed, by the other party or parties thereunder or
would cause the acceleration of any obligation of any party thereto or the
creation of an encumbrance upon any asset of Intermed. None of such items
listed will be violated by or terminate or lapse by reason of, the execution
and performance of this Agreement by Intermed.
5.15 Indebtedness to and from Related Parties. Except as set
forth on Schedule 5.15, Intermed is not indebted to any of its stockholders,
directors, officers, employees or agents except for amounts due as normal
salaries, wages and in reimbursement of ordinary expenses on a current basis.
Except as set forth on Schedule 5.15, no stockholder, director, officer,
employee or agent of Intermed is indebted to Intermed except for advances of
business expenses on a current basis. Any Material Contract between Intermed
and any of its stockholders, any party related to such stockholders, or any
affiliate or related party of such stockholders or Intermed, including without
limitation any leases of real property between or among any such parties, is
based on the fair market value of the consideration involved in such contract,
when compared to similar contracts between unrelated third parties.
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5.16 Licenses, Permits and Authorizations. Intermed and its
employees hold all governmental licenses, permits, franchises and other
authorizations necessary for its business as presently conducted or, in the
case of such employees, to carry out their duties on behalf of Intermed. Such
governmental licenses, permits, franchises and other authorizations are valid
and sufficient in all material respects for all business presently carried on
by Intermed, and Intermed knows of no threatened suspension, cancellation or
invalidation of any such license, permit, franchise or other authorization.
5.17 Intangible Property. Intermed has all rights to the
following items that are used in the conduct of its business as presently
conducted: all trade names including, without limitation, the trade names
listed on Schedule 5.17, unregistered trademarks and service marks, brand
names, patents, copyrights, registered trademarks, service marks, and computer
software, programs, and data bases, and all applications and documentation for
any of the foregoing, and all certificates, registrations, grants and licenses
or other rights with respect thereto, and all trade secrets, secret processes
and confidential know-how used in the business of Intermed ("Intangible
Property"). Schedule 5.17 lists all Intangible Property of Intermed. The
execution, delivery and performance of this Agreement will not violate any
rights of Intermed with respect to its Intangible Property. Intermed has not
been charged with any infringement of any Intangible Property of others or been
notified or advised of any claim of any other person relating to the
infringement of any of the Intangible Property of others by Intermed. None of
the Intangible Property of Intermed or any rights therein, has been assigned,
transferred or licensed by Intermed in whole or in part to any other party.
Each of the trade names and trademarks listed on Schedule 5.17 is valid, and is
in good standing and active use and none has been abandoned. To the best of
Intermed's knowledge, (i) there has been no unauthorized use of any of the
Intangible Property of Intermed by any third parties, (ii) there are no
outstanding or undetermined charges or claims of infringement by any third
parties regarding any of the Intangible Property of Intermed, and (iii) there
are no conflicts or claimed conflicts with respect to the rights of others to
the use of any Intangible Property of Intermed.
5.18 Accounts Receivable. All accounts receivable of Intermed,
whether reflected on the Balance Sheet or, with respect to receivables arising
after April 30, 1996, shown on the books of Intermed, represent sales actually
made in the ordinary course of business, and are fully collectible net of any
reserves shown on the Balance Sheet or on the books of Intermed (which reserves
are adequate and were calculated consistent with past practices).
5.19 Insurance. Schedule 5.19 contains an accurate and
complete listing (showing type of insurance, amount, insurance company, annual
premium, and special exclusions and deductibles) of all policies of fire,
liability, workers' compensation and other forms of insurance owned or held by
Intermed. All such policies (i) are in full force and effect, (ii) are
sufficient for compliance with all requirements of law and of all agreements to
which Intermed is a party, (iii) will remain in full force and effect through
the respective dates set forth in Schedule 5.19, and (iv) will not in any way
be affected by or terminate or lapse by reason of the transactions contemplated
by this Agreement.
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5.20 Overtime, Past Wages, Vacation and Minimum Wages. Except
as set forth in Schedule 5.20 hereto, no present or former employee of Intermed
has any claims against Intermed (whether under federal or state law, any
employment agreement or otherwise) on account of or for (a) overtime pay, other
than overtime pay for the current payroll period, (b) wages or salary
(excluding bonuses and amounts accruing under pension and profit sharing plans)
for any period other than the current payroll period, (c) vacation, time off
(except for sick time) or pay in lieu of vacation or time off (except for sick
time), other than that earned in respect of the current fiscal year or accrued
in the ordinary course in accordance with generally accepted accounting
principles, or (d) any violation of any statute, ordinance or regulation
relating to minimum wages or maximum hours of work.
5.21 Broker's or Finder's Fees. No agent, broker, investment
or commercial banker, person or firm acting on behalf of Intermed or its
shareholders or under the authority of any of them is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with any of the transactions contemplated by this
Agreement.
5.22 Books of Account and Reports. Intermed's books of account
reflect all of its items of income and expense, and substantially all of its
assets, liabilities and accruals, and are prepared and maintained in form and
substance adequate for preparing audited financial statements in accordance
with generally accepted accounting principles applied on a consistent basis.
Intermed has filed all reports required by any law or regulation to be filed by
it and it has duly paid or accrued on its books of account all applicable
duties and charges due (or assessed against it) pursuant to such reports.
Intermed's minute books accurately reflect all significant actions taken by the
shareholders and Board of Directors of Intermed. The stock certificate books of
Intermed accurately reflect all transactions in its capital stock of all
classes.
5.23 Customers and Suppliers. Schedule 5.23 sets forth the
names of, and a description of contractual arrangements (whether or not in
writing) with, the ten largest suppliers of Intermed as of the date of this
Agreement, and any sole-source suppliers of significant goods or services
(other than electricity, gas, telephone or water) to Intermed with respect to
which practicable alternative sources of supply are not readily available on
comparable terms and conditions. Schedule 5.23 sets forth the names of the ten
largest customers of Intermed and dollar amount of purchases made by each such
customer during 1995.
5.24 Bank Accounts. Schedule 5.24 sets forth (i) an accurate
list of each bank, trust company, savings institution or other financial
institution with which Intermed has an account or safe deposit box and the
names and identification of all persons authorized to draw thereon or to have
access thereto, and (ii) the name of each person holding a power of attorney or
agency authority from Intermed and a summary of the terms thereof.
5.25 Hazardous Wastes. Intermed has not used, generated,
manufactured, produced, installed, released, discharged, stored, treated or
disposed of any "Hazardous Materials," as defined below, on, under, in or about
the site of any property occupied, leased, owned or otherwise used by Intermed
or transported any Hazardous Materials to or from any such property
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in violation of any Environmental Law. The term "Hazardous Materials" means
any pesticides, fungicides, solvents, herbicides, flammable explosives,
asbestos, radioactive materials, toxic substances or related injurious
material, whether injurious by themselves or in combination with other
materials, and any waste material which is regulated by any governmental
entity, including but not limited to, any material or substance which is
defined, designated or listed as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substance" under any provision of any Environmental Law. The
term "Environmental Law" means any state or federal law governing, or intended
to protect, the environment or governing the use, generation, manufacture,
production, installation, release, discharge, storage, treatment or disposition
of any Hazardous Materials, including but not limited to (i) Section 311 of the
Clean Water Act, 33 U.S.C. Section 1251 et seq. or Section 307 of the Clean
Water Act, (ii) the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., (iii) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., (iv) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., or (v)
the regulations adopted and publications promulgated pursuant to such laws.
5.26 Distributions. Since April 30, 1996, Intermed has not
made distribution of cash or property to any of its stockholders, including the
payment of any dividend, loan, bonus, advance, compensation, or any other
transfer of anything of value, other than salary and other payments consistent
with pre-existing employment and fringe benefit arrangements, reimbursement of
ordinary business expenses incurred and loans or advances which have been
repaid by such shareholder on or prior to the Closing Date.
5.27 FDA Matters.
(a) Intermed and each of its subsidiaries is, and the
products sold by Intermed and each of its subsidiaries are, in compliance in
all material respects with all current applicable statutes, rules, regulations,
standards, guides or orders administered or issued by the Federal Food and Drug
Administration or any other federal, foreign, state or local agency or
governmental body having regulatory authority over the products of Intermed and
its subsidiaries (the "FDA").
(b) Intermed or its subsidiaries have not received from
the FDA, and none of them has knowledge of any facts which would furnish any
reasonable basis for, any notice of adverse findings, regulatory letters,
warning letters, Section 305 notices or other similar communications from the
FDA, and there have been no seizures conducted or threatened by the FDA, and no
recalls, field notifications or alerts conducted, requested or threatened by
the FDA relating to the products sold by Intermed or any of its subsidiaries.
(c) Each premarket approval ("PMA") and premarket
notification ("510(k)") documents and related documents and information for
each of the products of Intermed and its subsidiaries is in compliance in all
material respects with the applicable federal statutes, rules, regulations,
standards, guides or orders administered or promulgated by the FDA and all
preclinical and clinical studies have been conducted with recognized good
clinical and
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good laboratory practices in all material respects. Intermed has disclosed in
writing to Urohealth a complete and accurate list of all products of Intermed
and its subsidiaries indicating (i) which products are marketed under an
approved FDA authority (e.g., PMA, 510(k) or IDE) and identifying such
authority, and (ii) which products are not marketed under an approved FDA
authority, and indicating why such products are being marketed without such
authority. Such listing also contains a complete and accurate list of all PMA
applications, PMA supplements, 510(k) submissions and IDE submissions of
Intermed or any of its subsidiaries currently pending with the FDA.
(d) Intermed and its subsidiaries is not aware of any
facts which are reasonably likely to cause (i) the denial, withdrawal, recall
or suspension of any products sold or intended to be sold by Intermed or any of
its subsidiaries, or (ii) a change in the marketing classification or labeling
of any such products, or (iii) a termination or suspension of marketing of any
such products.
(e) None of the products manufactured, marketed or sold
by Intermed or any of its subsidiaries has been recalled or subject to a field
notification (whether voluntarily or otherwise), and Intermed and its
subsidiaries have not received notice (whether completed or pending) of any
proceeding seeking recall, suspension or seizure of any products sold or
proposed to be sold by Intermed or any of its subsidiaries.
5.28 NASP Agreement. All of the ongoing obligations of Intermed
pursuant to that certain Agreement, dated June 16, 1992, between North America
Sterilization and Packaging Co., Inc., Intermed, Norman T. Ruedt, Paul Wiebel
and F.O. Phoenix, Inc. (the "NASP Agreement") have terminated on or prior to
the date hereof, including, without limitation the obligations of Intermed
pursuant to Section 6 of the NASP Agreement.
5.29 Accuracy of Information Furnished. No representation or
warranty of Intermed contained in this Agreement or any other document,
certificate or written statement furnished or to be furnished to Urohealth by
Intermed for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER;
ADDITIONAL AGREEMENTS
6.1 Conduct of Business Pending the Merger. Intermed agrees on
its own behalf and on behalf of its subsidiaries that, during the period from
the date of this Agreement and continuing until the Effective Time:
(a) the respective businesses of Intermed and its
subsidiaries shall be conducted only in the ordinary and usual course of
business and consistent with past practices;
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(b) Intermed and its subsidiaries shall not (i) sell or
pledge or agree to sell or pledge any stock owned by it in any of its
subsidiaries; (ii) amend its Certificate or Articles of Incorporation, as
applicable, or Bylaws; or (iii) split, combine or reclassify any shares of its
outstanding capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property in respect of its capital
stock, or directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or other securities or shares of the capital stock
or other securities of any of its subsidiaries;
(c) Intermed and its subsidiaries shall not (i)
authorize for issuance, issue, sell, pledge, dispose of, encumber, deliver or
agree or commit to issue, sell, pledge, or deliver any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class or
exchangeable into shares of stock of any class or any voting debt (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise); (ii) acquire, dispose of,
transfer, lease, license, mortgage, pledge or encumber any fixed or other
substantial assets other than in the ordinary course of business and consistent
with past practices; (iii) incur, assume or prepay any material indebtedness,
liability or obligation or any other material liabilities or issue any debt
securities other than in the ordinary course of business and consistent with
past practices; (iv) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person (other than a subsidiary) in a material amount other than
in the ordinary course of business and consistent with past practices; (v) make
any loans, advances or capital contributions to, or investments in, any other
person, other than to subsidiaries, other than in the ordinary course of
business and consistent with past practices; (vi) fail to maintain adequate
insurance consistent with past practices for their businesses and properties;
or (vii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
(d) Intermed shall use its best efforts to preserve
intact the business organization of Intermed and its subsidiaries, to keep
available the services of its and their present officers and key employees, and
to preserve the goodwill of those having business relationships with it and
their respective subsidiaries; and
(e) Intermed and its subsidiaries shall use all
reasonable efforts to prevent any representation or warranty of Intermed herein
from becoming untrue or incorrect in any material respect.
6.2 Compensation Plans. During the period from the date of
this Agreement and continuing until the Effective Time, Intermed agrees as to
itself and its subsidiaries that, other than the agreements referred to herein,
it will not, without the prior written consent of Urohealth (except as required
by applicable law or pursuant to existing contractual arrangements) (a) enter
into, adopt or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment, severance or other
employee benefit plan, agreement, trust, plan, fund or other arrangement
between Intermed and one or more of its officers, directors or employees, in
each case so as to increase the benefits thereunder (collectively,
"COMPENSATION PLANS"), (b) grant or become obligated to grant any increase in
the compensation or fringe
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benefits of directors, officers or employees (including any such increase
pursuant to any Compensation Plan) or any increase in the compensation payable
or to become payable to any officer, except, with respect to employees other
than officers, for increases in compensation in the ordinary course of business
consistent with past practice, or enter into any contract, commitment or
arrangement to do any of the foregoing, except for normal increases and
non-stock benefit changes in the ordinary course of business consistent with
past practice, (c) institute any new employee benefit, welfare program or
Compensation Plan, (d) make any change in any Compensation Plan or other
employee welfare or benefit arrangement or enter into any employment or similar
agreement or arrangement with any employee, or (e) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of Intermed of compensation or benefits
contingent, or the terms of which are materially altered in favor of such
individual, upon the occurrence of any of the transactions contemplated by this
Agreement.
6.3 Legal Conditions to Merger. Each of Intermed and Urohealth
shall, and shall cause its subsidiaries to, use all reasonable efforts (a) to
take, or cause to be taken, all actions necessary to comply promptly with all
legal requirements which may be imposed on such party or its subsidiaries with
respect to the Merger and to consummate the transactions contemplated by this
Agreement, subject to the appropriate vote or consent of stockholders and (b)
to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any governmental
entity and or any other public or private third party which is required to be
obtained or made by such party or any of its subsidiaries in connection with
the Merger and the transactions contemplated by this Agreement. Each company
will promptly cooperate with and furnish information to the other in connection
with any such burden suffered by, or requirement imposed upon, any of them or
any of their subsidiaries in connection with the foregoing.
6.4 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses.
6.5 Book Account and Repayment of Loan. Concurrently with
the Closing, Urohealth shall cause the Surviving Corporation to pay to Norman
T. Ruedt the amount of $586,809 on Intermed's book account. Urohealth shall
also cause the Surviving Corporation to pay to William Aloia the full amount
of principal of, and accrued but unpaid interest on, that certain promissory
note, dated June 10, 1986, in the current principal amount of $30,000 and
interest in the amount of $3,600.
6.6 Payment of Accounting Services. Concurrently with the
Closing, Urohealth shall cause the Surviving Corporation to pay the account
receivable of Intermed in the amount of $38,450 owed to Paul Keady for
accounting services.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Both Intermed's and Urohealth's
Obligation to Effect the Merger. The respective obligations of Intermed and
Urohealth to effect the transactions contemplated herein shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any one of which may be waived by mutual agreement:
(a) No preliminary or permanent injunction or
other order by any federal, state or foreign court of competent jurisdiction
which prohibits the consummation of the Merger shall have been issued and
remain in effect. No statute, rule, regulation, executive order, stay, decree,
or judgment shall have been enacted, entered, issued, promulgated or enforced
by any court or governmental authority which prohibits or restricts the
consummation of the Merger. Other than the filing of the Merger Agreement with
the Secretary of State for the State of California and the Certificate of
Merger with the Delaware Secretary of State, all authorizations, consents,
orders or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any governmental entity (all of the foregoing,
"CONSENTS") which are necessary for the consummation of the Merger, other than
Consents the failure to obtain which would have no material adverse effect on
the consummation of the Merger or on the Surviving Corporation shall have been
filed, occurred or been obtained (all such permits, approvals, filings and
consents and the lapse of all such waiting periods being referred to as the
"REQUISITE REGULATORY APPROVALS") and all such Requisite Regulatory Approvals
shall be in full force and effect. All state securities or blue sky permits
and other authorizations necessary to issue the Urohealth Shares in exchange
for the Intermed Shares and to consummate the Merger shall have been received.
(b) There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any federal or state governmental entity which, in
connection with the grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon the Surviving Corporation, Urohealth or their
subsidiaries (or, in the case of any disposition of assets required in
connection with such Requisite Regulatory Approval, upon either Intermed or
Urohealth or their subsidiaries), including, without limitation, requirements
relating to the disposition of assets, which in any such case would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
(c) Each of the Intermed shareholders shall have
voted in favor of the Merger and thereby waived their right to dissent from the
Merger under Section 262 of the DGCL.
7.2 Conditions to Obligation of Urohealth and Urohealth
Sub. The obligation each of Urohealth and Urohealth Sub to effect the Merger
shall be further subject to the satisfaction at or prior to the Effective Time
of the following additional conditions, which may be waived by Urohealth:
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(a) The representations and warranties of
Intermed contained in this Agreement shall be true and correct at and as of the
Effective Time as if made at and as of such time. Intermed shall have delivered
to Urohealth and Urohealth Sub a certificate of its President as to the
satisfaction of this condition.
(b) Urohealth shall have received the opinion of
Wiley, Malehorn & Sirota, counsel to Intermed, dated the Closing Date and
covering the matters set forth in Exhibit D.
(c) Intermed shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument.
(d) Each of the Intermed stockholders receiving
Urohealth Shares in the Merger shall have delivered to Urohealth a
Representation Letter.
(e) Since April 30, 1996, there shall not have
been any material adverse change in the properties, business or condition
(financial or otherwise) of Intermed.
(f) Mr. Ruedt shall have executed and delivered
to Urohealth Sub a Consulting Agreement substantially in the form of Exhibit E
hereto (the "CONSULTING AGREEMENT").
(g) Mr. Ruedt shall have delivered to Urohealth
an acknowledgment of the termination of certain existing leases in a form
reasonably acceptable to Urohealth.
(h) Mr. Ruedt shall have delivered to Urohealth
documentation from Midlantic National Bank in a form reasonably acceptable to
Urohealth: (i) consenting to the termination of the Intermed lease; (ii)
consenting to the change in control of Intermed; (iii) terminating the
guarantee obligations of Intermed, Intermed Associates, Inc. and N.T. Ruedt
Corporation; (iv) terminating the Security Agreement of Intermed Associates,
Inc., and delivering appropriate UCC termination statements; and (v)
terminating the obligations of Intermed, Intermed Associates and N.T. Ruedt
Corporation under the Environmental Indemnification Agreement.
(i) At the Closing, Intermed shall transfer to
Norman T. Ruedt, and he shall specifically assume the obligations of Intermed
under that certain Consulting Agreement, dated April 15, 1993, among Intermed
and Robert Fair and Linda Lee Fair, doing business as "Fairmed" ("Fairs")
pursuant to which Fairs provide consulting services to Intermed. Norman T.
Ruedt hereby agrees to indemnify and hold harmless each of Urohealth and
Urohealth Sub, the directors, officers, employees and agents of each of
Urohealth and Urohealth Sub and each person who controls Urohealth and
Urohealth Sub against any and all loses, claims, damages or
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liabilities, joint or several, to which Urohealth or Urohealth Sub may become
subject under the Consulting Agreement and any and all transactions related
thereto.
(j) Norman T. Ruedt shall have executed and
delivered Urohealth a Voting Agreement substantially in the form of Exhibit F.
(k) Intermed shall have delivered to Urohealth
such other customary closing documents and certificates as Urohealth or its
counsel shall reasonably request.
7.3 Conditions to Obligation of Intermed. The obligation
of Intermed to effect the Merger shall be further subject to the satisfaction
at or prior to the Effective Time of the following additional conditions, which
may be waived by Intermed.
(a) The representations and warranties of
Urohealth and Urohealth Sub contained in this Agreement shall be true and
correct at and as of the Effective time as if made at and as of such time.
Urohealth and Urohealth Sub shall have delivered to Intermed a certificate of
its President or any Vice President as to the satisfaction of this condition.
(b) Urohealth shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument.
(c) Urohealth Sub shall have executed and
delivered the Consulting Agreement.
(d) Intermed shall have entered into Severance
Agreements with each of persons identified on Exhibit G, such agreements to be
substantially in the form of Exhibit G hereto.
(e) Intermed shall have transferred to Norman T.
Ruedt the following receivables: Continental Wholesale, Inc. a trade receivable
in the amount of $49, 645.83; Grinspic, Inc. an affiliate receivable in the
amount of $43,355.60; and Intermed Rehab, Inc. an affiliate receivable in the
amount of $337,167.77.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby abandoned at any time prior to the Effective
Time, whether before or after approval by the stockholders of the Constituent
Corporations:
(a) By mutual written consent of Urohealth and
Intermed.
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(b) By Urohealth or Intermed if the Merger shall
not have been consummated on the date of this Agreement.
(c) By Intermed or Urohealth, if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or any other action shall have become final and non-appealable.
8.2 Effect of Termination. In the event of termination
of this Agreement as provided above, this Agreement shall forthwith become of
no further effect. Nothing contained in this Section 8.2 shall relieve any
party from liability for willful breach of this Agreement that results in
termination of this Agreement.
8.3 Amendment. This Agreement may be amended by action
taken at any time before or after approval hereof by the stockholders of the
parties, but, after any such approval, no amendment shall be made which alters
the Exchange Ratio or which in any way materially adversely affects the rights
of such stockholders, without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Such waiver shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS
AND WAR
