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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO._____)*
UROHEALTH SYSTEMS, INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
917272 30 4
--------------------------------
(CUSIP Number)
Richard R. Newhauser
Fisher Island Club One Fisher Island Fisher Island, Florida 33109
(305) 535-6000 Ext. 5637
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 14, 1996
--------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /x/. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filed out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of 6 Pages
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CUSIP NO. 917272 30 4 13D PAGE 2 OF 6 PAGES
-------------- -- --
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Richard R. Newhauser
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) / /
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
PF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) / /
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7. SOLE VOTING POWER
2,081,916
NUMBER OF
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SHARES
8. SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY ----------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER
1,936,183
REPORTING
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PERSON
10. SHARED DISPOSITIVE POWER
WITH 145,733
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,081,916
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.7%
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14. TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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Page 3 of 6 Pages
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the shares of Common Stock, $.001 par value
per share (the "Shares"), of UroHealth Systems, Inc., a Delaware corporation
("UroHealth"), whose principal executive offices are located at 5 Civic Plaza,
Suite 100, Newport Beach, California 92660.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement on Schedule 13D is filed by Richard R.
Newhauser (the "Reporting Person").
(b) The address for the Reporting Person is: c/o Richard R. Newhauser
Fisher Island Club
One Fisher Island
Fisher Island, Florida
33109
(c) Richard R. Newhauser is the Executive Vice President of
UroHealth, whose principal executive offices are located at 5 Civic
Plaza, Suite 100, Newport Beach, California 92660.
(d) The Reporting Person has not been convicted in any criminal
proceeding (excluding traffic violations or similar misdemeanors)
during the last five years.
(e) During the last five years, the Reporting Person has not been
a party to any civil proceeding of a judicial or administrative body
of competent jurisdiction which as a result of such proceeding was
or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violation with
respect to such laws.
(f) The Reporting Person is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.
The Shares covered by this Schedule 13D were acquired by the Reporting
Person in exchange for all of the issued and outstanding shares of common stock
of Richard-Allan Medical Industries, Inc. ("RA") pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 5, 1996 (the "Merger Agreement"),
among UroHealth, UroHealth, Inc. (California), a California corporation and
wholly-owned subsidiary of UroHealth ("Uro Sub"), and RA. Pursuant to the Merger
Agreement, RA was merged with and into Uro Sub (the "Merger") and each share of
common stock of RA was converted into shares of common stock of UroHealth
pursuant to the terms of the Merger Agreement. The Merger Agreement is filed as
Exhibit 2 to this Schedule 13D.
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Page 4 of 6 Pages
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Person has acquired the Shares described in this Schedule
13D in order to effect the Merger pursuant to the terms of the Merger Agreement
as described above.
Pursuant to the terms of the Merger Agreement, following effectiveness of
the Merger, UroHealth shall nominate and exercise its best efforts to cause the
election of the Reporting Person to UroHealth's Board of Directors.
The Reporting Person does not intend to make a tender offer or propose a
merger, reorganization, liquidation or similar transaction involving UroHealth;
or, except as described above, to make any change in the Board of Directors,
management, business, corporate structure, capitalization, dividend policy,
Certificate of Incorporation, Bylaws or listing or registration of securities
of UroHealth; or to take any action which would impede the acquisition of
control of UroHealth by any person; or to take any action similar to any of
those set forth above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Richard R. Newhauser beneficially owns 2,081,916 Shares,
equal to approximately 12.7% of the outstanding Shares.
(b) The Reporting Person has the sole power to vote or to direct
the vote and sole power to dispose or to direct the disposition of
1,936,183 of the Shares owned by him. 145,733 of the total
2,081,916 Shares which are beneficially owned by the Reporting
Person are subject to an Escrow Agreement (the "Escrow Agreement")
dated August 14, 1996, among UroHealth, Uro Sub, the Reporting
Person, and American Stock Transfer and Trust Company (the "Escrow
Agent"). Pursuant to the Escrow Agreement, the Reporting Person has
the right to vote all of the escrowed shares. The Reporting Person
does not have the power to dispose of the escrowed shares. The
disposition of the escrowed shares is determined solely in
accordance with the terms of the Escrow Agreement, a copy of which
is filed herewith as Exhibit 10 to this Schedule 13D.
(c) The Reporting Person received the Shares in connection with
the consummation of the Merger, as described above, on July 5, 1996.
Except as described above, to the best of his knowledge, the
Reporting Person does not own or have any right to acquire, direct
or indirectly, any Shares, or has not effected any transactions in
the Shares in the last 60 days.
(d) Dividends, if any, which are paid on 41,638 of the 145,733
Shares held in escrow pursuant to the Escrow Agreement described in
Item 5(b) above, are to remain in the escrow fund for possible
distribution as a retention bonus to 11 individuals
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Page 5 of 6 Pages
identified in Exhibit 7.13 of the Merger Agreement. Except as
otherwise described in the previous sentence and Item 6 hereof, no
person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of the
Shares owned by the Reporting Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE LESSER.
Pursuant to the Merger Agreement, as amended, and the Escrow Agreement,
104,095 of the Shares are to be placed into an escrow fund to be used to
indemnify UroHealth and related parties against claims, damages, losses, costs,
expenses, liabilities, and reasonable legal fees and expenses incurred which
are caused by or arise out of any untruth, inaccuracy, error, or breach of any
representation or warranty of RA in the Merger Agreement. As a result, these
Shares may be transferred to UroHealth.
Similarly, the Merger Agreement and the Escrow Agreement provide for the
establishment of a bonus retention fund as a subaccount of the escrow fund to
be comprised, in part, of 41,638 shares of UroHealth common stock. Subject to
certain conditions, the shares in the bonus retention fund are to be
distributed to each of eleven individuals named on Exhibit 7.13 of the Merger
Agreement who is employed by the surviving corporation on the date twelve
months after the effective time of the Merger or who is terminated without
cause, as determined in the sole discretion of the Reporting Person.
In addition, in connection with his possible classification as an
affiliate of RA within the meaning of the Securities Act of 1933, as amended,
the Reporting Person has signed an agreement with UroHealth placing certain
restrictions on the transfer of the Shares owned by him. In addition, the
Reporting Person has certain registration rights with respect to the Shares
acquired by him in the Merger.
Except as described above or otherwise disclosed herein, the Reporting
Person is not a party to any contract, arrangement, understanding or
relationship (legal or otherwise) with respect to any securities of UroHealth.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 2. Agreement and Plan of Merger dated as of July 5, 1996, among
UroHealth, Uro Sub and RA and amendment thereto dated August 12, 1996.
Exhibit 10. Escrow Agreement dated August 14, 1996 among UroHealth, Uro
Sub, the Reporting Person, and American Stock Transfer and Trust Company.
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Page 6 of 6 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: August 28, 1996
/s/ Richard R. Newhauser
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Richard R. Newhauser
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 5, 1996, by and among
UROHEALTH Systems, Inc., a Delaware corporation ("UROHEALTH"), UROHEALTH, Inc.
(California), a California corporation and wholly-owned subsidiary of UROHEALTH
("UROHEALTH California"), and Richard-Allan Medical Industries, Inc. ("RA"), an
Illinois corporation ("RA"). The parties hereto are sometimes hereinafter
referred to collectively as the "Companies." UROHEALTH and UROHEALTH
California are sometimes referred to collectively as the "Constituent
Corporations," or individually as a "Constituent Corporation."
WHEREAS, the respective Boards of Directors of the Companies deem it
advisable and in the best interests of their respective stockholders that
UROHEALTH acquire RA by the merger of RA with and into UROHEALTH California
upon the terms and subject to the conditions set forth herein (the "Merger");
and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
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 1.2 hereof) of the Merger, RA shall
be merged with and into UROHEALTH California, with UROHEALTH California being
the surviving corporation in such Merger (the "Surviving Corporation") and the
separate existence of RA shall thereupon cease. The Merger shall have the
effects set forth in Section 1107 of the Corporations Code of the State of
California ("CCC"). The Surviving Corporation shall be a wholly-owned
subsidiary of UROHEALTH.
1.2 Effective Time of the Merger. The Merger shall become effective upon
the completion of the filing of properly executed Agreement of Merger with the
Secretary of State of the State of California and properly executed Articles of
Merger with the Secretary of State of the State of Illinois, which filing shall
be made on the Closing Date after satisfaction of the conditions set forth in
Article VIII. When used in this Agreement, the term "Effective Time" with
respect to the Merger shall mean the date and time at which such Agreement of
Merger and Articles of Merger are successfully filed.
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ARTICLE II
UROHEALTH AND THE SURVIVING CORPORATION
2.1 Articles of Incorporation of the Surviving Corporation. The Articles
of Incorporation of UROHEALTH California shall be the Articles of Incorporation
of the Surviving Corporation of the Merger.
2.2 Bylaws of the Surviving Corporation. The Bylaws of UROHEALTH
California 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 California 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 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.
2.4 Employment/Severance Agreements. Prior to the Effective Time,
UROHEALTH and RA shall take or cause to be taken all necessary action to cause
UROHEALTH to enter into employment agreements, on terms and conditions as
outlined in Exhibit 2.4 hereto with Richard R. Newhauser and the other
management employees identified in Exhibit 2.4.
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 the holder thereof:
(a) Each share of common stock of RA ("RA Share") issued and
outstanding immediately prior to the Effective Time (other than the Excluded
Shares as defined in Section 3.6 and RA Shares held by UROHEALTH or any
subsidiary of UROHEALTH, if any), shall be converted at the Effective Time into
the right to receive (i) a cash amount equal to $27.5 million divided by the
number of RA Shares outstanding immediately prior to the Effective Time other
than the Excluded Shares, plus (ii) that number of shares of UROHEALTH common
stock ("UROHEALTH Shares") equal to $27.5 million divided by (A) the Closing
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Market Value (as defined below) of UROHEALTH common stock multiplied by (B) the
number of RA Shares outstanding immediately prior to the Effective Time other
than the Excluded Shares, less (iii) amounts and shares distributed under the
Retention Plan (as described in Section 7.13) (the "Exchange Ratio"). "Closing
Market Value" shall mean the average of the closing prices of UROHEALTH common
stock as reported on the American Stock Exchange (or the Nasdaq National
Market, as applicable) for the 15 trading days preceding execution of this
Agreement and ending on the sixteenth trading day after the execution of this
Agreement.
(b) At the Effective Time, all RA Shares (other than the Excluded
Shares) shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each certificate previously representing
any such RA Shares shall thereafter represent the right to receive the cash and
UROHEALTH Shares into which such RA Shares have been converted. Certificates
representing RA Shares shall be exchanged for cash and 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 UROHEALTH or RA should split or combine the
UROHEALTH Shares or the RA Shares, or pay a stock dividend or other stock
distribution in UROHEALTH Shares or RA Shares, then the Exchange Ratio will be
appropriately adjusted to reflect such split, combination, dividend or other
distribution.
(c) Each RA Share held in the treasury of RA or by any subsidiary of RA
and each such RA Share held by UROHEALTH or any subsidiary of UROHEALTH
immediately prior to the Effective Time shall be canceled and retired and cease
to exist, and no UROHEALTH Shares shall be issued in exchange therefor. All
UROHEALTH Shares owned by RA or any subsidiary shall become treasury stock of
UROHEALTH.
3.2 Exchange of Shares.
(a) No later than the Effective Time, UROHEALTH shall make available,
and each holder of RA Shares (other than Excluded Shares) will be entitled to
receive, upon surrender to UROHEALTH of one or more certificates representing
such RA Shares for cancellation, cash in the amount and certificates
representing the number of UROHEALTH Shares into which such RA Shares are
converted in the Merger. The UROHEALTH Shares into which the RA Shares shall
be converted in the Merger shall be deemed to have been issued at the Effective
Time.
(b) Upon surrender of a certificate representing RA Shares
("Certificate") for cancellation duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor cash and a certificate
representing that number of whole UROHEALTH Shares which such holder has the
right to receive in respect of the Certificates surrendered pursuant to the
provisions of this Article III, less 10% of such UROHEALTH Shares (the
"Indemnification Shares"), which shall be delivered to the Escrow Agent for
deposit in the Indemnification Escrow (as defined in Section 10.1(b) hereof)
and less the Retention Funds (as defined in Section 7.13).
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(c) In the event that any stock certificate representing RA Shares
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed, UROHEALTH will issue or cause to be issued in exchange for such
lost, stolen or destroyed certificate the number of UROHEALTH Shares into which
such RA Shares are converted in the Merger in accordance with this Article III.
When authorizing such issuance in exchange therefor, the Board of Directors of
UROHEALTH may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate to
give UROHEALTH a bond in such sum as it may direct as indemnity, or such other
form of indemnity, as it shall direct, against any claim that may be made
against UROHEALTH with respect to the certificate alleged to have been lost,
stolen or destroyed.
3.3 Dividends; Transfer Taxes. No dividends that are declared on
UROHEALTH Shares will be paid to persons entitled to receive certificates
representing UROHEALTH Shares until such persons surrender their certificates
representing RA Shares. Upon such surrender, there shall be paid to the person
in whose name the certificates representing such UROHEALTH Shares shall be
issued any dividends which shall have become payable with respect to such
UROHEALTH Shares between the Effective Time and the time of such surrender. In
no event shall the person entitled to receive such dividends be entitled to
receive interest on such dividends. If any certificates for any UROHEALTH
Shares are to be issued in a name other than that in which the certificate
representing RA Shares surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the person requesting such exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such UROHEALTH Shares in a name other than that of
the registered holder of the certificate surrendered, or shall establish to the
satisfaction of UROHEALTH that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither UROHEALTH nor any other party hereto
shall be liable to a holder of RA Shares for any cash payment or UROHEALTH
Shares or dividends thereon or, in accordance with Section 3.4, the cash
payment for fractional interests, delivered to a public official pursuant to
applicable escheat laws.
3.4 No Fractional Securities. No certificates or scrip representing
fractional UROHEALTH Shares shall be issued upon the surrender for exchange of
certificates representing RA Shares pursuant to this Article III and no
dividend, stock split-up or other change in the capital structure of UROHEALTH
shall relate to any fractional security, and such fractional interests shall
not entitle the owner thereof to vote or to any rights of a security holder.
In lieu of any such fractional securities, each holder of RA Shares who would
otherwise have been entitled to a fraction of a UROHEALTH Share upon surrender
of stock certificates for exchange pursuant to this Article III shall be paid
cash upon such surrender in an amount equal to the product of such fraction
multiplied by the Closing Market Value.
3.5 Closing of Transfer Books. At the Effective Time, the stock transfer
books of RA shall be closed and no transfer of RA Shares shall thereafter be
made. If, after the Effective Time, certificates representing RA Shares are
presented to the Surviving Corporation, they shall be canceled and exchanged
for cash and certificates representing UROHEALTH Shares in accordance with the
terms hereof. At and after the Effective Time, the holders of RA Shares to
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be exchanged for cash and UROHEALTH Shares pursuant to this Agreement shall
cease to have any rights as stockholders of RA except for the right to
surrender such stock certificates in exchange for cash and UROHEALTH Shares as
provided hereunder.
3.6 Dissenting Shares. If holders of RA Shares are entitled to dissent
from a Merger and demand appraisal of any such RA Shares in accordance with the
provisions of the Illinois Business Corporation Act concerning the right of
such holders to dissent from a Merger and demand appraisal of their RA Shares
("Dissenting Holders"), any RA Shares held by a Dissenting Holder as to which
appraisal has been so demanded ("Excluded Shares") shall not be converted as
described in Section 3.1, but shall from and after the Effective Time represent
only the right to receive such consideration as may be determined to be due to
such Dissenting Holder pursuant to the Illinois Business Corporation Act,
provided, however, that each RA Share held by a Dissenting Holder who shall,
after the Effective Time, withdraw his demand for appraisal or lose his right
of appraisal with respect to such RA Shares, in either case pursuant to the
Illinois Business Corporation Act, shall not be deemed Excluded Shares but
shall be deemed to be converted, as of the Effective Time, into the right to
receive cash and UROHEALTH Shares in accordance with the Exchange Ratio.
3.7 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Morrison &
Foerster, 19900 MacArthur Boulevard, 12th Floor, Irvine, California 92715, at
9:00 a.m., local time, on the first business day (the "Closing Date") after the
later of (a) the day on which the stockholders' meeting referred to in Section
7.3 shall have occurred or (b) the day on which all of the conditions set forth
in Article VIII hereof are satisfied or waived, or at such other date, time and
place as the Companies shall agree.
3.8 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 RA, 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 RA, in
the name of and on behalf of RA, 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.
3.9 Update of Exhibits. To the extent any Exhibit called for in Article
IV or V hereto is not provided by the applicable party on the date this
Agreement is executed, such party shall have 20 days from the date of such
execution to provide such Exhibit to the other parties. Any Exhibit provided
subsequent to execution hereof and within 20 days of such execution shall be
attached hereto and the applicable party's requirements and warranties herein
shall be deemed amended thereby as of the date hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UROHEALTH
AND UROHEALTH CALIFORNIA
As used in this Agreement, (i) the term "Material Adverse Effect" means,
with respect to RA, UROHEALTH or UROHEALTH California, as the case may be, a
material adverse effect on the business, assets, results of operations or
financial condition of such party and its subsidiaries taken as a whole or in
the ability of such party to perform its obligations hereunder and (ii) the
word "subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, of which such party
or any other subsidiary of such party is a general partner (excluding
partnerships the general partnership interests of which held by such party or
any subsidiary of such party do not have a majority of the voting interests in
such partnership) or of which at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporations or other organizations is directly or indirectly owned or
controlled by such party and/or by any one or more of the subsidiaries.
UROHEALTH and UROHEALTH California represent and warrant to RA, except as
disclosed to RA in writing prior to the execution of this Agreement, as
follows:
4.1 Organization. Each of UROHEALTH and UROHEALTH California 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. Each of UROHEALTH and UROHEALTH California 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. Each corporate subsidiary of UROHEALTH and
UROHEALTH California 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 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 Capitalization. As of the date hereof, the authorized capital stock
of UROHEALTH and UROHEALTH California is as set forth in Exhibit 4.2 hereto.
As of the date hereof, the number of shares of capital stock of UROHEALTH and
UROHEALTH California which are issued and outstanding is as set forth in
Exhibit 4.2 hereto. All of the issued and outstanding shares of UROHEALTH and
UROHEALTH California are validly issued, fully paid and nonassessable and free
of preemptive rights or similar rights created by statute, the
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Certificate of Incorporation or Bylaws of UROHEALTH, the Articles of
Incorporation or Bylaws of UROHEALTH California or any agreement by which
UROHEALTH or UROHEALTH California or any of their subsidiaries is a party or by
which they are bound. Except (a) as set forth above or, (b) as disclosed in
Exhibit 4.2 hereto, there are not as of the date of this Agreement any shares
of capital stock of UROHEALTH issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating UROHEALTH to issue, transfer or sell any shares of its
capital stock. Except as set forth in Exhibit 4.2, as of the date hereof, no
bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into or exercisable for securities having the right to vote) on any
matters on which stockholders of UROHEALTH may vote ("Voting Debt") were issued
and outstanding with respect to UROHEALTH.
4.3 Authority Relative to this Agreement. UROHEALTH 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 the consummation
by UROHEALTH of the transactions contemplated hereby have been duly authorized
by the Boards of Directors of UROHEALTH and UROHEALTH California and no other
corporate proceedings on the part of either such Company are necessary to
approve this Agreement or the transactions contemplated hereby.
4.4 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), state or
foreign laws relating to takeovers, if applicable, state securities or blue sky
laws, and, as applicable, filing and recordation of Agreement of Merger under
the CCC and the Articles of Merger under the Illinois Business Corporation Act,
no filing with, and no permit, authorization, consent or approval of, any
public body or authority is necessary for the consummation by UROHEALTH of the
transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by UROHEALTH, nor the consummation by UROHEALTH of
the transactions contemplated hereby, nor compliance by UROHEALTH with any of
the provisions hereof, will (a) result in any breach of its Certificate of
Incorporation or Bylaws or the Articles of Incorporation or Bylaws of its
subsidiaries, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which UROHEALTH or any
of its subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to UROHEALTH, any of
its subsidiaries or any of their respective properties or assets, except in the
case of clauses (b) and (c) for violations, breaches or defaults that would not
have a Material Adverse Effect.
4.5 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 Exchange Act since July 1, 1993, including, without
limitation, an Annual Report on Form 10-K for the year ended March 31, 1996
(collectively, the "UROHEALTH SEC Reports"), and has
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previously furnished or made available to RA true and complete copies of all
such UROHEALTH SEC Reports. None of the UROHEALTH 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 UROHEALTH 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 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.
4.6 Compliance With Applicable Law. Except as disclosed in the UROHEALTH
SEC Reports filed prior to the date of this Agreement, UROHEALTH and each of
its subsidiaries holds all 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 each of
UROHEALTH and its subsidiaries 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 or any of its subsidiaries, except to the extent that the failure to
hold any such licenses, franchises, permits or authorizations, or any such
violation, would not, individually or in the aggregate, have a Material Adverse
Effect.
4.7 Ownership of RA Shares. As of the date hereof, neither UROHEALTH nor,
to the knowledge of UROHEALTH, any of its affiliates or associates (as such
terms are defined under the Exchange Act) (i) beneficially owns, directly or
indirectly, or (ii) are parties to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case, RA
Shares which in the aggregate represent 10% or more of the outstanding RA
Shares.
4.8 Absence of Certain Changes in Events. Since March 31, 1996, neither
UROHEALTH nor UROHEALTH California, nor any of their subsidiaries, have
suffered a change, or any event involving a prospective change, in the
business, assets, financial condition or results of operations of UROHEALTH,
UROHEALTH California, or any of their subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect (other than as a result of changes or proposed changes in federal or
state health care (including health care reimbursement) laws or regulations of
general applicability or interpretations thereof, changes in generally accepted
accounting principles and changes that could, under the circumstances,
reasonably have been anticipated in light of disclosures made in writing by
UROHEALTH or UROHEALTH California pursuant hereto.
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4.9 Employee Benefit Plans. Each written or formal employee benefit plan
(individually, without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") policy or agreement that is maintained by UROHEALTH (all of the
foregoing, the "UROHEALTH Benefit Plans"), that is subject to ERISA is in
substantial compliance with ERISA; each of the UROHEALTH Benefit Plans intended
to be "qualified" within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code") is so qualified; and no event has occurred, and to the
knowledge of UROHEALTH, there exists no condition or set of circumstances in
connection with where UROHEALTH or its subsidiaries is or could be subject to
liability (except liability for benefit claims and funding obligations payable
in the ordinary course) under ERISA, the Code, or any other applicable law with
respect to any UROHEALTH Benefit Plan.
4.10 Other Information. No representation or warranty by UROHEALTH
contained in this Agreement or any certificate furnished or to be furnished by
or on behalf of UROHEALTH pursuant to this Agreement contains or will contain
any untrue statement of material fact or omits or will omit to state any
material fact required to be stated herein or therein which is necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are or were made, not misleading in any material respect.
4.11 Shares to be Issued in Merger. The UROHEALTH Shares to be issued
upon consummation of the Merger pursuant hereto will, at the Effective Time, be
duly authorized and will, when issued pursuant to this Agreement, be validly
issued, fully paid and nonassessable.
4.12 Litigation. As of the date of this Agreement, except as disclosed in
the UROHEALTH SEC Reports or to the extent that individually and in the
aggregate they would not reasonably be expected to have a Material Adverse
Effect: (a) there is no action, suit, judicial or administrative proceeding,
arbitration or investigation pending or, to the best knowledge of UROHEALTH,
threatened against or involving UROHEALTH or any of its subsidiaries, or any of
their properties or rights, before any court, arbitrator, or administrative or
governmental body; (b) there is no judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against UROHEALTH or any of its subsidiaries; and (c)
UROHEALTH and its subsidiaries are not in violation of any term of any
judgments, decrees, injunctions or orders outstanding against them.
4.13 Taxes. For the purposes of this section, the term "tax" shall
include all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments imposed by any United States federal, state or
local authority or any other taxing authority on UROHEALTH or any of its Tax
Affiliates as to their respective income, profit, franchise, gross receipts,
payroll, sales, employment, worker's compensation, use, property, withholding,
excise, occupancy, environmental, and other taxes, duties or assessments of any
nature, whatsoever. UROHEALTH has filed or caused to be filed timely all
material federal, state, local and foreign tax returns required to be filed by
each of its and any member of its consolidated, combined, unitary or similar
group (each such member a "Tax Affiliate"). Such returns, reports and other
information are accurate and complete in all material respects. UROHEALTH has
paid or caused to be paid or has made adequate provision or set up an adequate
accrual or reserve for the payment of, all
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taxes shown to be due in respect of the periods for which returns are due, and
has established (or will establish at least quarterly) an adequate accrual or
reserve for the payment of all taxes payable in respect of the period
subsequent to the last of said periods required to be so accrued or reserved.
Neither UROHEALTH nor any of its Tax Affiliates has any material liability for
taxes in excess of the amount so paid or accruals or reserves so established.
Neither UROHEALTH nor any of its Tax Affiliates is delinquent in the payment of
any tax in excess of the amount reserved or provided therefor, and no
deficiencies for any tax, assessment or governmental charge in excess of the
amount reserved or provided therefor have been threatened, claimed, proposed or
assessed. No waiver or extension of time to assess any taxes has been given or
requested. UROHEALTH's federal and state income tax returns have never been
audited by the Internal Revenue Service or comparable state agencies.
4.14 Compliance With Legislation Regulating Environmental Quality.
(a) (i) Throughout the period of its ownership or operation of the
UROHEALTH Facilities, neither UROHEALTH nor any of its subsidiaries has
received any written notices, directives, violation reports, actions or claims
from or by (A) any local, state, federal or foreign governmental agency
concerning Environmental Laws or (B) any person alleging that, in connection
with Hazardous Materials, conditions at any of the UROHEALTH Facilities or
UROHEALTH's acts or omissions have resulted in or caused or threatened to
result in or cause injury or death to any person or damage to any property,
including without limitation, damage to natural resources, and to UROHEALTH's
knowledge, no such notices, directives, violation reports, actions, claims or
allegations exist; (ii) the UROHEALTH Facilities and the business operated by
UROHEALTH and its subsidiaries are in compliance with all applicable state,
federal, foreign and local Environmental Laws, except where any noncompliance
with Environmental Laws would not have a Material Adverse Effect on UROHEALTH;
and (iii) to UROHEALTH's knowledge, no friable asbestos or PCBs have been
located at any of the UROHEALTH Facilities. "UROHEALTH Facilities" shall mean
UROHEALTH's plants, offices, manufacturing facilities, warehouses,
improvements, administration buildings and real property.
(b) (i) There has been no spill, discharge, release, cleanup or
contamination of or by any Hazardous Materials used, generated, treated,
stored, disposed of or handled by UROHEALTH or any of its subsidiaries at any
of the UROHEALTH Facilities; (ii) neither UROHEALTH nor any of its subsidiaries
has treated, stored, disposed of, released or transported any Hazardous
Material in a manner which would give rise to any liability under any
Environmental Laws; and (iii) UROHEALTH and its subsidiaries hold all necessary
permits, licenses, approvals and consents to conduct their business as
currently being conducted and are not in violation of any condition of any such
permit, license or consent.
4.15 FDA Matters.
(a) UROHEALTH and each of its subsidiaries is, and the products sold by
UROHEALTH 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
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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 UROHEALTH and its subsidiaries (the "FDA").
(b) Neither UROHEALTH nor any of its subsidiaries has received from the
FDA, or 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 UROHEALTH 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 UROHEALTH 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 good
laboratory practices in all material respects.
(d) Neither UROHEALTH nor any of its subsidiaries is 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 UROHEALTH or any of
its subsidiaries, (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 UROHEALTH or
any of its subsidiaries has been recalled or subject to a field notification
(whether voluntarily or otherwise), and neither UROHEALTH nor any of its
subsidiaries has received notice (whether completed or pending) of any
proceeding seeking recall, suspension or seizure of any products sold or
proposed to be sold by UROHEALTH or any of its subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RA
RA represents and warrants to UROHEALTH, except as disclosed to
UROHEALTH in writing prior to the execution of this Agreement, as follows:
5.1 Organization. RA 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. RA 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. Each corporate subsidiary of RA is a
corporation duly organized, validly existing and in good standing (to the
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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 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.
5.2 Capitalization. As of the date hereof, the authorized capital
stock of RA is as set forth in Exhibit 5.2 hereto. As of the date hereof, the
number of RA Shares which are issued and outstanding is as set forth in Exhibit
5.2 hereto. All of the issued and outstanding RA Shares are validly issued,
fully paid and nonassessable and free of preemptive rights or similar rights
created by statute, the Articles of Incorporation or Bylaws of RA or any
agreement by which RA or any of its subsidiaries is a party or by which it is
bound. Except (a) as set forth above or, (b) as disclosed in Exhibit 5.2
hereto, there are not as of the date of this Agreement any shares of capital
stock of RA issued or outstanding or any options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or commitments
obligating RA to issue, transfer or sell any shares of its capital stock. As
of the date hereof, no bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into or exercisable for securities having the
right to vote) on any matters on which stockholders of RA may vote ("Voting
Debt") were issued and outstanding with respect to RA. As of the date hereof
and at the Effective Time, no stock options, warrants, convertible securities
or other contractual commitments to purchase or issue RA Shares are
outstanding.
5.3 Authority Relative to this Agreement. RA has the corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by RA and the consummation by RA of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of RA, and, except for approval by the requisite votes cast by RA's
stockholders at the meeting provided for in Section 7.3, no other corporate
proceedings on the part of RA are necessary to approve this Agreement or the
transactions contemplated hereby.
5.4 Consents and Approvals; No Violations. Except for the Securities
Act, the Exchange Act, state or foreign laws relating to takeovers, if
applicable, state securities or blue sky laws, and, as applicable, filing and
recordation of the Agreement of Merger under the CCC and the Articles of Merger
under the Illinois Business Corporations Act, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is
necessary for the consummation by RA of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by RA, nor the
consummation by RA of the transactions contemplated hereby, nor compliance by
RA with any of the provisions hereof, will (a) result in any breach of the
Articles of Incorporation or Bylaws of RA, (b) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which RA or any of its subsidiaries is a party or by which any of
them
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or any of their respective properties or assets may be bound or (c) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to RA,
any of its subsidiaries or any of their respective properties or assets, except
in the case of clauses (b) and (c) for violations, breaches or defaults that
would not have a Material Adverse Effect.
5.5 Financial Statements. RA has furnished to UROHEALTH RA's audited
consolidated financial statements (consolidated balance sheets, consolidated
statements of income, consolidated statements of stockholders' equity and
consolidated statements of cash flows) at and for each of the 12-month periods
ended June 30, 1993, 1994 and 1995 and its unaudited financial statements at
and for the 10-month period ended April 30, 1996 (collectively, the "RA
Financial Statements"). Each of the balance sheets (including the related
notes) included in the RA Financial Statements fairly presents in all material
respects the consolidated financial position of RA and its subsidiaries as of
the respective dates thereof, and the other related statements (including the
related notes) included therein fairly present in all material respects the
results of operations and cash flows of RA 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.
5.6 Absence of Certain Changes or Events. Since June 30, 1995, neither
RA nor any of its subsidiaries has: (a) taken any of the actions set forth in
Sections 6.1(b), 6.1(c) or 6.1(e) hereof; (b) incurred any liability material
to RA and its subsidiaries on a consolidated basis, except in the ordinary
course of its business, consistent with past practices; (c) suffered a change,
or any event involving a prospective change, in the business, assets, financial
condition or results of operations of RA or any of its subsidiaries which has
had, or is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect (other than as a result of changes or proposed changes
in federal or state health care (including health care reimbursement) laws or
regulations of general applicability or interpretations thereof, changes in
generally accepted accounting principles and changes that could, under the
circumstances, reasonably have been anticipated in light of disclosures made in
writing by RA to UROHEALTH pursuant hereto); or (d) subsequent to the date
hereof, except as permitted by Section 6.1 hereof, conducted its business and
operations other than in the ordinary course of business and consistent with
past practices.
5.7 Litigation. As of the date of this Agreement, except to the extent
that individually and in the aggregate they would not reasonably be expected to
have a Material Adverse Effect or except as set forth in Exhibit 5.7 hereto:
(a) there is no action, suit, judicial or administrative proceeding,
arbitration or investigation pending or, to the best knowledge of RA,
threatened against or involving RA or any of its subsidiaries, or any of their
properties or rights, before any court, arbitrator, or administrative or
governmental body; (b) there is no judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against RA or any of its subsidiaries; and (c) RA and
its subsidiaries are not in violation of any term of any judgments, decrees,
injunctions or orders outstanding against them. RA has furnished to UROHEALTH
in writing, a description of all
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litigation, actions, suits, proceedings, arbitrations, investigations known to
it, judgments, decrees, injunctions or orders pending, or to the knowledge of
RA, threatened against or involving RA or any of its subsidiaries, or any of
their properties or rights as of the date hereof.
5.8 Contracts.
(a) Each of the material contracts, instruments, mortgages, notes,
security agreements, leases, agreements or understandings to which RA or any of
its subsidiaries is a party that relates to or affects the assets or operations
of RA or any of its subsidiaries or to which RA or any of its subsidiaries or
their respective assets or operations may be bound or subject is a valid and
binding obligation of RA and in full force and effect (with respect to RA or
such subsidiary), except for where the failure to be in full force and effect
would not, individually or in the aggregate, have a Material Adverse Effect.
Except to the extent that the consummation of the transactions contemplated by
this Agreement may require the consent of third parties, as disclosed in
writing to UROHEALTH pursuant hereto, there are no existing defaults by RA or
any of its subsidiaries thereunder or, to the knowledge of RA, by any other
party thereto, which defaults, individually or in the aggregate, would have a
Material Adverse Effect; and no event of default has occurred, and no event,
condition or occurrence exists, that (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute a
default by RA or any of its subsidiaries thereunder which default would,
individually or in the aggregate, have a Material Adverse Effect.
(b) As of the date of this Agreement neither RA nor any of its
subsidiaries is a party to any oral or written (i) consulting agreement not
terminable on 60 days or less notice involving the payment of more than $25,000
per annum, in the case of any such agreement with an individual, (ii) joint
venture agreement, (iii) noncompetition or similar agreements that restricts RA
or its subsidiaries from engaging in a line of business, (iv) agreement with
any executive officer or other employee of RA or any subsidiary the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving RA of the nature contemplated by this
Agreement and which provides for the payment of in excess of $10,000, (v)
agreement with respect to any executive officer of RA or any subsidiary
providing any term of employment beyond one year or compensation guaranty in
excess of $50,000 per annum, or (vi) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
5.9 Employee Benefit Plans.
(a) RA has previously delivered to UROHEALTH a true and complete list
of each written or formal employee benefit plan (including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of ERISA) policy or
agreement that is maintained (all of the foregoing, the "RA Benefit Plans"), or
is or was contributed to by RA or any of its subsidiaries or pursuant to which
RA or any of its subsidiaries or any trade or business, whether
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or not incorporated (an "RA ERISA Affiliate"), which together with RA would be
deemed a "single employer" within the meaning of Section 4001 of ERISA, is
still potentially liable for payments, benefits or claims. A copy of each RA
Benefit Plan as currently in effect and, if applicable, the most recent Annual
Report, Actuarial Report or Valuation, Summary Plan Description, Trust
Agreement and a Determination Letter issued by the IRS for each RA Benefit Plan
have heretofore been delivered to UROHEALTH. No RA Benefit Plan was or is
subject to Title IV of ERISA or Section 412 of the Code (including any
"multiemployer plan," as defined in Section 3(37) of ERISA).
(b) Each of the RA Benefit Plans that are subject to ERISA is in
substantial compliance with ERISA; each of the RA Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified;
and no event has occurred, and to the knowledge of RA, there exists no
condition or set of circumstances in connection with which RA or any RA ERISA
Affiliate is or could be subject to liability (except liability for benefit
claims and funding obligations payable in the ordinary course) under ERISA, the
Code, or any other applicable law with respect to any RA Benefit Plan.
(c) All contributions or other amounts payable by RA or its
subsidiaries through June 30, 1996 with respect to each RA Benefit Plan in
respect of current or prior plan years have been either paid or accrued on the
most recent financial statements of RA made available to UROHEALTH. Any
contributions or other amounts payable by RA or its subsidiaries for periods
between June 30, 1996 and the Effective Time with respect to each RA Benefit
Plan in respect of current or prior plan years have been or will be either paid
or accrued in the normal course of business on the books and records of RA at
or prior to the Effective Time. There are no pending, or, to the best
knowledge of RA, threatened or anticipated, claims (other than routine claims
for benefits) by or on behalf of or against any of the RA Benefit Plans or any
trusts or other funding vehicles related thereto.
(d) No RA Benefit Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees for periods extending beyond their retirement or other
termination of service (other than (i) coverage mandated by Part 6 of Subtitle
B of Title I of ERISA, Section 4980B of the Code or any comparable state law,
(ii) death benefits or retirement benefits under any "employee pension plan,"
as that term is defined in Section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as liabilities on the books of RA or the RA ERISA Affiliates,
or (iv) benefits the full cost of which is borne by the current or former
employee or his or her beneficiary).
5.10 Taxes. For the purposes of this section, the term "tax" shall
include all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments imposed by any United States federal, state or
local authority or any other taxing authority on RA or any of its Tax
Affiliates as to their respective income, profit, franchise, gross receipts,
payroll, sales, employment, worker's compensation, use, property, withholding,
excise, occupancy, environmental, and other taxes, duties or assessments of any
nature, whatsoever. RA has filed or caused to be filed timely all material
federal, state, local and foreign tax returns required to be filed by each of
its and any member of its consolidated, combined, unitary or similar group
(each
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such member a "Tax Affiliate"). Such returns, reports and other information
are accurate and complete in all material respects. RA has paid or caused to
be paid or has made adequate provision or set up an adequate accrual or reserve
for the payment of, all taxes shown to be due in respect of the periods for
which returns are due, and has established (or will establish at least
quarterly) an adequate accrual or reserve for the payment of all taxes payable
in respect of the period subsequent to the last of said periods required to be
so accrued or reserved. Neither RA nor any of its Tax Affiliates has any
material liability for taxes in excess of the amount so paid or accruals or
reserves so established. Neither RA nor any of its Tax Affiliates is
delinquent in the payment of any tax in excess of the amount reserved or
provided therefor, and no deficiencies for any tax, assessment or governmental
charge in excess of the amount reserved or provided therefor have been
threatened, claimed, proposed or assessed. No waiver or extension of time to
assess any taxes has been given or requested.
5.11 Compliance With Applicable Law. RA and each of its subsidiaries
holds all 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 each of RA and its subsidiaries 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 RA or any of its subsidiaries, except
to the extent that the failure to hold any such licenses, franchises, permits
or authorizations, or any such violation, would not, individually or in the
aggregate, have a Material Adverse Effect.
5.12 Subsidiaries. Exhibit 5.12 lists all the subsidiaries of RA as of
the date of this Agreement and indicates for each such corporate subsidiary as
of such date the jurisdiction of incorporation or organization. All of the
outstanding shares of capital stock or other equity interests of each of the
subsidiaries are (a) held by RA or one of such wholly-owned subsidiaries, (b)
fully paid and nonassessable, and (c) owned by RA or one of such wholly-owned
subsidiaries free and clear of any claim, lien or encumbrance.
5.13 Labor and Employment Matters. (a) RA and its subsidiaries are and
have been in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, the Immigration
Reform and Control Act, the Worker Adjustment and Retraining Notification Act,
the Americans with Disabilities Act and such laws respecting employment
discrimination, equal opportunity, affirmative action, worker's compensation,
occupational safety and health requirements and unemployment insurance and
related matters, and are not engaged in and have not engaged in any unfair
labor practice; (b) to the best knowledge of RA, no investigation or review by
or before any governmental entity concerning any violations of any such
applicable laws is pending nor, to the best knowledge of RA is any such
investigation threatened or has any such investigation occurred during the last
three years, and no governmental entity has provided any notice to RA or any of
its subsidiaries or otherwise asserted an intention to conduct any such
investigation; (c) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against RA or any of its subsidiaries; (d) no
union representation question or union organizational activity exists
respecting the
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employees of RA or any of its subsidiaries; (e) no collective bargaining
agreement exists which is binding on RA or any of its subsidiaries; (f) neither
RA nor any of its subsidiaries has experienced any material work stoppage or
other material labor difficulty; and (g) in the event of termination of the
employment of any of the current officers, directors, employees or agents of RA
or any of its subsidiaries, none of RA, any of its subsidiaries, UROHEALTH, any
of its subsidiaries or the Surviving Corporation, will pursuant to any
agreement or by reason of anything done prior to the Effective Time by RA or
any of its subsidiaries be liable to any of said officers, directors, employees
or agents for so-called "severance pay" or any other similar payments or
benefits, including, without limitation, post-employment health care (other
than pursuant to COBRA) or insurance benefits.
5.14 Insurance. As of the date hereof, RA and each of its subsidiaries
are insured by insurers reasonably believed by RA to be of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which they are engaged. All material policies
of insurance and fidelity or surety bonds insuring RA or any of its
subsidiaries or their respective businesses, assets, employees, officers and
directors are in full force and effect. As of the date hereof, there are no
material claims by RA or any of its subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or defending
under a reservation of rights clause.
5.15 Contracts with Physicians, Hospitals, HMOs and Third Party Providers.
RA has made available to UROHEALTH copies (or in the case where no written
documentation exists, a summary) of all outstanding contracts, partnerships,
joint ventures and other arrangements or understandings (written or oral)
between (a) RA or any of its subsidiaries and (b) any physician, hospital, HMO,
other managed care organization, or other third-party provider relating to the
provision of medical or consulting services, treatments, patient referrals,
medical or similar activities.
5.16 Ownership of Shares. As of the date hereof, neither RA nor, to its
best knowledge, any of its affiliates or associates (as such terms are defined
under the Exchange Act) (a) beneficially owns, directly or indirectly, or (b)
are parties to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of the capital
stock of UROHEALTH which in the aggregate represent 10% or more of the
outstanding UROHEALTH Shares.
5.17 FDA Matters.
(a) RA and each of its subsidiaries is, and the products sold by RA 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 RA and its subsidiaries (the "FDA").
(b) Neither RA nor any of its subsidiaries has received from the FDA,
or has knowledge of any facts which would furnish any reasonable basis for, any
notice of adverse
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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
RA or any of its subsidiaries.
(c) Each premarket approval ("PMA") and each of the premarket
notification ("510(k)") documents and related documents and information for
each of the products of RA 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 good laboratory practices in all material respects. RA has
disclosed in writing to UROHEALTH a complete and accurate list of all products
of RA 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 RA or
any of its subsidiaries currently pending with the FDA.
(d) Neither RA nor any of its subsidiaries is 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 RA or any of its subsidiaries,
(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 RA or any
of its subsidiaries has been recalled or subject to a field notification
(whether voluntarily or otherwise), and neither RA nor any of its subsidiaries
has received notice (whether completed or pending) of any proceeding seeking
recall, suspension or seizure of any products sold or proposed to be sold by RA
or any of its subsidiaries.
5.18 RA Proprietary Rights. For purposes of this Section 5.18, RA shall
mean RA and each of its subsidiaries.
(a) Exhibit 5.18 sets forth a listing of all of RA's domestic or
foreign federal, state and foreign registrations of trademarks and of other
marks, trade names or other trade rights, and all pending applications for any
such registrations and all of RA's patents and copyrights and all pending
applications therefor, all other trademarks and other marks, trade names and
other trade rights or in which RA has any interest whatsoever, and all other
trade secrets, designs, plans, specifications, technical information and other
RA proprietary rights, whether or not registered, created or used by or on
behalf of RA (collectively "RA Proprietary Rights"). Exhibit 5.18 (the "RA
Proprietary Rights List") also sets forth: (i) for each patent and registered
design, the number, normal expiration date and subject matter for each country
in which such patent or registered design has been issued, (ii) for each patent
application and registered design application, the application number, date of
filing and subject matter for each
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country, (iii) for each trademark, the trademark application serial number or
the trademark registration number, the trademark class of goods covered and the
trademark expiration date for each country in which a trademark has been
registered, (iv) for each service mark, the service mark serial number or the
service mark registration number, the service mark class of goods covered and
the service mark expiration date for each country in which a service mark has
been registered and (v) for each copyright, the copyright number and date of
filing for each country in which a copyright has been filed. The RA
Proprietary Rights listed in the RA Proprietary Rights List are all those used
by RA in connection with its business. True and correct copies of all patents,
and all pending applications for patents, owned, controlled, created or used by
or on behalf of RA or in which RA has any interest whatsoever have been
provided to UROHEALTH.
(b) (i) Except as set forth in Exhibit 5.18, no person has a right to
receive a royalty or similar payment in respect of any RA Proprietary Rights
whether or not pursuant to any contractual arrangements entered into by RA; and
RA has no licenses granted, sold or otherwise transferred by or to it nor other
agreements to which it is a party relating in whole or in part to any of the RA
Proprietary Rights.
(ii) Except as set forth in Exhibit 5.18, RA owns and has the sole
right to use each of the RA Proprietary Rights. Except for applications
pending, all of the patents, registered designs and trademarks listed in the RA
Proprietary Rights List have been duly issued and all of the other RA
Proprietary Rights exist, are registered and are subsisting. All of the
pending patent applications have been duly filed. None of the RA Proprietary
Rights is involved in any pending or threatened litigation. RA has not
received any notice of invalidity or infringement of any rights of others with
respect to such trademarks. RA has taken all reasonable and prudent steps to
protect the RA Proprietary Rights from infringement by any other person. No
other person (x) has the right to use any such trademarks on the goods on which
they are now being used either in identical form or in such near resemblance
thereto as to be likely, when applied to the goods of any such person, to cause
confusion with the trademarks or to cause a mistake or to deceive, (y) has
notified RA that it is claiming any ownership of or right to use such RA
Proprietary Rights, or (z) to the knowledge of RA, is infringing upon any such
RA Proprietary Rights in any way. To the knowledge of RA, RA's use of the RA
Proprietary Rights is not infringing upon or otherwise violating the rights of
any third party in or to such RA Proprietary Rights, and no proceedings have
been instituted against or notices received by RA that are presently
outstanding alleging that RA's use of the RA Proprietary Rights infringes upon
or otherwise violates any rights of a third party in or to such RA Proprietary
Rights. All of the RA Proprietary Rights are valid and enforceable rights of
RA and will not cease to be valid and in full force and effect by reason of the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated by this Agreement. There are not, and it is
reasonably expected that after the Effective Time there will not be, any
restrictions on RA's right to sell products manufactured by or for RA which
relate to the RA Proprietary Rights.
(c) Except as set forth in Exhibit 5.18, no employee of RA or any of
its subsidiaries is, or is now expected to be, in default under any term of any
employment contract, agreement or arrangement relating to any RA Proprietary
Rights or noncompetition agreement,
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or any other contract or any restrictive covenant relating to the right of any
such officer or employee to be employed by RA or any of its subsidiaries
because of the nature of the business conducted or to be conducted by RA or any
of its subsidiaries or relating to the use of any intellectual property of
others, and the continued employment of RA's and its subsidiaries' officers and
employees does not subject RA or any of its subsidiaries to any liability
resulting from such a violation.
5.19 Owned Property; RA Facilities. Except as set forth in Exhibit 5.19,
neither RA nor any of its subsidiaries owns any real property. Exhibit 5.19
lists all of RA's plants, offices, manufacturing facilities, warehouses,
improvements, administration buildings and real property (the "RA Facilities").
5.20 Compliance With Legislation Regulating Environmental Quality.
(a) (i) Throughout the period of its ownership or operation of the RA
Facilities, neither RA nor any of its subsidiaries has received any written
notices, directives, violation reports, actions or claims from or by (A) any
local, state, federal or foreign governmental agency concerning Environmental
Laws or (B) any person alleging that, in connection with Hazardous Materials,
conditions at any of the RA Facilities or RA's acts or omissions have resulted
in or caused or threatened to result in or cause injury or death to any person
or damage to any property, including without limitation, damage to natural
resources, and to the knowledge of RA, no such notices, directives, violation
reports, actions, claims or allegations exist; (ii) the RA Facilities and the
business operated by RA and its subsidiaries are in compliance with all
applicable state, federal, foreign and local Environmental Laws, except where
any noncompliance with Environmental Laws would not have a Material Adverse
Effect on RA; (iii) no underground storage tanks either are or, to the
knowledge of RA, have been located at any of the RA Facilities; and (iv) to the
knowledge of RA, no friable asbestos or PCBs have been located at any of the RA
Facilities.
(b) (i) To the knowledge of RA, there has been no spill, discharge,
release, cleanup or contamination of or by any Hazardous Materials used,
generated, treated, stored, disposed of or handled by RA or any of its
subsidiaries at any of the RA Facilities; (ii) neither RA nor any of its
subsidiaries has treated, stored, disposed of, released or transported any
Hazardous Material in a manner which would give rise to any liability under any
Environmental Laws; and (iii) RA and its subsidiaries hold all necessary
permits, licenses, approvals and consents to conduct their business as
currently being conducted and are not in violation of any condition of any such
permit, license, approval or consent, except where the failure to hold any such
permit, license, approval or consent would not have a Material Adverse Effect.
5.21 Private Sale.
(a) RA and its stockholders understand and acknowledge that the
offering of UROHEALTH Shares pursuant to this Agreement will not be registered
under the Securities Act of 1933, as amended (the "Act"), in reliance on
exemptions set forth in the Act and the regulations thereunder, nor will it be
registered or qualified in any state under any securities or
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blue sky laws, by reason of their issuance in a transaction exempt from such
requirements or qualification. UROHEALTH's reliance upon such exemptions is
predicated in part upon RA's representations as set forth in this Agreement.
(b) RA's stockholders are acquiring the UROHEALTH Shares for their own
respective accounts, for investment and not with a view to the distribution
thereof, nor with any present intention of distributing the same.
(c) RA's stockholders are "accredited investors" as defined in
Regulation D of the Act. RA, and all of its stockholders, by reason of their
business or financial experience or the business or financial experience of its
professional advisors who are unaffiliated with and who are not compensated by
UROHEALTH or any affiliates or selling agent of UROHEALTH, directly or
indirectly, have the capacity to protect their own interests in connection with
the purchase of UROHEALTH Shares and have no need for liquidity and are able to
bear the risk of such investment for an indefinite period of time and to afford
a complete loss thereof.
(d) RA and its stockholders acknowledge that UROHEALTH has made
available to them, at a reasonable time prior to the purchase of the UROHEALTH
Shares, the opportunity to ask questions and receive answers concerning the
terms and conditions of the offering of the UROHEALTH Shares and to obtain any
additional information that UROHEALTH possesses or can acquire without
unreasonable effort or expense.
(e) RA and its stockholders understand that each stockholder must bear
the economic risk of its investment indefinitely, unless the UROHEALTH Shares
are registered pursuant to the Act or an exemption from such registration is
available.
5.22 Other Information. No representation or warranty by RA contained in
this Agreement or any certificate furnished or to be furnished by or on behalf
of RA pursuant to this Agreement contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact required to
be stated herein or therein which is necessary to make the statements contained
herein or therein, in light of the circumstances in which they are or were
made, not misleading in any material respect.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business Pending the Merger. Each of UROHEALTH, UROHEALTH
California and RA 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 such Company 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) such Company 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)
except for (A) the proposed increase in UROHEALTH's authorized capital stock
consisting of 50,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock and (B) the proposed amendment of UROHEALTH's Certificate of
Incorporation to entitle the holders of its 8.75% Convertible Subordinated
Debentures due 2006 to voting rights, amend its 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, except for the proposed redemption of UROHEALTH California's Series
A Preferred Stock, 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) such Company 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), except that such Company may issue shares required
to be issued upon exercise of existing stock options, warrants or similar
plans, or under other contractual commitments previously made, which options,
warrants, plans or commitments have been disclosed in writing to the other
Company pursuant hereto; (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 material 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; provided, however, that nothing in this subsection (c) to
Section 6.1 shall prevent UROHEALTH from issuing warrants to purchase its
Common Stock in accordance with the court-approved settlement of its
stockholder securities class action litigation;
(d) such Company shall use its best efforts to preserve intact the
business organization of such Company 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; provided, however, that no breach of this covenant
shall be deemed to have occurred if a failure to comply with this Section
6.1(d) occurs as a result of any matter arising out of the transactions
contemplated by this Agreement or any acquisition proposals made to such
Company or the public announcement thereof;
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(e) such Company and its subsidiaries shall not knowingly take or allow
to be taken or fail to take any action which act or omission would jeopardize
qualification of the Merger as a "reorganization" within the meaning of Section
368 of the Code; and
(f) such Company and its subsidiaries shall use all reasonable efforts
to prevent any representation or warranty of such Company 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, each of UROHEALTH, UROHEALTH
California and RA agrees as to itself and its subsidiaries that, other than the
agreements referred to in Section 2.4, it will not, without the prior written
consent of the other (except as required by applicable law or pursuant to
existing contractual arrangements or other plans or commitments as otherwise
disclosed to the other in writing pursuant hereto) (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 such
Company and one or more of its officers, directors or employees, in each case
so as to materially increase the benefits thereunder (collectively,
"Compensation Plans"), (b) grant or become obligated to grant any increase in
the compensation or fringe 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 and consistent with past practices, (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 such Company
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 Current Information. From the date of this Agreement to the Effective
Time, each of RA, UROHEALTH and UROHEALTH California will cause one or more of
its designated representatives to confer on a regular and frequent basis (not
less than semi-monthly) with representatives of the other and to report the
general status of its ongoing operations and to deliver to the other (not less
than quarterly) unaudited consolidated balance sheets and related consolidated
statements of income, stockholders equity and cash flows for the period since
the last such report. Each of RA and UROHEALTH will promptly notify the other
of any material change in the normal course of business or in its or its
subsidiaries' properties.
6.4 Legal Conditions to Merger. Each of RA, UROHEALTH and UROHEALTH
California 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
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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; provided, however, that a party
shall not be obligated to take any action pursuant to the foregoing if the
taking of such action or such compliance or the obtaining of such consent,
authorization, order, approval or exemption would, in such party's reasonable
opinion, (i) be materially burdensome to such party and its subsidiaries taken
as a whole or impact in such a materially adverse manner the economic or
business benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger or (ii) result in the
imposition of a condition or restriction on such party or on the Surviving
Corporation of the type referred to in Section 8.1(c). 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.
6.5 Advice of Changes; Government Filings. Each of UROHEALTH,
UROHEALTH California and RA shall confer on a regular and frequent basis with
the other, report on operational matters and promptly advise the other orally
and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, could have, a Material Adverse Effect on such party or
which would cause or constitute a material breach of any of the
representations, warranties or covenants of such party contained herein.
UROHEALTH shall file all reports required by regulation to be filed by it with
the SEC between the date of this Agreement and the Effective Time and shall
deliver to RA copies of all such reports promptly after the same are filed.
Except where prohibited by applicable statutes and regulations, each party
shall promptly provide the other (or its counsel) with copies of all other
filings made by such party with any state or federal government entity in
connection with this Agreement or the transactions contemplated hereby.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access and Information.
(a) RA, UROHEALTH and UROHEALTH California and their respective
subsidiaries shall each afford to the other and to the other's financial
advisors, legal counsel, accountants, consultants and other representatives
access during normal business hours throughout the period from the date hereof
to the Effective Time to all of its books, records, properties, facilities,
personnel commitments and records (including but not limited to tax returns)
and, during such period, each shall furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request. No investigation pursuant to this Section 7.1
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Merger.
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(b) All information furnished by either RA, UROHEALTH and UROHEALTH
California to the other pursuant hereto shall be treated as the sole property
of the party furnishing the information until consummation of the Merger. The
parties will hold any such information that is nonpublic in confidence to the
extent required by, and in accordance with the Confidentiality Agreement dated
as of May 31, 1996 among RA and UROHEALTH (the "Confidentiality Agreement") and
such Confidentiality Agreement shall survive the termination of this Agreement.
7.2 Acquisition Proposals. RA and its subsidiaries will not, and will use
their best efforts to cause their respective directors, officers, employees,
financial advisors, legal counsel, accountants and other agents and
representatives ("advisors") not to, initiate, solicit or encourage, directly
or indirectly, or take any other action to facilitate any inquiries or the
making of any proposal with respect to, or engage or participate in
negotiations concerning, provide any nonpublic information or data to or have
any discussions with any person other than UROHEALTH and its advisors relating
to, any acquisition, tender offer (including a self-tender offer), exchange
offer, merger, consolidation, acquisition of beneficial ownership of or the
right to vote securities representing 10% or more of the total voting power of
such Company or any of its subsidiaries, dissolution, business combination,
purchase of all or any significant portion of the assets or any division of, or
any equity interest in, such Company or any of its subsidiaries, or similar
transaction other than the Merger (such proposals, announcements, or
transactions being referred to as "Acquisition Proposals"). RA will promptly
notify UROHEALTH orally and in writing if any such Acquisition Proposal
(including the terms thereof and identity of the persons making such proposals)
is received and furnish to UROHEALTH a copy of any written proposal.
7.3 RA Stockholder Approval. RA acting through its Board of Directors,
shall, in accordance with applicable law and its Articles of Incorporation and
Bylaws:
(a) promptly and duly call, give notice of, convene and hold as soon as
practicable following the date hereof a meeting of RA's respective stockholders
(or obtain a written consent of its stockholders) for the purpose of voting to
approve and adopt this Agreement and shall use its best efforts, except to the
extent the Board of Directors reasonably believe is otherwise required by its
fiduciary duty, to obtain each such stockholder's approval; and
(b) except to the extent the Board of Directors reasonably believes it
is otherwise required by its fiduciary duty, recommend approval and adoption of
this Agreement by the stockholders of RA, and take all lawful action to solicit
such approval.
7.4 Director and Officer Indemnification. All rights to indemnification
and advancement of expenses existing in favor of the directors, officers and
agents of RA (the "Indemnified Parties") under the provisions existing on the
date hereof of any of RA's Articles of Incorporation, Bylaws and
indemnification agreements shall survive the Effective Time for at least three
years thereafter (including any directors' and officers' liability insurance
heretofore maintained if such insurance remains available for such period on
commercially reasonable terms) and UROHEALTH agrees to indemnify and advance
expenses to the Indemnified Parties
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to the full extent required or permitted by RA under the provisions existing on
the date hereof of the Articles of Incorporation, Bylaws and indemnification
agreements of RA.
7.5 Public Announcements. So long as this Agreement is in effect, each
of UROHEALTH, UROHEALTH California and RA agrees that it will obtain the
approval of the other prior to issuing any press release and will use its best
efforts to consult with the others before otherwise making any public statement
or responding to any press inquiry with respect to this Agreement or the
transactions contemplated hereby, except as may be required by law or any
governmental agency if required by such agency or the rules of the American
Stock Exchange.
7.6 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
7.7 Additional Agreements.
(a) Subject to the terms and conditions herein provided, including
without limitation those set forth in the proviso to Section 6.4 hereof, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including using
all reasonable efforts to obtain all necessary waivers, consents and approvals,
and to effect all necessary registrations and filings. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and/or directors of the
Companies shall take all such necessary action.
(b) Subject to the terms and conditions herein provided, including
without limitation those set forth in the proviso to Section 6.4 hereof,
UROHEALTH, UROHEALTH California and RA will cooperate with each other and use
all reasonable efforts to prepare all necessary documentation to effect
promptly all necessary filings and to obtain all necessary permits, consents,
approvals, orders and authorizations of or any exemptions by, all third parties
and governmental bodies necessary to consummate the transactions contemplated
by this Agreement.
(c) Each party will keep the other party apprised of the status of any
inquiries made of such party by the SEC or any other governmental agency or
authority or members of their respective staffs with respect to this Agreement
or the transactions contemplated herein.
7.8 Company Accruals and Reserves. Prior to the Closing Date, RA shall
review and, to the extent determined necessary or advisable, consistent with
generally accepted accounting principles and the accounting rules, regulations
and interpretations of the SEC and its staff, modify and change its accrual,
reserve and provision policies and practices to (a) reflect UROHEALTH's plans
with respect to the conduct of RA's business following the Merger and (b) make
adequate provision (for the costs and expenses relating thereto) so as to be
applied
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consistently on a mutually satisfactory basis with those of UROHEALTH. The
parties agree to cooperate in preparing for the implementation of the
adjustments contemplated by this Section 7.8. Notwithstanding the foregoing,
(i) RA shall not be obligated to take in any respect any such action pursuant
to this Section 7.8 (other than pursuant to the preceding sentence) unless and
until UROHEALTH acknowledges that all conditions to its obligations to
consummate the Merger have been satisfied and (ii) no adjustments made solely
as a result of this Section 7.8 shall change the Exchange Ratio.
7.9 Purchase of Property. UROHEALTH or UROHEALTH California shall acquire
from Newhauser Associates, a Michigan general partnership, that certain real
property commonly known as 8850 M-89, Richland, Michigan 49083 pursuant to
documents (the "Real Estate Documents") to be attached hereto as Exhibit 7.9
within 20 days of execution hereof for a purchase price of $4.5 million, on the
terms and conditions mutually agreed to by the parties and described in the
Real Estate Documents. The Real Estate Documents shall contemplate that $1.5
million of the purchase price shall be paid in cash and Newhauser Associates
will carry a $3.5 million, 10 year mortgage on such real property at an
interest rate equal to the Prime Rate published in the Wall Street Journal on
the date of Closing, or if such date is not a day on which such rate is
published, on such previous date on which the rate is published.
7.10 Election of Director. UROHEALTH shall use its best efforts to cause
Richard R. Newhauser to be nominated as a director of UROHEALTH and to be
renominated as such for three years from the Effective Time.
7.11 Voting Agreement. The stockholders of RA shall enter into that
certain Stockholders Agreement, dated May 13, 1996, agreeing to vote in favor
of the Debenture Voting Rights Proposal at the UROHEALTH annual meeting, as
described in the related proxy statement.
7.12 Registration Rights. The parties shall enter into a mutually
acceptable agreement providing the stockholders of RA with at least one demand
registration right and piggyback registration rights relating to the UROHEALTH
Shares, which agreement shall take into account the rights of others under
existing registration rights agreements with UROHEALTH.
7.13 Retention Bonus. At Closing, UROHEALTH shall place into a
segregated account of the Indemnification Escrow cash in the amount of $550,000
and that number of UROHEALTH Shares equal to $550,000 (such cash and shares,
the "Retention Fund"). Each of the eleven individuals named on Exhibit 7.13
shall be entitled to receive a bonus (the "Retention Bonus") in the event such
individual is employed by the Surviving Corporation on the date twelve months
after the Effective Time. The Retention Bonus shall equal $50,000 in cash and
UROHEALTH Shares equal to $50,000 for each such individual, and shall be paid
from the Retention Fund. Any amounts or shares remaining in the Retention Fund
after all Retention Bonuses shall have been paid shall be distributed to the RA
Stockholders pro rata.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to all Parties' Obligation to Effect the Merger. The
respective obligations of RA, UROHEALTH and UROHEALTH California 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) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of RA in
accordance with applicable law and there shall be no Dissenting Holders.
(b) 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 Agreement of Merger with the Secretary of
State for the State of Delaware and the Articles of Merger with the Secretary
of State of the State of Illinois, 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 UROHEALTH or UROHEALTH California and their
subsidiaries, taken as a whole, 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 RA Shares and to
consummate the Merger shall have been received.
(c) 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 UROHEALTH, UROHEALTH California or their subsidiaries (or, in
the case of any disposition of assets required in connection with such
Requisite Regulatory Approval, upon either RA, UROHEALTH or UROHEALTH
California 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.
8.2 Conditions to Obligation of Each Company to Effect the Merger. The
obligation each of RA, UROHEALTH and UROHEALTH California 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 such Company:
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(a) The other Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of the other Company
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time as if made at and as of such time, except as
contemplated by this Agreement. RA, UROHEALTH and UROHEALTH California shall
have delivered to the other a certificate of its President or an Executive Vice
President as to the satisfaction of this condition.
(b) Each of RA, UROHEALTH and UROHEALTH California shall have received
an opinion of its outside counsel, dated as of the Effective Time,
substantially to the effect that, on the basis of facts, representations, and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger applicable to such Company
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that such Company will be a party to
the reorganization within the meaning of Section 368(a) of the Code. In
addition, each of RA, UROHEALTH and UROHEALTH California shall have received
the opinion of its, and the other Company's or Companies' respective, outside
counsel dated the Closing Date and addressed to itself and the other Company or
Companies covering the additional matters set forth in Exhibit 8.2(b).
(c) Each of RA, UROHEALTH and UROHEALTH California 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, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a material
adverse effect on UROHEALTH or UROHEALTH California and their subsidiaries
taken as a whole or upon the consummation of the transactions contemplated
hereby.
8.3 Conditions to Obligation of UROHEALTH and UROHEALTH California to
Effect the Merger. The obligation of UROHEALTH and UROHEALTH California to
effect the Merger shall be further subject to the following conditions:
(a) UROHEALTH shall have completed a due diligence review of the
operations, properties, records, contracts, assets, liabilities (contingent and
otherwise), and regulatory compliance of RA and its subsidiaries and the
results of the due diligence review shall be satisfactory to UROHEALTH in its
sole discretion. In the event the results of the due diligence review are
unsatisfactory to UROHEALTH, UROHEALTH and UROHEALTH California shall have the
option within twenty (20) days of the execution of this Agreement to (i)
terminate this Agreement by written notice to RA or (ii) delivery of a written
notice ("Notice") to RA conditioning UROHEALTH's and UROHEALTH California's
obligation to consummate the Merger upon RA's resolving, to UROHEALTH's
satisfaction prior to the Closing Date, those matters described in the Notice,
including, if applicable, amendment or termination of agreements or
arrangements as set forth in the Notice on terms acceptable to UROHEALTH. Upon
receiving the Notice, RA shall have five (5) business days to either (i)
terminate this Agreement by giving written notice to UROHEALTH or (ii) proceed
with the
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Merger, in which case the conditions outlined in the Notice shall be deemed
additional Closing conditions under this Section 8.3.
The results of UROHEALTH's due diligence shall be deemed satisfactory
for the purposes of this Section 8.3 unless in UROHEALTH's reasonable judgment
(a) they indicate that any representation or warranty made by RA under this
Agreement was materially untrue or inaccurate as of the date when made or (b)
they otherwise reveal liabilities (contingent or otherwise), accounting
irregularities (particularly other statements of assets or income or inadequate
reserves or allowances) in excess of $100,000 in the aggregate, adverse
agreements, understandings or arrangements to which RA or any of its
subsidiaries is a party, or any set of adverse facts or circumstances relating
to the general affairs, management, financial position or prospects of RA or
its subsidiaries (including the ability of UROHEALTH or UROHEALTH California to
succeed to the benefits of any arrangements between RA and physicians,
hospitals, managed care organizations or other third-party providers) which, if
known to UROHEALTH or UROHEALTH California at the time of the execution of this
Agreement, would have made it inadvisable for UROHEALTH or UROHEALTH California
to proceed with the Merger on the terms contemplated by this Agreement.
(b) Consistent with oral commitments from UROHEALTH's lenders, a
minimum of $27.5 million shall have been funded on or prior to Closing.
8.4 Conditions to Obligation of RA to Effect the Merger. The obligation
of RA to effect the Merger shall be further subject to the following
conditions:
(a) RA shall have completed a due diligence review of the operations,
properties, records, contracts, assets, liabilities (contingent and otherwise),
and regulatory compliance of RA and its subsidiaries and the results of the due
diligence review shall be satisfactory to RA in its sole discretion. In the
event the results of the due diligence review are unsatisfactory to RA, RA
shall have the option within twenty (20) days of the execution of this
Agreement to (i) terminate this Agreement by written notice to UROHEALTH or
(ii) delivery of a written notice ("Notice") to UROHEALTH conditioning RA's
obligation to consummate the Merger upon UROHEALTH's resolving, to RA's
satisfaction prior to the Closing Date, those matters described in the Notice,
including, if applicable, amendment or termination of agreements or
arrangements as set forth in the Notice on terms acceptable to RA. Upon
receiving the Notice, UROHEALTH shall have five (5) business days to either (i)
terminate this Agreement by giving written notice to RA or (ii) proceed with
the Merger, in which case the conditions outlined in the Notice shall be deemed
additional Closing conditions under this Section 8.4.
(b) The results of RA's due diligence shall be deemed satisfactory for
the purposes of this Section 8.4 unless in RA's reasonable judgment (i) they
indicate that any representation or warranty made by UROHEALTH under this
Agreement was materially untrue or inaccurate as of the date when made or (ii)
they otherwise reveal liabilities (contingent or otherwise), accounting
irregularities (particularly other statements of assets or income or inadequate
reserves or allowances) in excess of $100,000 in the aggregate, adverse
agreements,
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understandings or arrangements to which UROHEALTH or any of its subsidiaries is
a party, or any set of adverse facts or circumstances relating to the general
affairs, management, financial position or prospects of UROHEALTH or its
subsidiaries which, if known to RA at the time of the execution of this
Agreement, would have made it inadvisable for RA to proceed with the Merger on
the terms contemplated by this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 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 RA:
(a) By mutual written consent of UROHEALTH and RA.
(b) By UROHEALTH or RA if the Merger shall not have been consummated on
or before September 1, 1996.
(c) By either UROHEALTH or RA if there shall have been any material
breach of a material obligation of the other and, if such breach is curable,
such default shall have not been remedied within 10 days after receipt by the
defaulting party of notice in writing from the other specifying such breach and
requesting that it be remedied, provided, that such 10-day period shall be
extended for so long as the other Company shall be making diligent attempts to
cure such default.
(d) By RA 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 any Merger and such order, decree, ruling or any other
action shall have become final and non-appealable.
(e) By RA or UROHEALTH upon written notice to the other if any approval
of its stockholders required for the consummation of the Merger submitted for
their approval shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of stockholders or at any adjournment
thereof.
(f) By RA or UROHEALTH at any time prior to the date of RA's
stockholders' meeting, if the Closing Market Value is more than 15% below the
closing price of UROHEALTH common stock on the American Stock Exchange on the
date this Agreement is executed.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1 above, this Agreement shall forthwith become of no
further effect and, except for a termination resulting from a breach by a party
of this Agreement, there shall be no liability or obligation on the part of any
Company or its officers or directors (except as set forth
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in Section 7.1(b) hereof and except for Sections 7.6, 9.2 and 11.6 hereof which
shall survive the termination). Nothing contained in this Section 9.2 shall
relieve any party from liability for willful breach of this Agreement that
results in termination of this Agreement. Upon request therefor, each party
will redeliver all documents, work papers and other material of any other party
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing same.
9.3 Amendment. This Agreement may be amended by action taken at any
time before or after approval hereof by the stockholders of RA, 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.
9.4 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 X
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations, Warranties and Agreements.
(a) No representations, warranties or agreements contained herein shall
survive beyond the Effective Time except that (i) the agreements contained in
Sections 2.3, 3.1, 3.2, 3.3, 3.4, 3.5, 5.21, 7.4, 7.5, 7.7(a), 7.9, 7.13, 10.1
and Article XI hereof, and all other agreements of the parties, shall survive
beyond the Effective Time and (ii) the representations and warranties of RA
shall survive beyond the Effective Time until the earlier of (x) one year
following the Effective Time or (y) the release of the first audited financial
statements for UROHEALTH following the Effective Time ("Termination Date").
(b) Through the Indemnification Shares, the Surviving Corporation,
UROHEALTH, and each of their officers, directors, employees, agents,
representatives and affiliates (collectively, the "Indemnitees" and
individually each an "Indemnitee") (subject to the terms and conditions of
subparagraph (c) below) will be entitled to be indemnified and held harmless
against and in respect of any claims, damages, losses, costs, expenses,
liabilities (absolute, accrued, contingent or otherwise), and reasonable legal
fees and expenses (collectively, "Losses") incurred or suffered by any
Indemnitee, directly or indirectly caused by
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or arising out of or related to any untruth, inaccuracy, error in, or breach
of, any representation or warranty of RA contained in this Agreement, when made
or deemed to be made. The rights of Indemnitees to indemnification under this
Section 10.1(b) shall be limited to, and satisfied solely out of and to the
extent of, the Indemnification Shares (which shall not include the Retention
Funds) exchanged for RA Shares in the Merger (the "Indemnification Escrow"),
and any Loss shall be limited to those amounts for which the Indemnitee does
not receive coverage under applicable insurance policies, if any. All
indemnification requests of Indemnitees hereunder shall be made by or through
UROHEALTH.
(c) By voting to approve this Agreement or by surrendering his or her
certificate(s) evidencing RA Shares as described in Section 3.2, each holder of
RA Shares, other than Excluded Shares ("RA Stockholder"), agrees that UROHEALTH
Shares equal to 10% of such shares to which such stockholder becomes entitled
upon consummation of the Merger and the Retention Funds shall be placed in the
Indemnification Escrow provided for in an Escrow Agreement to be entered into,
as of the Effective Time, between UROHEALTH, RA and the Escrow Agent (which
shall be mutually agreed by RA and UROHEALTH). The Escrow Agent is authorized
from time to time to transfer all or any portion of the amount of the
Indemnification Shares so deposited in satisfaction of the indemnity obligation
as contemplated in the Escrow Agreement. The Indemnitees agree to look solely
to the Indemnification Shares for satisfaction of the obligation of RA
Stockholders to indemnify Indemnitees hereunder and will not look directly to
any RA Stockholder for any indemnification hereunder, nor to the Retention
Funds.
(d) If any Indemnitee shall have any liquidated claim of
indemnification pursuant to Section 10.1(b) above, it shall promptly request
that UROHEALTH give written notice thereof to the Representative (as defined in
paragraph (h) below) and the Escrow Agent, including a brief description of the
facts upon which such claim is based and the amount thereof. Any Indemnitee
may also request that UROHEALTH provide written notice to the Representative
and the Escrow Agent of any unliquidated claim of indemnification pursuant to
Section 10.1(b), including a brief description of the facts upon which such
claim is based and a demand for a reserve amount to be created in respect of
such claim. Any claim made by any Indemnitee for Losses that are unliquidated
shall not be paid but Indemnification Shares with a fair market value equal to
such claim shall be held in the Indemnification Escrow until such Losses are
fully liquidated. Notwithstanding the foregoing, no UROHEALTH Shares will be
delivered to an Indemnitee pursuant to a written claim notice (with respect to
either a liquidated or unliquidated claim) pursuant to Section 10.1(b) above
unless, and only to the extent that, the aggregate amount of Losses sustained
by Indemnitees as a group and as to which written claim notices have been given
exceeds $75,000 (taking into account any reduction of prior noticed claims
resulting from the dispute resolution procedures of Section 10.1(e) below).
(e) If the Representative shall notify the Escrow Agent in writing
(within fifteen (15) days of delivery to the Escrow Agent by UROHEALTH of a
written notice of claim for indemnification) of his objection to a claim of
indemnification or a demand for the creation of a reserve for any unliquidated
claim (or the amount thereof), the Escrow Agent shall hold the disputed amount
of Indemnification Shares in the Indemnification Escrow until the rights of the
RA Stockholders and the Indemnitees with respect thereto have been agreed upon
between the
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Representative and the claiming Indemnitee. In the event such an agreement is
reached, the claiming Indemnitee shall request UROHEALTH to provide to the
Escrow Agent a written notice signed by the Representative in the form
specified in the Escrow Agreement. If no such agreement has been reached,
either the Indemnitee or the Representative may, not earlier than forty-five
(45) days after the date of the initial claim notice, submit the dispute to
binding arbitration in Orange County, California, pursuant to the procedures
and rules for commercial arbitration of the American Arbitration Association.
The Escrow Agent may rely on the order or other determination of any such
arbitrator. If any such arbitrator shall determine that any part of the
Indemnification Escrow is to be delivered to an Indemnitee or is to be set
aside in a reserve for any unliquidated claim, the Escrow Agent shall promptly
following receipt of a copy of such determination establish such reserve or
deliver to such Indemnitee the lesser of (i) that number of Indemnification
Shares with a fair market value equal to the amount of the claim or claims as
awarded to the Indemnitee to be satisfied, subject to the limitation set forth
in paragraph (d) above, or (ii) the entire amount of Indemnification Shares
remaining in the Indemnification Escrow. Any disputed amounts not awarded to
the Indemnitee shall promptly be transferred to the unreserved portion of the
Indemnification Escrow. UROHEALTH and the Representative shall bear their
respective costs and expenses of any such arbitration; provided that, the
Representative shall be entitled to charge the Indemnification Escrow for his
costs and expenses as set forth in the Escrow Agreement.
(f) On the Termination Date, the Escrow Agent shall distribute to the
RA Stockholders on a pro rata basis all remaining Indemnification Shares in the
Indemnification Escrow, less such amount of Indemnification Shares with a fair
market value equal to the dollar amount of all claims pursuant to Section
10.1(c) that are still in process of resolution pursuant to Section 10.1(c).
(g) After the Termination Date, (i) as each matter referred to in
Section 10.1(e) is resolved or otherwise concluded and (ii) as each undisputed
unliquidated claim under Section 10.1(b) which remains unliquidated as of the
Termination Date is liquidated, the Escrow Agent shall distribute to the RA
Stockholders their respective pro rata amount of Indemnification Shares then
determined by the Escrow Agent to be free of any rights of any Indemnitee under
Section 10.1(b) through (d), and, when all such matters are resolved and such
claims are liquidated, the obligations under Section 10(b) hereof shall
terminate. The Indemnification Escrow shall be terminated when all of the
Indemnification Shares placed originally into the Indemnification Escrow shall
have been disbursed in accordance with the provisions hereof and the Escrow
Agreement.
(h) As of the Effective Time of the Merger, the RA Stockholders shall,
by virtue of the approval of this Agreement by the requisite vote of the
Stockholders, be deemed, for themselves and their heirs and representatives and
successors, to have constituted and appointed, effective from the Effective
Time, Richard R. Newhauser, as their agent and attorney-in-fact (the
"Representative") to take all action required or permitted under the
Indemnification Escrow as provided in the Escrow Agreement or herein with
respect to the interests and rights of the RA Stockholders. In the event of
the death, physical or mental incapacity or resignation of the
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Representative a replacement Representative shall be appointed as provided in
the Escrow Agreement.
In taking any action whatsoever hereunder, the Representative shall be
protected in relying upon any notice, paper or other document reasonably
believed by him to be genuine, or upon any evidence reasonably deemed by him to
be sufficient. The Representative may consult with counsel in connection with
his duties hereunder and shall be fully protected in any act taken, suffered or
permitted by him in good faith or in accordance with the advice of counsel.
The Representative shall not be liable to the RA Stockholders for the
performance of any act or the failure to act so long as he acted or failed to
act in good faith within what he reasonably believed to be the scope of his
authority and for a purpose which he reasonably believed to be in the best
interests of the RA Stockholders.
(i) The Escrow Agent shall distribute the Retention Funds in the manner
set forth in Section 7.13 within 30 days after the individuals earning
Retention Bonuses are determined.
ARTICLE XI
GENERAL PROVISIONS
11.1 Brokers. RA represents and warrants to the other Companies that no
broker, finder or financial advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
RA. UROHEALTH and UROHEALTH California represent and warrant to RA that,
except for UROHEALTH's financial advisor, Bear Stearns & Co., Inc., no broker,
finder or financial advisor is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of UROHEALTH or
UROHEALTH California.
11.2 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by telex or telecopy or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to RA, to:
Richard-Allan Medical Industries, Inc.
8850 M-89
Richland, Michigan 49083
Attention: Richard R. Newhauser
with a copy to:
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Howard & Howard Attorneys, P.C.
107 W. Michigan Avenue, Ste. 400
Kalamazoo, Michigan 47007-3956
Attention: Peter J. Livingston, Esq.
(b) If to UROHEALTH or UROHEALTH California, to:
UROHEALTH Systems, Inc.
3050 Redhill Avenue
Costa Mesa, California 92628
Attention: General Counsel
with a copy to:
Morrison & Foerster
19900 MacArthur Boulevard, Suite 1200
Irvine, California 92612
Attention: Robert M. Mattson, Jr., Esq.
11.3 Descriptive Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.4 Entire Agreement; Assignment. This Agreement (including the Exhibits
and other documents and instruments referred to herein) and the Confidentiality
Agreement constitute the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them, with respect to the subject matter hereof, and shall not be assigned
by operation of law or otherwise.
11.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to
the provisions thereof relating to conflicts of law.
11.6 Parties in Interest. Except for Sections 2.4, 7.4, 7.6 and Article X
hereof, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefit or remedies of any nature
whatsoever or by reason of this Agreement.
11.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
11.8 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not effect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
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11.9 Investigation. The respective representations and warranties of
UROHEALTH, UROHEALTH California or RA contained herein or in the certificates
or other documents delivered prior to the Closing shall not be deemed waived or
otherwise affected by any investigation made by the other.
11.10 Consents. For purposes of any provision of this Agreement
requiring, permitting or providing for the consent of any Company, the written
consent of the Chief Executive Officer of a Company shall be sufficient to
constitute such consent.
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IN WITNESS WHEREOF, each Company has caused this Agreement to be executed
on its behalf by its officers thereunto duly authorized, all as of the date
first above written.
UROHEALTH SYSTEMS, INC.
By:
----------------------------------------------
Name: Charles A. Laverty
Title: President and Chief Executive Officer
UROHEALTH, INC. (California)
By:
----------------------------------------------
Name: Charles A. Laverty
Title: President and Chief Executive Officer
RICHARD-ALLAN MEDICAL INDUSTRIES, INC.
By:
---------------------------------------------
Name: Richard R. Newhauser
Title: Chairman
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Exhibit 2.4
1. Richard R. Newhauser and Kevin Duffy, Darryl Eckstein and Rich Kindberg
("Employees") will continue to operate the RA Division of UROHEALTH
California for an agreed-upon period after the Closing Date.
2. Richard R. Newhauser and Employees will be entitled to participate in
UROHEALTH's Stock Option Plan at levels consistent with their position in
the Surviving Corporation.
3. Richard R. Newhauser and Employees will receive options exercisable for
an aggregate of 400,000 shares of UROHEALTH Common Stock on the Closing
Date, with an exercise price equal to the closing price of UROHEALTH
Common Stock on the American Stock Exchange on the Closing Date.
4. Richard R. Newhauser and UROHEALTH California will enter, into an
employment agreement containing mutually agreeable terms for an annual
base salary to Richard R. Newhauser of $350,000 pursuant to which Richard
R. Newhauser will provide services to the RA Division of UROHEALTH
California. For a five-year period after expiration of the employment
agreement, Richard R. Newhauser will act as a consultant to UROHEALTH
California for an annual consulting fee of $200,000. UROHEALTH California
will provide Richard R. Newhauser health insurance benefits throughout the
employment and consulting term and during retirement thereafter at levels
comparable to benefits then afforded UROHEALTH California employees.
Employment agreements will be negotiated between UROHEALTH California and
Kevin Duffy, Darryl Eckstein and Rich Kindberg.
<PAGE> 40
Exhibit 7.13
1. Roy Melling
2. Jeff Zerfas
3. Andy Lenczycki
4. Kathy Gietzen
5. Bob Taylor
6. Debbie Myers
7. John Klinger
8. Julie Powell
9. Darrell Eckstein
10. Rich Kindberg
11. Kevin Duffy
<PAGE> 41
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
made and entered into as of August 12, 1996, by and among UROHEALTH Systems,
Inc., a Delaware corporation ("UROHEALTH"), UROHEALTH, Inc. (California), a
California corporation and wholly-owned subsidiary of UROHEALTH ("UROHEALTH
California"), and Richard-Allan Medical Industries, Inc., an Illinois
corporation ("RA"). The parties hereto are sometimes hereinafter referred to
collectively as the "Companies."
WHEREAS, the Companies have previously executed a certain Agreement and
Plan of Merger dated as of July 5, 1996 (the "Merger Agreement"); and
WHEREAS, the Companies now desire to amend the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Section 3.2(b) of the Merger Agreement shall be amended and restated in
its entirety as follows:
"(b) Upon surrender of a certificate representing RA Shares
("Certificate") for cancellation duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor cash
and a certificate representing that number of whole UROHEALTH
Shares which such holder has the right to receive in respect of
the Certificates surrendered pursuant to the provisions of this
Article III, less 5% of the cash and 5% of such UROHEALTH Shares
(the "Indemnification Fund"), which shall be delivered to the
Escrow Agent for deposit in the Indemnification Escrow (as defined
in Section 10.1(b) hereof) and less the Retention Funds (as
defined in Section 7.13)."
2. The first sentence of Section 7.13 of the Merger Agreement is hereby
amended and restated in its entirety to read as follows:
At Closing, UROHEALTH shall place into a segregated account
of the Indemnification Escrow cash in the amount of $550,000.00
and that number of UROHEALTH Shares with a Closing Market Value
equal to $550,000.00 (such cash and shares, the "Retention Fund").
3. Sections 10.1(b) through 10.1(i) of the Merger Agreement shall be
amended and restated in their entirety as follows:
(b) Through the Indemnification Fund, the Surviving
Corporation, UROHEALTH, and each of their officers, directors,
employees, agents, representatives and affiliates (collectively,
the "Indemnitees" and individually each
<PAGE> 42
an "Indemnitee") (subject to the terms and conditions of
subparagraph (c) below) will be entitled to be indemnified and held
harmless against and in respect of any claims, damages, losses,
costs, expenses, liabilities (absolute, accrued, contingent or
otherwise), and reasonable legal fees and expenses (collectively,
"Losses") incurred or suffered by any Indemnitee, directly or
indirectly caused by or arising out of or related to any untruth,
inaccuracy, error in, or breach of, any representation or warranty
of RA contained in this Agreement, when made or deemed to be made.
The rights of Indemnitees to indemnification under this Section
10.1(b) shall be limited to, and satisfied solely out of and to the
extent of, the Indemnification Fund (which shall not include the
Retention Funds) exchanged for RA Shares in the Merger (the
"Indemnification Escrow"), and any Loss shall be limited to those
amounts for which the Indemnitee does not receive coverage under
applicable insurance policies, if any. All indemnification
requests of Indemnitees hereunder shall be made by or through
UROHEALTH.
(c) By voting to approve this Agreement or by surrendering his
or her certificate(s) evidencing RA Shares as described in Section
3.2, each holder of RA Shares, other than Excluded Shares ("RA
Stockholder"), agrees that 5% of the cash and UROHEALTH Shares
equal to 5% of such shares to which such stockholder becomes
entitled upon consummation of the Merger and the Retention Funds
shall be placed in the Indemnification Escrow provided for in an
Escrow Agreement to be entered into, as of the Effective Time,
between UROHEALTH, RA and the Escrow Agent (which shall be mutually
agreed by RA and UROHEALTH). The Escrow Agent is authorized from
time to time to transfer all or any portion of the amount of the
Indemnification Fund so deposited in satisfaction of the indemnity
obligation as contemplated in the Escrow Agreement. The
Indemnitees agree to look solely to the Indemnification Fund for
satisfaction of the obligation of RA Stockholders to indemnify
Indemnitees hereunder and will not look directly to any RA
Stockholder for any indemnification hereunder, nor to the Retention
Funds.
(d) If any Indemnitee shall have any liquidated claim of
indemnification pursuant to Section 10.1(b) above, it shall
promptly request that UROHEALTH give written notice thereof to the
Representative (as defined in paragraph (h) below) and the Escrow
Agent, including a brief description of the facts upon which such
claim is based and the amount thereof. Any Indemnitee may also
request that UROHEALTH provide written notice to the Representative
and the Escrow Agent of any unliquidated claim of indemnification
pursuant to Section 10.1(b), including a brief description of the
facts upon which such claim is based and a demand for a reserve
amount to be created in respect of such claim. Any claim made by
any Indemnitee for Losses that are unliquidated shall not be paid
but a portion of the Indemnification Fund with a fair market value
equal to such claim shall be held in the Indemnification Escrow
until such Losses are fully liquidated. Notwithstanding the
foregoing, no portion of the Indemnification Fund will be delivered
to an Indemnitee pursuant to a written claim notice (with respect
to either a liquidated or unliquidated claim) pursuant to Section
10.1(b) above
2
<PAGE> 43
unless, and only to the extent that, the aggregate amount of Losses
sustained by Indemnitees as a group and as to which written claim
notices have been given exceeds $75,000 (taking into account any
reduction of prior noticed claims resulting from the dispute
resolution procedures of Section 10.1(e) below).
(e) If the Representative shall notify the Escrow Agent in
writing (within fifteen (15) days of delivery to the Escrow Agent
by UROHEALTH of a written notice of claim for indemnification) of
his objection to a claim of indemnification or a demand for the
creation of a reserve for any unliquidated claim (or the amount
thereof), the Escrow Agent shall hold the disputed amount of the
Indemnification Fund in the Indemnification Escrow until the rights
of the RA Stockholders and the Indemnitees with respect thereto
have been agreed upon between the Representative and the claiming
Indemnitee. In the event such an agreement is reached, the
claiming Indemnitee shall request UROHEALTH to provide to the
Escrow Agent a written notice signed by the Representative in the
form specified in the Escrow Agreement. If no such agreement has
been reached, either the Indemnitee or the Representative may, not
earlier than forty-five (45) days after the date of the initial
claim notice, submit the dispute to binding arbitration in Orange
County, California, pursuant to the procedures and rules for
commercial arbitration of the American Arbitration Association.
The Escrow Agent may rely on the order or other determination of
any such arbitrator. If any such arbitrator shall determine that
any part of the Indemnification Escrow is to be delivered to an
Indemnitee or is to be set aside in a reserve for any unliquidated
claim, the Escrow Agent shall promptly following receipt of a copy
of such determination establish such reserve or deliver to such
Indemnitee the lesser of (i) that portion of the Indemnification
Fund with a fair market value equal to the amount of the claim or
claims as awarded to the Indemnitee to be satisfied, subject to the
limitation set forth in paragraph (d) above, or (ii) the entire
amount of Indemnification Fund remaining in the Indemnification
Escrow. Any disputed amounts not awarded to the Indemnitee shall
promptly be transferred to the unreserved portion of the
Indemnification Escrow. UROHEALTH and the Representative shall
bear their respective costs and expenses of any such arbitration;
provided that, the Representative shall be entitled to charge the
Indemnification Escrow for his costs and expenses as set forth in
the Escrow Agreement.
(f) On the Termination Date, the Escrow Agent shall distribute
to the RA Stockholders on a pro rata basis all remaining
Indemnification Funds in the Indemnification Escrow, less such
portion of the Indemnification Fund with a fair market value equal
to the dollar amount of all claims pursuant to Section 10.1(c) that
are still in process of resolution pursuant to Section 10.1(c).
(g) After the Termination Date, (i) as each matter referred to
in Section 10.1(e) is resolved or otherwise concluded and (ii) as
each undisputed unliquidated claim under Section 10.1(b) which
remains unliquidated as of the
3
<PAGE> 44
Termination Date is liquidated, the Escrow Agent shall distribute
to the RA Stockholders their respective pro rata portion of the of
Indemnification Fund then determined by the Escrow Agent to be free
of any rights of any Indemnitee under Section 10.1(b) through (d),
and, when all such matters are resolved and such claims are
liquidated, the obligations under Section 10.1(b) hereof shall
terminate. The Indemnification Escrow shall be terminated when all
of the Indemnification Fund placed originally into the
Indemnification Escrow shall have been disbursed in accordance with
the provisions hereof and the Escrow Agreement.
(h) As of the Effective Time of the Merger, the RA
Stockholders shall, by virtue of the approval of this Agreement by
the requisite vote of the Stockholders, be deemed, for themselves
and their heirs and representatives and successors, to have
constituted and appointed, effective from the Effective Time,
Richard R. Newhauser, as their agent and attorney-in-fact (the
"Representative") to take all action required or permitted under
the Indemnification Escrow as provided in the Escrow Agreement or
herein with respect to the interests and rights of the RA
Stockholders. In the event of the death, physical or mental
incapacity or resignation of the Representative a replacement
Representative shall be appointed as provided in the Escrow
Agreement.
In taking any action whatsoever hereunder, the Representative
shall be protected in relying upon any notice, paper or other
document reasonably believed by him to be genuine, or upon any
evidence reasonably deemed by him to be sufficient. The
Representative may consult with counsel in connection with his
duties hereunder and shall be fully protected in any act taken,
suffered or permitted by him in good faith or in accordance with
the advice of counsel. The Representative shall not be liable to
the RA Stockholders for the performance of any act or the failure
to act so long as he acted or failed to act in good faith within
what he reasonably believed to be the scope of his authority and
for a purpose which he reasonably believed to be in the best
interests of the RA Stockholders.
(i) The Escrow Agent shall distribute the Retention Funds in
the manner set forth in Section 7.13 within 30 days after the
individuals earning Retention Bonuses are determined.
4. Section 10.1 of the Merger Agreement is hereby amended by adding new
Sections 10.1(j) and (k) which immediately follows Section 10.1(i):
"(j) All payments made, or reservations therefore, out of the
Indemnification Fund shall be made or reserved 50% in cash and 50%
in UROHEALTH Shares so held in the Indemnification Escrow.
(k) Notwithstanding the other provisions of this Article X to
the contrary, the Indemnitees shall be entitled to be indemnified
out of the Indemnification Escrow with respect to any claims by
Goldman, Sachs & Co.
4
<PAGE> 45
relating to that certain letter agreement
dated June 4, 1994, without regard to the provisions of Section
10.1(d) above."
5. Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Merger Agreement.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of California without giving effect to the provisions
thereof relating to conflicts of law.
IN WITNESS WHEREOF, each Company has caused this Amendment to be executed
on its behalf by its officers thereunto duly authorized, all as of the date
first above written.
UROHEALTH SYSTEMS, INC.
By:______________________________
Name:
Title:
UROHEALTH, INC. (California)
By:______________________________
Name:
Title:
RICHARD-ALLAN MEDICAL INDUSTRIES, INC.
By:______________________________
Name: Richard R. Newhauser
Title:
5
<PAGE> 1
EXHIBIT 10
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of this 14th day of August, 1996, among
UROHEALTH Systems, Inc. ("UROHEALTH"), UROHEALTH, Inc. (California) ("UROHEALTH
CALIFORNIA"), Richard R. Newhauser (as the sole stockholder of Richard-Allan
Medical Industries, Inc., the "RA STOCKHOLDER") and American Stock Transfer and
Trust Company (the "ESCROW AGENT").
WHEREAS, pursuant to an Agreement and Plan of Merger (the "MERGER
AGREEMENT") between UROHEALTH, UROHEALTH California, and Richard-Allan Medical
Industries, Inc. ("RA"), dated as of July 5, 1996, as amended August 12, 1996,
a copy of which has been delivered to the Escrow Agent, RA is contemporaneously
with the execution of this Agreement being merged with and into UROHEALTH
California (the "MERGER") and the outstanding shares of RA common stock are
being converted into cash and shares of UROHEALTH common stock ("UROHEALTH
SHARES"); and
WHEREAS, the RA Stockholder has agreed to indemnify UROHEALTH, UROHEALTH
California and the other Indemnitees (as defined in Section 10.1(b) of the
Merger Agreement) to the extent and in the manner provided in the Merger
Agreement through an Indemnification Escrow to be established hereunder
consisting of a portion of the cash and UROHEALTH Shares into which the shares
of RA common stock are being converted in the Merger; and
WHEREAS, UROHEALTH has agreed that at the time of the closing of the
Merger it will place into an account of the Indemnification Escrow additional
cash in the amount of $550,000 and an additional number of UROHEALTH Shares
with a Closing Market Value equal to $550,000 (such cash and shares, the
"RETENTION FUND"); and
WHEREAS, the Escrow Agent is willing to act as escrow agent hereunder;
NOW, THEREFORE, in order to induce UROHEALTH, RA, UROHEALTH California and
the RA Stockholder to consummate the transactions contemplated by the Merger
Agreement and in consideration of the premises and mutual covenants and
agreements hereinafter set forth, and of other good and valuable
considerations, the parties hereto hereby agree as follows:
1. Effectiveness of Agreement. The terms and provisions of this Agreement
shall not become effective unless and until RA is merged with and into
UROHEALTH California in accordance with the terms of the Merger Agreement. In
the event that the Merger is consummated in accordance with the Merger
Agreement, then, at the Effective Time of the
<PAGE> 2
Merger (as defined in Section 1.2 of the Merger Agreement), the following terms
and provisions shall, without further act on the part of any of the parties
hereto, become effective and enforceable in accordance with their terms.
2. Establishment of the Indemnification Escrow. The RA Stockholder, by
executing this Escrow Agreement, hereby authorizes the deposit with the Escrow
Agent of (a) cash and certificates evidencing five percent (5%) of such cash
and five percent (5%) of such UROHEALTH Shares into which shares of RA common
stock held by the RA Stockholder have been converted pursuant to the Merger
Agreement and (b) the cash and UROHEALTH Shares constituting the Retention
Fund. The Indemnification Escrow shall include the cash and certificates
evidencing UROHEALTH Shares so deposited and any other shares of stock or other
securities or other property or cash, including the Retention Fund, from time
to time held in the Indemnification Escrow by the Escrow Agent pursuant to the
terms hereof (such UROHEALTH Shares, other securities and other property or
cash being referred to collectively as the "ESCROW FUND"). The RA Stockholder
shall from time to time thereafter execute and deliver to the Escrow Agent such
additional powers, guarantees or endorsements with respect to the securities in
the Escrow Fund as the Escrow Agent may from time to time request. Any shares
or other securities from time to time held in the Escrow Fund, including those
UROHEALTH Shares held in the Retention Fund, shall be registered in the name of
the RA Stockholder, and the Escrow Agent shall maintain for record keeping
purposes an account for the RA Stockholder indicating the portion of the Escrow
Fund contributed by the RA Stockholder. The Escrow Fund shall be held by the
Escrow Agent in escrow subject to the terms and conditions hereinafter set
forth.
3. Meetings of UROHEALTH Stockholders. Copies of each notice of meeting
of UROHEALTH stockholders, and any related proxy statement, shall be sent by
UROHEALTH to the RA Stockholder, and so long as he has securities subject to
this Agreement, the RA Stockholder shall retain all the voting rights to his
UROHEALTH Shares or other securities which are held in the Escrow Fund.
4. Distributions and Dividends on, Changes in, and Exchanges of, Escrow
Stock; Interest on Escrow Securities and Cash. Any shares issued on or in
exchange for any shares held in the Escrow Fund as a result of any stock
dividend, stock split-up, consolidation of shares, reclassification or merger
or consolidation shall become part of the Escrow Fund and be held hereunder on
the same terms as the shares on or in exchange for which such shares shall have
been issued. Any rights distributed from time to time on the shares held in
the Escrow Fund shall be sold promptly by the Escrow Agent and the proceeds of
such sale shall be added to the Escrow Fund. Cash dividends on the shares held
in the Escrow Fund and interest paid on other securities and cash held in the
Escrow Fund (other than such shares, other securities and cash constituting the
Retention Fund) shall be delivered to the RA Stockholder and shall not become
part of the Escrow Fund. The cash constituting a portion of the Escrow Fund
shall be invested in accordance with written instructions from UROHEALTH and
the RA Stockholder to the Escrow Agent.
2
<PAGE> 3
5. Claims Against the Escrow Fund.
(a) If and when UROHEALTH, acting on its behalf or on behalf of
UROHEALTH California or any other Indemnitee, shall claim indemnification from a
liquidated claim pursuant to the provisions of Section 10.1(b) of the Merger
Agreement, UROHEALTH shall promptly send written notice of the same to the
Escrow Agent and the RA Stockholder either by hand delivery or by first-class
mail, postage prepaid. Such notice shall state the basis for such claim
including a brief description of the facts upon which such claim is based and
the amount thereof. In the event of an unliquidated claim for indemnification
pursuant to the Merger Agreement, UROHEALTH shall provide written notice to the
RA Stockholder and the Escrow Agent as aforesaid of the unliquidated claim,
including a brief description of the facts upon which such claim is based and a
demand for a reserve to be created in respect of such claim. Any claim made by
UROHEALTH on behalf of any Indemnitee for Losses that are unliquidated shall not
be paid but the Escrow Agent shall set aside an appropriate reserve of cash and
UROHEALTH Shares or other securities or property within the Escrow Fund to
address such claim until such Losses (as defined in Section 10.1(b) of the
Merger Agreement) represented by the claim are fully liquidated. If the RA
Stockholder shall object to such claim, he shall send written notice of his
objection to the Escrow Agent and UROHEALTH either by hand delivery or by
first-class mail, certified or registered mail, postage prepaid, within 15 days
after UROHEALTH's delivery of its notice as aforesaid. If no objection to such
claim shall have been received by the Escrow Agent within 15 days after delivery
to it of UROHEALTH's notice, the RA Stockholder shall be deemed to have
acknowledged the correctness of such claim for the full amount thereof and the
Escrow Agent shall transfer to UROHEALTH as provided in the following sentence
on behalf of the claiming Indemnitee(s) out of the Escrow Fund cash and
UROHEALTH Shares having a "value" (as defined in paragraph (c) below) equal to
the amount of such claim. All payments made in satisfaction of a claim for
indemnification shall be made 50% in cash and 50% in UROHEALTH Shares. Transfer
to UROHEALTH of the cash and UROHEALTH Shares shall be made, in the case of a
liquidated claim, promptly following such 15-day period, or, in the case of an
unliquidated claim, promptly following the date upon which the claim is fully
liquidated. For the purpose of this paragraph (a), the term "delivery" shall
mean, in the case of notices sent by first-class mail, certified or registered
mail, postage prepaid, the time at which such notice is mailed. All claims for
indemnification out of the Escrow Fund shall be satisfied only out of the
portion of the Escrow Fund not constituting the Retention Fund subaccount of the
Escrow Fund.
(b) If the RA Stockholder shall timely notify the Escrow Agent in
writing of his objection to a claim of indemnification or a demand for the
creation of a reserve for any unliquidated claim (or the amount thereof), the
Escrow Agent shall hold the disputed amount of funds in the Escrow Fund until
the rights of the RA Stockholder and the Indemnitee(s) with respect thereto have
been agreed upon between the RA Stockholder and the claiming Indemnitee(s). In
the event such an agreement is reached, the claiming Indemnitee(s) shall request
UROHEALTH to provide to the Escrow Agent a written notice signed by the RA
Stockholder acknowledging that such agreement has been reached and authorizing
the Escrow
3
<PAGE> 4
Agent to release cash and UROHEALTH Shares having a value equal to the agreed
amount specified in the notice in the same manner set forth for undisputed
claims as provided in paragraph (a) hereof. If no such agreement has been
reached, either the Indemnitee(s) or the RA Stockholder may, not earlier than
forty-five (45) days after the date of the initial claim notice, submit the
dispute to binding arbitration in Orange County, California, pursuant to the
procedures and rules for commercial arbitration of the American Arbitration
Association. The Escrow Agent may rely on the order or other determination of
any such arbitrator. If any such arbitrator shall determine that any part of
the Escrow Fund is to be delivered to UROHEALTH for the benefit of an
Indemnitee or is to be set aside in a reserve for any unliquidated claim, the
Escrow Agent shall promptly following receipt of a copy of such determination
establish such reserve or deliver to UROHEALTH for the benefit of such
Indemnitee the lesser of (i) escrowed cash and UROHEALTH Shares or other
securities and property in the Escrow Fund, having a value equal to the amount
of the claim or claims as awarded to the Indemnitee to be satisfied, subject to
the limitation set forth in paragraph (a) above, or (ii) the entire amount of
cash and number of UROHEALTH Shares or other securities or property remaining
in the Escrow Fund (other than the portion of the Escrow Fund constituting the
Retention Fund subaccount of the Escrow Fund.) Any disputed amounts not
awarded to the Indemnitee shall promptly be transferred to the unreserved
portion of the Escrow Fund. UROHEALTH and the RA Stockholder shall bear their
respective costs and expenses of any such arbitration.
(c) Promptly following the Termination Date (as defined in Section 10.1
of the Merger Agreement), the Escrow Agent shall distribute to the RA
Stockholder all remaining cash and UROHEALTH Shares and any other securities or
property in the Escrow Fund, less (i) such amount of cash and number of
UROHEALTH Shares, or other securities or property, having a value on that date
equal to the dollar amount of all claims that are still in process of resolution
pursuant to paragraph (b) hereof; and (ii) the cash and UROHEALTH Shares held in
the Retention Fund.
(d) After the Termination Date, (i) as each matter referred to in
paragraph (b) hereof is resolved or otherwise concluded and (ii) as each
undisputed liquidated claim under paragraph (a) which remains unliquidated as of
the Termination Date is liquidated, the Escrow Agent shall distribute to the RA
Stockholder the amount of cash and number of escrowed UROHEALTH Shares then
determined by the Escrow Agent to be free of any rights of any Indemnitee. The
Indemnification Escrow shall be terminated when all of the cash and UROHEALTH
Shares and other property placed originally into the Indemnification Escrow
shall have been disbursed in accordance with the provisions hereof.
(e) For purposes of this Section 5, the term "value" shall mean the
fair market value of escrowed UROHEALTH Shares, securities or other property, if
applicable, determined by the Escrow Agent in good faith; provided, however,
that, where there exists a public market for any escrowed securities (other than
the UROHEALTH Shares) at the time of such determination, the value of such
securities shall be based on the average of the closing bid and asked prices of
such securities quoted in the over-the-counter Market Summary or the last
reported sale price of such securities or the closing price quoted on the Nasdaq
National Market or on any exchange on which the securities are listed, whichever
is applicable, as published in the
4
<PAGE> 5
Western Edition of The Wall Street Journal on the date prior to such
determination; and provided further, that the value of the UROHEALTH Shares
shall be based on the Closing Market Value of the UROHEALTH Common Stock.
6. Retention Fund. At the Closing of the Merger (as defined in Section
3.7 of the Merger Agreement), UROHEALTH shall place into a subaccount of the
Indemnification Escrow cash in the amount of $550,000 and that number of
UROHEALTH Shares with a Closing Market Value equal to $550,000. Upon written
instruction to the Escrow Agent by UROHEALTH, the Escrow Agent shall distribute
a retention bonus (the "RETENTION BONUS") equal to $50,000 in cash (plus a
proportionate share of any earnings thereon) and UROHEALTH Shares with a
Closing Market Value equal to $50,000 to each of the eleven individuals named
on Exhibit 7.13 of the Merger Agreement ("EXHIBIT 7.13") who is employed by the
Surviving Corporation on the date twelve months after the Effective Time or who
is terminated from such employment without cause, as determined in the sole
discretion of the RA Stockholder. The RA Stockholder shall deliver to the
Escrow Agent written stock powers transferring the UROHEALTH Shares contained
in the Retention Fund to those designated individuals entitled to receive a
portion of the Retention Fund. Any amounts or shares remaining in the Retention
Fund after all Retention Bonuses have been paid shall be distributed to the RA
Stockholder. The individuals listed on Exhibit 7.13 shall not be third party
beneficiaries to this Escrow Agreement. Cash dividends on the shares held in
the Escrow Fund and interest paid on other securities or cash held in the
Escrow Fund which constitutes the Retention Fund shall become part of the
Retention Fund and shall be invested in accordance with written instructions
from UROHEALTH and the RA Stockholder to the Escrow Agent.
7. Termination of Escrow.
(a) The escrow provided for hereunder shall terminate upon written
notification by UROHEALTH to the Escrow Agent that (i) the RA Stockholders'
indemnity obligation under Sections 10.1(b) and 10.1(k) of the Merger Agreement
has been satisfied or waived by UROHEALTH; and (ii) all the Retention Bonuses
have been paid and the Retention Fund shall have been closed in accordance with
the provisions hereof by the Escrow Agent.
(b) Upon such termination, the Escrow Agent shall pay over the Escrow
Fund, if any, to UROHEALTH and the RA Stockholder as their respective interests
may appear in accordance with the provisions hereof.
8. Escrow Agent.
(a) The Escrow Agent shall be entitled to receive normal compensation
for its services as Escrow Agent hereunder. Such compensation shall be paid by
UROHEALTH.
(b) In taking any action whatsoever hereunder, the Escrow Agent shall
be protected in relying upon any notice, paper or other document believed by it
to be genuine, or upon any evidence deemed by it to be sufficient, and in no
event shall be liable hereunder for any act performed or omitted to be performed
by it hereunder, in the absence of gross negligence or
5
<PAGE> 6
bad faith. The Escrow Agent may consult with counsel in connection with its
duties hereunder and shall be fully protected in any act taken, suffered or
permitted by it in good faith in accordance with the advice of such counsel.
(c) UROHEALTH and the RA Stockholder hereby agree to jointly and
severally indemnify the Escrow Agent for, and to hold it harmless against, any
loss, liability or expense arising out of or in connection with this Escrow
Agreement and carrying out its duties hereunder, including the costs and
expenses of defending itself against any claim of liability, except in those
cases where the Escrow Agent has been guilty of gross negligence or willful
misconduct.
(d) The Escrow Agent's duties and responsibilities shall be limited to
those expressly set forth in this Escrow Agreement, and it shall not be subject
to, or obligated to recognize, any other agreement between the parties hereto
even though reference thereto may be made herein; provided, however, that, with
the Escrow Agent's written consent, this Escrow Agreement may be amended at any
time or times by an instrument in writing signed by or on behalf of UROHEALTH,
UROHEALTH California (or, after the Merger, the Surviving Corporation), the RA
Stockholder and the Escrow Agent. The Escrow Agent may withhold such consent
only if such amendment would adversely affect the rights or liabilities of the
Escrow Agent.
(e) The Escrow Agent is authorized, in its reasonable discretion, to
disregard any and all notices or instructions given by any of the parties hereto
or by any other person, firm or corporation, except only (i) such notices or
instructions as are herein specifically provided for, and (ii) orders or process
of any court with jurisdiction. If any property in the Escrow Fund is at any
time attached, garnished or levied upon or under any court order or in case the
payment, assignment, transfer, conveyance or delivery of any such property shall
be stayed or enjoined by any court order, or in case any order, judgment or
decree shall be made or entered by any court affecting such property or any part
thereof, then, and in any of such events, the Escrow Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel of its own choosing is binding upon
it; and if it complies with any such order, writ, judgment or decree it shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance even though such order, writ, judgment
or decree may be subsequently reversed, modified, annulled, set aside or
vacated.
(f) The Escrow Agent shall not be personally liable for any act taken
or omitted hereunder if taken or omitted by it in good faith. In taking any
action whatsoever hereunder, the Escrow Agent shall be protected in relying upon
any notice, paper or other document reasonably believed by it to be genuine, or
upon any evidence reasonably deemed by it to be sufficient. The Escrow Agent
may consult with counsel in connection with its duties hereunder and shall be
fully protected in any act taken, suffered or permitted by it in good faith in
accordance with the advice of counsel. It shall also be fully protected in
relying upon any written notice, demand, certificate or document which it in
good faith believes to be genuine. The Escrow Agent shall not be responsible
for the sufficiency or accuracy of the form, execution,
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validity or genuineness of documents now or hereafter deposited hereunder, nor
shall it be responsible or liable in any respect on account of the identity,
authority or rights of the persons executing and delivering or purporting to
execute or deliver any such document.
(g) If the Escrow Agent believes it to be reasonably necessary to
consult with counsel concerning any of its duties in connection with this Escrow
Agreement, or in case it becomes involved in litigation on account of being
Escrow Agent hereunder or on account of having received property subject hereto,
then, in either case, the Escrow Agent's costs, expenses, and reasonable
attorneys' fees shall be paid by UROHEALTH.
(h) By its execution and delivery of this Escrow Agreement, the Escrow
Agent acknowledges that its terms and provisions are acceptable and it agrees to
carry out the provisions hereof on its part.
9. Resignation, Removal of Escrow Agent. The Escrow Agent may at any time
resign by giving 60 days' written notice of resignation to the RA Stockholder
and UROHEALTH. The RA Stockholder and UROHEALTH may jointly at any time remove
the Escrow Agent by giving written notice to the Escrow Agent. If the Escrow
Agent shall resign or be removed, a successor Escrow Agent, which shall be
either a bank, trust company or other financial institution satisfactory to
both UROHEALTH and the RA Stockholder, shall be appointed by written instrument
executed and delivered by both UROHEALTH and the RA Stockholder to the Escrow
Agent and to such successor Escrow Agent, and upon the resignation or removal
of the predecessor Escrow Agent, the successor Escrow Agent shall, without any
further act, deed or conveyance, become vested with all the right, title and
interest to all property held hereunder, of such predecessor Escrow Agent; but
nevertheless such predecessor Escrow Agent shall, on the written request of the
RA Stockholder, UROHEALTH or such successor Escrow Agent, execute and deliver
to such successor Escrow Agent an instrument transferring to such successor
Escrow Agent all right, title and interest hereunder in and to the property in
the Escrow Funds, and all other rights hereunder, of such predecessor Escrow
Agent. If no successor Escrow Agent has been appointed at the end of 60 days
after notice of resignation by the Escrow Agent, the Escrow Agent hereunder may
seek relief from an appropriate court in interpleader proceedings in which
UROHEALTH and the RA Stockholder shall be joined as parties.
10. Governing Agreement; Amendments. The Escrow Agent hereby acknowledges
receipt of a copy of the Merger Agreement, but except for reference thereto for
definitions of certain words and terms not defined herein, the Escrow Agent is
not charged with any duty or obligation arising under the Merger Agreement and
the responsibilities and duties of the Escrow Agent shall be governed by this
Escrow Agreement. As between the Escrow Agent, on the one hand, and the other
parties hereto, on the other hand, this Escrow Agreement constitutes the entire
agreement with respect to the subject matter herein. As between the other
parties hereto, this Escrow Agreement shall govern to the extent of any
conflict between it and the Merger Agreement; provided, however, that the RA
Stockholder, UROHEALTH and UROHEALTH California agree to make such amendments
herein as may be necessary to reconcile any conflict between the terms hereof
and the Merger Agreement. No change in, addition to, or waiver of the
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terms and conditions hereof shall be binding upon any of the parties hereto
unless approved in writing by the other parties hereto.
11. Notices. Any notice to or claims upon the parties hereto shall be in
writing and must be given by postage prepaid registered mail as follows:
To UROHEALTH or UROHEALTH California:
UROHEALTH Systems, Inc.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
Attention: General Counsel
To the Escrow Agent:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Attention: Herbert J. Lemmer
To the RA Stockholder:
Richard R. Newhauser
8850 M-89
Richland, Nichigan 49083
with a copy to:
Howard & Howard Attorneys, P.C.
107 W. Michigan Avenue, Suite 400
Kalamazoo, Michigan 49007
or to such other address as a party hereto shall have furnished to the other
parties in accordance herewith, effective upon receipt by such other parties.
12. Binding Effect. This Escrow Agreement shall be binding upon and inure
to the benefit of the parties, their successors, heirs and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
the day and year first above written.
Attest: UROHEALTH SYSTEMS, INC.
______________________________ By: _______________________________
Attest: UROHEALTH, INC. (CALIFORNIA)
______________________________ By: _______________________________
Attest: RICHARD R. NEWHAUSER
______________________________ _______________________________
The undersigned Escrow Agent hereby agrees to serve as Escrow Agent.
American Stock Transfer & Trust Company
By:_________________________________
Name:____________________________
Title:_____________________________
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